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Investment Securities | 6 Months Ended
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Jun. 30, 2024
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | Investment Securities The Company’s investment securities portfolio includes obligations of states and political subdivisions, securities issued by U.S. federal government agencies, such as the SBA, and securities issued by U.S. GSEs, such as the FNMA, the FHLMC, and the FHLB. The Company also invests in residential and commercial mortgage-backed securities, collateralized mortgage obligations issued or guaranteed by GSEs, and corporate bonds, as reflected in Tables 3.1 and 3.2. A summary of the amortized cost and fair value related to securities held-to-maturity as of June 30, 2024 and December 31, 2023 is presented in Table 3.1.
Table 3.1: Securities Held-to-Maturity
(in thousands) |  | Amortized Cost |  | Gross Unrealized |  | Fair Value
|  | Gains |  | (Losses) |
June 30, 2024 |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 2,973 |  |  | $ | — |  |  | $ | (172) |  |  | $ | 2,801 |
Total held-to-maturity |  | $ | 2,973 |  |  | $ | — |  |  | $ | (172) |  |  | $ | 2,801 |
December 31, 2023 |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 3,077 |  |  | $ | — |  |  | $ | (164) |  |  | $ | 2,913 |
Total held-to-maturity |  | $ | 3,077 |  |  | $ | — |  |  | $ | (164) |  |  | $ | 2,913 |
For securities issued by states and political subdivisions, for purposes of evaluating whether to recognize credit loss expense, management considers: (i) issuer and/or guarantor credit ratings; (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity; (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities; (iv) internal credit review of the financial information; and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers. A summary of the amortized cost and fair value related to securities available-for-sale as of June 30, 2024 and December 31, 2023 is presented in Table 3.2. Securities available-for-sale did not have an allowance for credit losses as of June 30, 2024 or December 31, 2023.
Table 3.2: Securities Available-for-Sale
(in thousands) |  | Amortized Cost |  | Gross Unrealized |  | Fair Value
|  | Gains |  | (Losses) |
June 30, 2024 |  |  |  |  |  |  |  |
U.S. government agency securities |  | $ | 9,494 |  |  | $ | 144 |  |  | $ | (109) |  |  | $ | 9,529 |
Mortgage-backed securities |  | 65,712 |  |  | 3 |  |  | (11,695) |  |  | 54,020 |
Obligations of states and political subdivisions |  | 43,027 |  |  | 2 |  |  | (5,500) |  |  | 37,529 |
Collateralized mortgage obligations |  | 336 |  |  | — |  |  | (31) |  |  | 305 |
Corporate bonds |  | 2,000 |  |  | — |  |  | (179) |  |  | 1,821 |
Total available-for-sale |  | $ | 120,569 |  |  | $ | 149 |  |  | $ | (17,514) |  |  | $ | 103,204 |
December 31, 2023 |  |  |  |  |  |  |  |
U.S. government agency securities |  | $ | 10,548 |  |  | $ | 142 |  |  | $ | (149) |  |  | $ | 10,541 |
Mortgage-backed securities |  | 68,585 |  |  | 7 |  |  | (11,619) |  |  | 56,973 |
Obligations of states and political subdivisions |  | 43,288 |  |  | 12 |  |  | (4,841) |  |  | 38,459 |
Collateralized mortgage obligations |  | 367 |  |  | — |  |  | (35) |  |  | 332 |
Corporate bonds |  | 2,000 |  |  | — |  |  | (222) |  |  | 1,778 |
Total available-for-sale |  | $ | 124,788 |  |  | $ | 161 |  |  | $ | (16,866) |  |  | $ | 108,083 |
The amortized cost and fair value of investment securities by contractual maturity at June 30, 2024 and December 31, 2023 are shown in Table 3.3. Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties.
Table 3.3: Contractual Maturities - Investment Securities
(in thousands) |  | June 30, 2024 |  | December 31, 2023
| Held-to-Maturity |  | Available-for-Sale |  | Held-to-Maturity |  | Available-for-Sale
| Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Within one year |  | $ | 218 |  |  | $ | 205 |  |  | $ | — |  |  | $ | — |  |  | $ | 277 |  |  | $ | 263 |  |  | $ | — |  |  | $ | — |
After one but within five years |  | 920 |  |  | 867 |  |  | 806 |  |  | 736 |  |  | 935 |  |  | 885 |  |  | 394 |  |  | 367 |
After five years through ten years |  | 1,340 |  |  | 1,263 |  |  | 8,511 |  |  | 7,459 |  |  | 1,365 |  |  | 1,292 |  |  | 6,407 |  |  | 5,838 |
After ten years |  | 495 |  |  | 466 |  |  | 33,710 |  |  | 29,334 |  |  | 500 |  |  | 473 |  |  | 36,487 |  |  | 32,254 |
Investment securities not due at a single maturity date: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agency securities |  | — |  |  | — |  |  | 9,494 |  |  | 9,529 |  |  | — |  |  | — |  |  | 10,548 |  |  | 10,541 |
Mortgage-backed securities |  | — |  |  | — |  |  | 65,712 |  |  | 54,020 |  |  | — |  |  | — |  |  | 68,585 |  |  | 56,973 |
Collateralized mortgage obligations |  | — |  |  | — |  |  | 336 |  |  | 305 |  |  | — |  |  | — |  |  | 367 |  |  | 332 |
Corporate bonds |  | — |  |  | — |  |  | 2,000 |  |  | 1,821 |  |  | — |  |  | — |  |  | 2,000 |  |  | 1,778 |
Total |  | $ | 2,973 |  |  | $ | 2,801 |  |  | $ | 120,569 |  |  | $ | 103,204 |  |  | $ | 3,077 |  |  | $ | 2,913 |  |  | $ | 124,788 |  |  | $ | 108,083 |
There were no purchases or sales of investment securities during the three and six months ended June 30, 2024 and June 30, 2023. Pledged investment securities are shown in Table 3.4.
Table 3.4: Pledged Investment Securities
(in thousands) |  | June 30, 2024 |  | December 31, 2023
Pledged to: |  |  |  |
The State of California, securing deposits of public funds and borrowings |  | $ | 52,687 |  |  | $ | 55,435 |
The Federal Reserve Discount Window, increasing borrowing capacity |  | 47,094 |  |  | 48,964 |
Total pledged investment securities |  | $ | 99,781 |  |  | $ | 104,399 |
Table 3.5 details the gross unrealized losses and fair values aggregated by investment category and length of time that individual available-for-sale securities have been in a continuous unrealized loss position at June 30, 2024 and December 31, 2023.
Table 3.5: Securities Available-for-Sale in Continuous Unrealized Loss Positions
(in thousands) |  | Less than 12 months |  | 12 months or more |  | Total securities in a loss position
| Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
June 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agency securities |  | $ | 199 |  |  | $ | (1) |  |  | $ | 5,549 |  |  | $ | (108) |  |  | $ | 5,748 |  |  | $ | (109) |
Mortgage-backed securities |  | 1,013 |  |  | (2) |  |  | 52,686 |  |  | (11,693) |  |  | 53,699 |  |  | (11,695) |
Obligations of states and political subdivisions |  | 512 |  |  | — |  |  | 36,016 |  |  | (5,500) |  |  | 36,528 |  |  | (5,500) |
Collateralized mortgage obligations |  | — |  |  | — |  |  | 304 |  |  | (31) |  |  | 304 |  |  | (31) |
Corporate bonds |  | — |  |  | — |  |  | 1,821 |  |  | (179) |  |  | 1,821 |  |  | (179) |
Total temporarily impaired securities |  | $ | 1,724 |  |  | $ | (3) |  |  | $ | 96,376 |  |  | $ | (17,511) |  |  | $ | 98,100 |  |  | $ | (17,514) |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agency securities |  | $ | 1,130 |  |  | $ | (14) |  |  | $ | 7,081 |  |  | $ | (135) |  |  | $ | 8,211 |  |  | $ | (149) |
Mortgage-backed securities |  | — |  |  | — |  |  | 55,609 |  |  | (11,619) |  |  | 55,609 |  |  | (11,619) |
Obligations of states and political subdivisions |  | — |  |  | — |  |  | 36,930 |  |  | (4,841) |  |  | 36,930 |  |  | (4,841) |
Collateralized mortgage obligations |  | — |  |  | — |  |  | 332 |  |  | (35) |  |  | 332 |  |  | (35) |
Corporate bonds |  | — |  |  | — |  |  | 1,778 |  |  | (222) |  |  | 1,778 |  |  | (222) |
Total temporarily impaired securities |  | $ | 1,130 |  |  | $ | (14) |  |  | $ | 101,730 |  |  | $ | (16,852) |  |  | $ | 102,860 |  |  | $ | (16,866) |
There were 147 and 149 available-for-sale securities in unrealized loss positions at June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, the investment portfolio included 143 investment securities that had been in a continuous loss position for twelve months or more and four investment securities that had been in a loss position for less than twelve months. There was one held-to-maturity security in a continuous unrealized loss position at June 30, 2024 and December 31, 2023, which had been in a continuous loss position for more than twelve months. Obligations issued or guaranteed by government agencies such as the GNMA and the SBA or GSEs under conservatorship such as the FNMA and the FHLMC, are guaranteed or sponsored by agencies of the U.S. government and have strong credit profiles. The Company therefore expects to receive all contractual interest payments on time and believes the risk of credit losses on these securities is remote. The Company’s investment in obligations of states and political subdivisions are deemed credit worthy after management’s comprehensive analysis of the issuers’ latest financial information, credit ratings by major credit agencies, and/or credit enhancements. Non-Marketable Securities Included in Other Assets FHLB capital stock: As a member of the FHLB, the Company is required to maintain a minimum investment in FHLB capital stock determined by the board of directors of the FHLB. The minimum investment requirements can increase in the event the Company increases its total asset size or borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $100 per share par value. The Company held $15.0 million of FHLB stock at June 30, 2024 and December 31, 2023. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and do not have a readily determinable market value. Based on management’s analysis of the FHLB’s financial condition and certain qualitative factors, management determined that the FHLB stock was not impaired at June 30, 2024 and December 31, 2023.

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