59 / 146
43
We had no fed funds sold at December 31, 2015 or 2014, but interest-bearing balances held at other banks increased
slightly, to about $2 million at December 31, 2015, due to the timing of cash flows in our FRB account. The Company’s
investment portfolio reflects a reduction of $4 million, or less than 1%, during 2015, ending the period with a book
balance of $508 million. The Company carries investments at their fair market values. Although we currently have
the intent and ability to hold our investment securities to maturity, the securities are all marketable and are classified as
“available for sale” to allow maximum flexibility with regard to interest rate risk and liquidity management. The
expected average life for all bonds in our investment portfolio was 3.9 years and their average effective duration was
2.5 years as of December 31, 2015, both up slightly relative to year-end 2014.
The following Investment Portfolio table reflects the amortized cost and fair market values for each primary category
of investments for the past three years:
Investment Portfolio-Available for Sale
(dollars in thousands)
US Government Agencies
28,801
$
29,042
$
26,959
$
27,270
$
5,395
$
5,304
$
Mortgage-backed securities
374,683
375,061
378,339
381,442
320,223
320,721
State and political subdivisions
99,093
102,183
98,056
100,949
97,361
96,563
Equity securities
575
1,296
1,210
2,222
1,336
2,456
Total securities
503,152
$
507,582
$
504,564
$
511,883
$
424,315
$
425,044
$
Fair Market Value
As of December 31,
2015
2014
2013
Amortized Cost Fair Market Value Amortized Cost Fair Market Value Amortized Cost
The net unrealized gain on our investment portfolio, or the difference between the fair market value and amortized cost,
was $4.4 million at December 31, 2015, down from a net unrealized gain of $7.3 million at December 31, 2014 due to
higher interest rates. The value of U.S. Government agency securities increased by $2 million, or 6%, during 2015,
due to bond purchases net of sales and maturities. Mortgage-backed securities were down $6 million, or 2%, due
prepayments and lower market values. Municipal bonds were up by $1 million, or 1%, since bond purchases offset the
decline in market values. All newly purchased municipal bonds have strong underlying ratings, and all municipal bonds
in our portfolio are evaluated quarterly for potential impairment. The market value of equity securities reflects a drop
of $926,000, or 42%, for the year, since we sold certain of our investments for realized gains of $506,000.
Investment securities pledged as collateral for Federal Home Loan Bank of San Francisco (“FHLB”) borrowings,
repurchase agreements, public deposits and other purposes as required or permitted by law totaled $180 million at
December 31, 2015 and $141 million at December 31, 2014, leaving $326 million in unpledged debt securities at
December 31, 2015 and $369 million at December 31, 2014. Securities pledged in excess of actual pledging needs and
thus available for liquidity purposes, if necessary, totaled $57 million at December 31, 2015 and $25 million at Decem-
ber 31, 2014.
The investment maturities table below summarizes contractual maturities for the Company’s investment securities and
their weighted average yields at December 31, 2015. The actual timing of principal payments may differ from remain-
ing contractual maturities, because obligors may have the right to prepay certain obligations.