NOTE 3–INVESTMENT SECURITIES:

The following table sets forth certain information regarding the amortized cost and fair values of our investment securities available for sale.



	At March 31, 2015
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	113,549	$	1,007	$	(381	)	$	114,175
Commercial	12,941		726		—			13,667
Municipal bonds	119,315		3,324		(205		)	122,434
Collateralized mortgage obligations:
Residential	59,050		293		(867		)	58,476
Commercial	19,818		61		(85		)	19,794
Corporate debt securities	79,634		903		(768		)	79,769
U.S. Treasury securities	40,981		34		—			41,015
	$	445,288	$	6,348	$	(2,306	)	$	449,330



	At December 31, 2014
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	107,624	$	509	$	(853	)	$	107,280
Commercial	13,030		641		—			13,671
Municipal bonds	119,744		2,847		(257		)	122,334
Collateralized mortgage obligations:
Residential	44,254		161		(1,249		)	43,166
Commercial	20,775		—		(289		)	20,486
Corporate debt securities	80,214		296		(1,110		)	79,400
U.S. Treasury securities	40,976		13		—			40,989
	$	426,617	$	4,467	$	(3,758	)	$	427,326

Mortgage-backed securities ("MBS") and collateralized mortgage obligations ("CMO") represent securities issued by government sponsored entities ("GSEs"). Each of the MBS and CMO securities in our investment portfolio are guaranteed by Fannie Mae, Ginnie Mae or Freddie Mac. Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by revenues from the specific project being financed) issued by various municipal corporations. As of March 31, 2015 and December 31, 2014, all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon external ratings where available and, where not available, based upon internal ratings which correspond to ratings as defined by Standard and Poor’s Rating Services (“S&P”) or Moody’s Investors Services (“Moody’s”). As of March 31, 2015 and December 31, 2014, substantially all securities held had ratings available by external ratings agencies.

Investment securities available for sale that were in an unrealized loss position are presented in the following tables based on the length of time the individual securities have been in an unrealized loss position.



	At March 31, 2015
	Less than 12 months					12 months or more					Total
(in thousands)	Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	(90	)	$	10,607	$	(291	)	$	23,483	$	(381	)	$	34,090
Municipal bonds	(60		)	10,815		(145		)	5,858		(205		)	16,673
Collateralized mortgage obligations:
Residential	(13		)	8,711		(854		)	29,855		(867		)	38,566
Commercial	(5		)	5,468		(80		)	5,068		(85		)	10,536
Corporate debt securities	(90		)	9,238		(678		)	28,049		(768		)	37,287
	$	(258	)	$	44,839	$	(2,048	)	$	92,313	$	(2,306	)	$	137,152



	At December 31, 2014
	Less than 12 months					12 months or more					Total
(in thousands)	Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value

Mortgage-backed securities:
Residential	$	—		$	—	$	(853	)	$	57,242	$	(853	)	$	57,242
Municipal bonds	(11		)	2,339		(246		)	17,155		(257		)	19,494
Collateralized mortgage obligations:
Residential	—			—		(1,249		)	31,021		(1,249		)	31,021
Commercial	(29		)	5,037		(260		)	15,449		(289		)	20,486
Corporate debt securities	(56		)	13,140		(1,054		)	40,997		(1,110		)	54,137
	$	(96	)	$	20,516	$	(3,662	)	$	161,864	$	(3,758	)	$	182,380

The Company has evaluated securities available for sale that are in an unrealized loss position and has determined that the decline in value is temporary and is related to the change in market interest rates since purchase. The decline in value is not related to any issuer- or industry-specific credit event. As of March 31, 2015 and December 31, 2014, the Company does not expect any credit losses on its debt securities. In addition, as of March 31, 2015 and December 31, 2014, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.

The following tables present the fair value of investment securities available for sale by contractual maturity along with the associated contractual yield for the periods indicated below. Contractual maturities for mortgage-backed securities and collateralized mortgage obligations as presented exclude the effect of expected prepayments. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature. The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis.



	At March 31, 2015
	Within one year				After one year through five years				After five years through ten years				After ten years				Total
(in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield

Mortgage-backed securities:
Residential	$	—	—	%	$	6	0.46	%	$	6,535	1.76	%	$	107,634	1.77	%	$	114,175	1.77	%
Commercial	—		—		—		—		—		—		13,667		4.82		13,667		4.82
Municipal bonds	—		—		2,506		3.89		22,337		3.52		97,591		4.24		122,434		4.10
Collateralized mortgage obligations:
Residential	—		—		—		—		181		0.83		58,295		1.43		58,476		1.43
Commercial	—		—		—		—		9,892		1.97		9,902		1.68		19,794		1.83
Corporate debt securities	—		—		10,129		2.37		37,551		3.39		32,089		3.84		79,769		3.44
U.S. Treasury securities	26,010		0.28		15,005		0.46		—		—		—		—		41,015		0.35
Total available for sale	$	26,010	0.28	%	$	27,646	1.46	%	$	76,496	3.10	%	$	319,178	2.78	%	$	449,330	2.61	%



	At December 31, 2014
	Within one year				After one year through five years				After five years through ten years				After ten years				Total
(in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield

Mortgage-backed securities:
Residential	$	—	—	%	$	—	—	%	$	6,949	1.72	%	$	100,331	1.75	%	$	107,280	1.75	%
Commercial	—		—		—		—		—		—		13,671		4.75		13,671		4.75
Municipal bonds	—		—		604		4.10		23,465		3.55		98,265		4.21		122,334		4.09
Collateralized mortgage obligations:
Residential	—		—		—		—		—		—		43,166		1.84		43,166		1.84
Commercial	—		—		—		—		9,776		1.96		10,710		1.99		20,486		1.97
Corporate debt securities	—		—		9,000		2.21		38,487		3.35		31,913		3.73		79,400		3.37
U.S. Treasury securities	25,998		0.28		14,991		0.46		—		—		—		—		40,989		0.35
Total available for sale	$	25,998	0.28	%	$	24,595	1.19	%	$	78,677	3.09	%	$	298,056	2.92	%	$	427,326	2.69	%

Sales of investment securities available for sale were as follows.



	Three Months Ended March 31,
(in thousands)	2015		2014

Proceeds	$	—	$	54,305
Gross gains	—		777
Gross losses	—		(64		)

There were $119.5 million and $44.3 million in investment securities pledged to secure advances from the Federal Home Loan Bank of Seattle ("FHLB") at March 31, 2015 and December 31, 2014, respectively. At March 31, 2015 and December 31, 2014, there were $44.4 million and $33.4 million, respectively, of securities pledged to secure derivatives in a liability position.

At March 31, 2015, there were $10.0 million of two-year U.S. Treasury securities pledged under repurchase agreements with a contractual maturity of 14 days. The Company assesses the creditworthiness of the counterparties that hold the pledged collateral and has determined that these arrangements have little risk. There were no securities pledged at December 31, 2014.

Tax-exempt interest income on securities available for sale totaling $784 thousand and $921 thousand for the three months ended March 31, 2015 and 2014, respectively, was recorded in the Company's consolidated statements of operations.