Investments

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investments

NOTE 2 - INVESTMENTS

The following tables present the amortized costs, unrealized gains, unrealized losses, and estimated fair values of securities available-for-sale and held-to-maturity at September 30, 2021 and December 31, 2020:

	September 30, 2021
							Estimated
	Amortized		Unrealized		Unrealized		Fair
SECURITIES AVAILABLE-FOR-SALE	Cost		Gains		Losses		Values
U.S. agency securities	$	26,155	$	175	$	(148)	$	26,182
Corporate securities		9,495		35		(388)		9,142
Municipal bonds		130,806		1,443		(2,940)		129,309
Mortgage-backed securities		85,314		2,181		(364)		87,131
U.S. Small Business Administration securities		16,736		356		(54)		17,038
Total securities available-for-sale		268,506		4,190		(3,894)		268,802
SECURITIES HELD-TO-MATURITY
Corporate securities		7,500		613		—		8,113
Total securities held-to-maturity		7,500		613		—		8,113
Total securities	$	276,006	$	4,803	$	(3,894)	$	276,915

	December 31, 2020
							Estimated
	Amortized		Unrealized		Unrealized		Fair
SECURITIES AVAILABLE-FOR-SALE	Cost		Gains		Losses		Values
U.S. agency securities	$	7,940	$	166	$	(1)	$	8,105
Corporate securities		11,885		54		(939)		11,000
Municipal bonds		69,572		2,435		(150)		71,857
Mortgage-backed securities		65,722		2,541		(76)		68,187
U.S. Small Business Administration securities		18,441		443		(15)		18,869
Total securities available-for-sale		173,560		5,639		(1,181)		178,018
SECURITIES HELD-TO-MATURITY
Corporate securities		7,500		77		(21)		7,556
Total securities held-to-maturity		7,500		77		(21)		7,556
Total securities	$	181,060	$	5,716	$	(1,202)	$	185,574

At September 30, 2021, the Bank pledged seven securities held at the FHLB of Des Moines with a carrying value of $8.4 million to secure Washington State public deposits of $13.1 million with a $5.1 million collateral requirement by the Washington Public Deposit Protection Commission.  At December 31, 2020, the Bank pledged seven securities held at the FHLB of Des Moines with a carrying value of $8.8 million to secure Washington State public deposits of $13.2 million with a $5.3 million minimum collateral requirement by the Washington Public Deposit Protection Commission.  At September 30, 2021, the Bank had pledged two securities with a total carrying value of $3.4 million to secure interest rate swaps designated as cash flow hedges. See “Note 5- Derivatives”, for detail on the Bank’s interest rate swaps.

Investment securities that were in an unrealized loss position at September 30, 2021 and December 31, 2020 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral.

	September 30, 2021
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
SECURITIES AVAILABLE-FOR-SALE	Value		Losses		Value		Losses		Value		Losses
U.S. agency securities	$	2,903	$	(74)	$	1,914	$	(74)	$	4,817	$	(148)
Corporate securities		—		—		5,612		(388)		5,612		(388)
Municipal bonds		73,562		(2,757)		6,114		(183)		79,676		(2,940)
Mortgage-backed securities		17,442		(227)		4,790		(137)		22,232		(364)
U.S. Small Business Administration securities		2,107		(54)		—		—		2,107		(54)
Total securities available-for-sale	$	96,014	$	(3,112)	$	18,430	$	(782)	$	114,444	$	(3,894)

	December 31, 2020
	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
SECURITIES AVAILABLE-FOR-SALE	Value		Losses		Value		Losses		Value		Losses
U.S. agency securities	$	1,986	$	(1)	$	—	$	—	$	1,986	$	(1)
Corporate securities		7,059		(939)		—		—		7,059		(939)
Municipal bonds		8,377		(150)		—		—		8,377		(150)
Mortgage-backed securities		6,903		(65)		3,002		(11)		9,905		(76)
U.S. Small Business Administration securities		2,314		(15)		—		—		2,314		(15)
Total securities available-for-sale		26,639		(1,170)		3,002		(11)		29,641		(1,181)
SECURITIES HELD-TO-MATURITY
Corporate securities		4,979		(21)		—		—		4,979		(21)
Total securities held-to-maturity		4,979		(21)		—		—		4,979		(21)
Total	$	31,618	$	(1,191)	$	3,002	$	(11)	$	34,620	$	(1,202)

There were 63 investments with unrealized losses of less than one year, and ten investments with an unrealized loss of more than one year at September 30, 2021. There were 21 investments with unrealized losses of less than one year, and one investment with an unrealized loss of more than one year at December 31, 2020. The unrealized losses associated with these investments are believed to be caused by changing market conditions that are considered to be temporary and the Company does not intend to sell the securities, and it is not likely to be required to sell these securities prior to maturity. Based on the Company’s evaluation of these securities, no other-than-temporary impairment was recorded for the nine months ended September 30, 2021, or for the year ended December 31, 2020.  Additional deterioration in market and economic conditions, may have an adverse impact on credit quality in the future and result in other-than-temporary impairment charges.

The contractual maturities of securities available-for-sale and held-to-maturity at September 30, 2021 and December 31, 2020 are listed below. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay the obligations; therefore, these securities are classified separately with no specific maturity date.

	September 30, 2021				December 31, 2020
SECURITIES AVAILABLE-FOR-SALE	Amortized		Fair		Amortized		Fair
U.S. agency securities	Cost		Value		Cost		Value
Due after one year through five years	$	964	$	1,025	$	978	$	1,060
Due after five years through ten years		6,916		6,939		1,000		1,036
Due after ten years		18,275		18,218		5,962		6,009
Subtotal		26,155		26,182		7,940		8,105
Corporate securities
Due in one year or less		—		—		2,392		2,433
Due after one year through five years		3,495		3,530		3,493		3,491
Due after five years through ten years		4,000		3,691		4,000		3,676
Due after ten years		2,000		1,921		2,000		1,400
Subtotal		9,495		9,142		11,885		11,000
Municipal bonds
Due in one year or less		—		—		101		101
Due after one year through five years		3,730		3,899		3,749		3,980
Due after five years through ten years		6,879		7,069		7,994		8,321
Due after ten years		120,197		118,341		57,728		59,455
Subtotal		130,806		129,309		69,572		71,857

Mortgage-backed securities
Federal National Mortgage Association (“FNMA”)		71,249		72,877		47,675		50,005
Federal Home Loan Mortgage Corporation (“FHLMC”)		9,789		9,907		11,825		11,913
Government National Mortgage Association (“GNMA”)		4,276		4,347		6,222		6,269
Subtotal		85,314		87,131		65,722		68,187
U.S. Small Business Administration securities
Due after one year through five years		2,518		2,568		2,266		2,353
Due after five years through ten years		4,463		4,605		8,097		8,333
Due after ten years		9,755		9,865		8,078		8,183
Subtotal		16,736		17,038		18,441		18,869
Total securities available-for-sale		268,506		268,802		173,560		178,018
SECURITIES HELD-TO-MATURITY
Corporate securities
Due after five years through ten years		7,500		8,113		7,500		7,556
Total securities held-to-maturity		7,500		8,113		7,500		7,556
Total securities	$	276,006	$	276,915	$	181,060	$	185,574

There were no sales proceeds, gains or losses from the sale of securities available-for-sale for the three and nine months ended September 30, 2021, compared to $3.0 million and $12.2 million in proceeds and $119,000 and $300,000 in gains for the three and nine months ended September 30, 2020, respectively.