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Investment Securities
 12 Months Ended
Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
Investment Securities
The Company’s investment policy is designed primarily to provide and maintain liquidity, generate a favorable return on assets without incurring undue interest rate and credit risk, and complement the Bank’s lending activities. Securities are classified as either available for sale or held to maturity when acquired.
(a) Securities by Type and Maturity
The amortized cost, gross unrealized gains, gross unrealized losses and fair values of investment securities available for sale at the dates indicated were as follows:
 
Securities Available for Sale
 
December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
U.S. Treasury and U.S. Government-sponsored agencies
$
21,414

 
$
44

 
$
(31
)
 
$
21,427

Municipal securities
170,082

 
3,139

 
(184
)
 
173,037

Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
539,859

 
4,015

 
(1,475
)
 
542,399

Corporate obligations
4,034

 
—

 
(24
)
 
4,010

Mutual funds and other equities
1,956

 
17

 
—

 
1,973

Total
$
737,345

 
$
7,215

 
$
(1,714
)
 
$
742,846

 
Securities Available for Sale
 
December 31, 2013
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
U.S. Treasury and U.S. Government-sponsored agencies
$
6,098

 
$
3

 
$
(62
)
 
$
6,039

Municipal securities
49,989

 
806

 
(1,735
)
 
49,060

Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
108,466

 
898

 
(1,329
)
 
108,035

Total
$
164,553

 
$
1,707

 
$
(3,126
)
 
$
163,134



The amortized cost, gross unrecognized gains, gross unrecognized losses and fair values of investment securities held to maturity at the dates indicated were as follows:
 
Securities Held to Maturity
 
December 31, 2014
 
Amortized
Cost
 
Gross
Unrecognized
Gains
 
Gross
Unrecognized
Losses
 
Fair
Value
 
(In thousands)
U.S. Treasury and U.S. Government-sponsored agencies
$
1,591

 
$
167

 
$
—

 
$
1,758

Municipal securities
22,486

 
643

 
(11
)
 
23,118

Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
10,866

 
364

 
(74
)
 
11,156

Private residential collateralized mortgage obligations
871

 
75

 
(104
)
 
842

Total
$
35,814

 
$
1,249

 
$
(189
)
 
$
36,874

 
Securities Held to Maturity
 
December 31, 2013
 
Amortized
Cost
 
Gross
Unrecognized
Gains
 
Gross
Unrecognized
Losses
 
Fair
Value
 
(In thousands)
U.S. Treasury and U.S. Government-sponsored agencies
$
1,687

 
$
153

 
$
—

 
$
1,840

Municipal securities
24,290

 
200

 
(184
)
 
24,306

Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
9,129

 
144

 
(284
)
 
8,989

Private residential collateralized mortgage obligations
1,048

 
185

 
(28
)
 
1,205

Total
$
36,154

 
$
682

 
$
(496
)
 
$
36,340


There were no securities classified as trading at December 31, 2014 or December 31, 2013.
The amortized cost and fair value of securities at December 31, 2014, by contractual maturity, are set forth below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
 
Securities Available for Sale
 
Securities Held to Maturity
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair Value
 
(In thousands)
Due in one year or less
$
4,148

 
$
4,171

 
$
2,895

 
$
2,912

Due after one year through three years
31,547

 
31,693

 
4,336

 
4,385

Due after three years through five years
23,675

 
24,104

 
5,490

 
5,710

Due after five years through ten years
150,635

 
151,946

 
18,558

 
19,359

Due after ten years
525,384

 
528,959

 
4,535

 
4,508

Investment securities with no stated maturity
1,956

 
1,973

 
—

 
—

Total
$
737,345

 
$
742,846

 
$
35,814

 
$
36,874


(b) Unrealized Losses and Other-Than-Temporary Impairments
Available for sale investment securities with unrealized losses as of December 31, 2014 and December 31, 2013 were as follows:
 
Securities Available for Sale
 
December 31, 2014
 
Less than 12 Months
 
12 Months or
Longer
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
U.S. Treasury and U.S. Government-sponsored agencies
$
3,567

 
$
(31
)
 
$
—

 
$
—

 
$
3,567

 
$
(31
)
Municipal securities
25,176

 
(184
)
 
—

 
—

 
25,176

 
(184
)
Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
182,970

 
(1,475
)
 
—

 
—

 
182,970

 
(1,475
)
Corporate obligations
2,119

 
(24
)
 
—

 
—

 
2,119

 
(24
)
Total
$
213,832

 
$
(1,714
)
 
$
—

 
$
—

 
$
213,832

 
$
(1,714
)
 
Securities Available for Sale
 
December 31, 2013
 
Less than 12 Months
 
12 Months or
Longer
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
U.S. Treasury and U.S. Government-sponsored agencies
$
3,031

 
$
(62
)
 
$
—

 
$
—

 
$
3,031

 
$
(62
)
Municipal securities
21,471

 
(1,242
)
 
4,644

 
(493
)
 
26,115

 
(1,735
)
Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
56,327

 
(1,184
)
 
7,758

 
(145
)
 
64,085

 
(1,329
)
Total
$
80,829

 
$
(2,488
)
 
$
12,402

 
$
(638
)
 
$
93,231

 
$
(3,126
)


Held to maturity investment securities with unrecognized losses as of December 31, 2014 and December 31, 2013 were as follows:
 
Securities Held to Maturity
 
December 31, 2014
 
Less than 12
Months
 
12 Months or
Longer
 
Total
 
Fair
Value
 
Unrecognized
Losses
 
Fair
Value
 
Unrecognized
Losses
 
Fair
Value
 
Unrecognized
Losses
 
(In thousands)
Municipal securities
$
2,196

 
$
(11
)
 
$
—

 
$
—

 
$
2,196

 
$
(11
)
Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
2,553

 
(74
)
 
—

 
—

 
2,553

 
(74
)
Private residential collateralized mortgage obligations
558

 
(104
)
 
—

 
—

 
558

 
(104
)
Total
$
5,307

 
$
(189
)
 
$
—

 
$
—

 
$
5,307

 
$
(189
)

 
Securities Held to Maturity
 
December 31, 2013
 
Less than 12
Months
 
12 Months or
Longer
 
Total
 
Fair
Value
 
Unrecognized
Losses
 
Fair
Value
 
Unrecognized
Losses
 
Fair
Value
 
Unrecognized
Losses
 
(In thousands)
Municipal securities
$
10,967

 
$
(184
)
 
$
—

 
$
—

 
$
10,967

 
$
(184
)
Mortgage backed securities and collateralized mortgage obligations-residential:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government-sponsored agencies
4,869

 
(284
)
 
—

 
—

 
4,869

 
(284
)
Private residential collateralized mortgage obligations
211

 
(5
)
 
124

 
(23
)
 
335

 
(28
)
Total
$
16,047

 
$
(473
)
 
$
124

 
$
(23
)
 
$
16,171

 
$
(496
)
The Company has evaluated these securities and has determined that, other than certain private residential collateralized mortgage obligations discussed below, the decline in their value is temporary. The unrealized losses are primarily due to increases in market interest rates and larger spreads in the market for mortgage-related products. The fair value of these securities is expected to recover as the securities approach their maturity date and/or as the pricing spreads narrow on mortgage-related securities. The Company has the ability and intent to hold the investments until recovery of the market value which may be the maturity date of the securities.
To analyze the unrealized losses, the Company estimated expected future cash flows of the private residential collateralized mortgage obligations by estimating the expected future cash flows of the underlying collateral and applying those collateral cash flows, together with any credit enhancements such as subordination interests owned by third parties, to the security. The expected future cash flows of the underlying collateral are determined using the remaining contractual cash flows adjusted for future expected credit losses (which considers current delinquencies and nonperforming assets, future expected default rates and collateral value by vintage and geographic region) and prepayments. The expected cash flows of the security are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. The average discount interest rate used in the valuations of the present value as of December 31, 2014 and 2013 was 9.4% and 6.4%, respectively, and the average prepayment rate for each period was 6.0%.
For the years ended December 31, 2014 and 2013, there were four and eight, respectively, private residential collateralized mortgage obligations determined to be other-than-temporarily impaired. All unrealized losses for the years ended December 31, 2014 and 2013 were deemed to be credit related, and the Company recorded the impairment in earnings. No impairment for the years ended December 31, 2014 and 2013 was recorded through other comprehensive income (loss). For the year ended December 31, 2012, there were eight private residential collateralized mortgage obligations determined to be other-than-temporarily impaired. A portion of the impairment not related to credit losses was recorded through other comprehensive (loss) income for the year ended December 31, 2012.
The following table summarizes activity for the years ended December 31, 2014, 2013 and 2012 related to the amount of impairments on held to maturity securities:
 
Life-to-Date Gross Other-Than-Temporary Impairments (1)
 
Life-to-Date Other-Than-Temporary Impairments Included in Other Comprehensive Income (Loss)
 
Life-to-Date Net
Other-Than-Temporary Impairments Included in Earnings
 
(In thousands)
December 31, 2011
$
2,435

 
$
1,100

 
$
1,335

Subsequent impairments
130

 
52

 
78

December 31, 2012
2,565

 
1,152

 
1,413

Subsequent impairments
38

 
—

 
38

December 31, 2013
2,603

 
1,152

 
1,451

Subsequent impairments
45

 
—

 
45

December 31, 2014
$
2,648

 
$
1,152

 
$
1,496

(1)
Life-to-date gross other-than-temporary impairments disclosed in this table are not reflective of subsequent recoveries, if any.

(c) Pledged Securities
The following table summarizes the amortized cost and fair value of available for sale and held to maturity securities that are pledged as collateral for the following obligations at December 31, 2014 and December 31, 2013:
 
December 31, 2014
 
December 31, 2013
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(In thousands)
Washington and Oregon state to secure public deposits
$
150,507

 
$
153,785

 
$
80,386

 
$
80,881

Federal Reserve Bank and FHLB to secure borrowing arrangements
4,430

 
4,460

 
—

 
—

Repurchase agreements
43,676

 
44,457

 
34,170

 
33,893

Other securities pledged
14,828

 
14,922

 
—

 
—

Total
$
213,441

 
$
217,624

 
$
114,556

 
$
114,774



At December 31, 2014 and 2013, total carrying value of pledged securities was $216.7 million and $114.8 million, respectively.