Derivative Financial Instruments

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial InstrumentsThe Company has entered into certain interest rate swap contracts that are not designated as hedging instruments. The following table presents the notional amounts and estimated fair values of interest rate derivative contracts outstanding at December 31, 2020 and December 31, 2019:


	December 31, 2020			December 31, 2019
	Notional Amounts	Estimated Fair Value		Notional Amounts		Estimated Fair Value
	(In thousands)
Non-hedging interest rate derivatives
Interest rate swap asset (1)	308,126	$	25,740	$	221,436	$	8,318
Interest rate swap liability (1)	308,126	(26,162)		221,436		(8,318)

(1) The estimated fair value of derivatives with customers was $25.4 million and $8.1 million as of December 31, 2020 and December 31, 2019, respectively. The estimated fair value of derivatives with third-parties was $(25.9) million and $(8.1) million as of December 31, 2020 and December 31, 2019, respectively.

Generally, the gains and losses of the interest rate derivatives offset due to the back-to-back nature of the contracts. However, as of December 31, 2020, the settlement values of the Bank's net derivative assets decreased due to the recognition of a credit valuation adjustment of $422,000 during the year ended December 31, 2020. A credit valuation adjustment was not recorded on the Bank's net derivative assets as of December 31, 2019.

Credit risk for derivatives with customers is concentrated within our primary market areas which are concentrated along the I-5 corridor from Whatcom County to Clark County in Washington State and Multnomah County and Washington County in Oregon, as well as other contiguous markets and represents a geographic concentration. Credit risk for derivatives with third-parties is concentrated among four well-known broker dealers.