Regulatory matters

12 Months Ended

Dec. 31, 2012

Notes To Financials Statement [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

20. Regulatory matters

Bancorp and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Bancorp and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Bancorp’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require Bancorp and the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Tier 1 capital to average assets and Tier 1 and total capital to risk-weighted assets (all as defined in the regulations).

Federal banking regulators are required to take prompt corrective action if an insured depository institution fails to satisfy certain minimum capital requirements. Such actions could potentially include a leverage capital limit, a risk-based capital requirement, and any other measure of capital deemed appropriate by the federal banking regulator for measuring the capital adequacy of an insured depository institution. In addition, payment of dividends by Bancorp and the Bank are subject to restriction by state and federal regulators and availability of retained earnings.

At December 31, 2012 the Bank and Bancorp met the regulatory benchmarks to be “well-capitalized” under the applicable regulations and the Order and the Written Agreement (discussed below). At December 31, 2011 the Bank and Bancorp did not meet the 10% Tier 1 leverage ratio requirement per the Order and the Written Agreement, and were both considered “adequately capitalized” under the applicable regulations. As a result, Bancorp filed the required update to its capital plan with the FRB and the Oregon Division of Finance and Corporate Securities (“DFCS”) which was accepted by its regulators.

On August 27, 2009, the Bank entered into an agreement with the FDIC, its principal federal banking regulator, and DFCS which required the Bank to take certain measures to improve its safety and soundness.

In connection with this agreement, the Bank stipulated to the issuance by the FDIC and the DFCS of a cease-and-desist order (the “Order”) against the Bank based on certain findings from an examination of the Bank concluded in February 2009 based upon financial and lending data measured as of December 31, 2008 (the Report of Examination, or “ROE”). In entering into the stipulation and consenting to entry of the Order, the Bank did not concede the findings or admit to any of the assertions therein.

Under the Order, the Bank was required to take certain measures to improve its capital position, maintain liquidity ratios, reduce its level of non-performing assets, reduce its loan concentrations in certain portfolios, improve management practices and board supervision, and assure that its reserve for loan losses is maintained at an appropriate level.

Among the corrective actions required were for the Bank to develop and adopt a plan to maintain the minimum capital requirements for a “well-capitalized” bank, including a Tier 1 leverage ratio of at least 10% at the Bank level beginning 150 days from the issuance of the Order. As of December 31, 2012, the requirement relating to increasing the Bank’s Tier 1 leverage ratio was met.

The Order further required the Bank to ensure the level of the reserve for loan losses be maintained at appropriate levels to safeguard the book value of the Bank’s loans and leases, and to reduce the amount of classified loans as of the ROE to no more than 75% of capital. As of December 31, 2012, the requirement that the amount of classified loans as of the ROE be reduced to no more than 75% of capital was met. As required by the Order, all assets classified as “Loss” in the ROE have been charged-off. The Bank has also developed and implemented a process for the review and approval of all applicable asset disposition plans.

The Order further required the Bank to maintain a primary liquidity ratio (net cash, plus net short-term and marketable assets divided by net deposits and short-term liabilities) of at least 15%. As of December 31, 2012, the Bank’s primary liquidity ratio was 26.0%.

In addition, pursuant to the Order, the Bank was required to retain qualified management and to notify the FDIC and the DFCS in writing before adding any individual to its Board or employing any new senior executive officer. Under the Order, the Bank’s Board also was required to increase its participation in the affairs of the Bank, assuming full responsibility for the approval of sound policies and objectives and for the supervision of all the Bank’s activities. The Order also restricted the Bank from taking certain actions without the consent of the FDIC and the DFCS, including paying cash dividends, and from extending additional credit to certain types of borrowers.

On March 7, 2013, the Bank entered into a memorandum of understanding with the FDIC and DFCS and the Order was terminated. During the life of the memorandum of understanding the Bank may not pay dividends without the written consent of the FDIC and DFCS and the Bank must maintain higher levels of capital than required by published capital adequacy requirements, as discussed above. The Order was still in place at December 31, 2012.

On October 26, 2009, Bancorp entered into a written agreement with the FRB and DFCS (the “Written Agreement”), which requires Bancorp to take certain measures to improve its safety and soundness. Under the Written Agreement, Bancorp was required to develop and submit for approval, a plan to maintain sufficient capital at Bancorp and the Bank within 60 days of the date of the Written Agreement. The Company submitted a strategic plan on October 28, 2009. As of December 31, 2012, Bancorp met the 10% Tier 1 leverage ratio requirement per the Written Agreement, however at December 31, 2011 Bancorp did not meet this requirement and was considered “adequately capitalized” under the applicable regulations. As a result, Bancorp filed the required update to its capital plan with the FRB and DFCS which was accepted by its regulators.

Bancorp’s actual and required capital amounts and ratios as of December 31, 2012 and December 31, 2011 are presented in the following table (dollars in thousands):

	Actual					Regulatory minimum to be “adequately capitalized”					Regulatory minimum to be “well capitalized” under prompt corrective action provisions
	Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount		Ratio
2012:
Tier 1 leverage (to average assets)	$	136,960		10.4	%	$	52,470		4.0	%	$	131,174		10.0	%(1)
Tier 1 capital (to risk-weighted assets)		136,960		14.1			38,811		4.0			58,216		6.0
Total capital (to risk-weighted assets)		149,296		15.4			77,621		8.0			97,027		10.0
2011:
Tier 1 leverage (to average assets)	$	130,172		9.4	%	$	55,260		4.0	%	$	138,151		10.0	%(1)
Tier 1 capital (to risk-weighted assets)		130,172		13.0			39,917		4.0			59,875		6.0
Total capital (to risk-weighted assets)		143,067		14.3			79,834		8.0			99,792		10.0

(1) Pursuant to the Written Agreement, in order to be deemed “well capitalized”, Bancorp must maintain a Tier 1 leverage ratio of at least 10.00%.

The Bank’s actual and required capital amounts and ratios as of December 31, 2012 and 2011 are presented in the following table (dollars in thousands):

	Actual					Regulatory minimum to be “adequately capitalized”					Regulatory minimum to be “well capitalized” under prompt corrective action provisions
Capital Amount	Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount		Ratio
2012:
Tier 1 leverage (to average assets)	$	136,658		10.4	%	$	52,457		4.0	%	$	131,142		10.0	%
Tier 1 capital (to risk-weighted assets)		136,658		14.1			38,803		4.0			58,205		6.0
Total capital (to risk-weighted assets)		148,991		15.4			77,607		8.0			97,008		10.0
2011:(2)
Tier 1 leverage (to average assets)	$	129,473		9.4	%	$	55,223		4.0	%	$	138,059		10.0	%
Tier 1 capital (to risk-weighted assets)		129,473		13.0			39,910		4.0			59,865		6.0
Total capital (to risk-weighted assets)		142,366		14.3			79,819		8.0			99,774		10.0

(1) Pursuant to the Order, as of December 31, 2012 and 2011, in order to be deemed “well capitalized”, the Bank must maintain a Tier 1 leverage ratio of at least 10.00%.

(2) Adjusted to correct for an error in the computation of the Bank's regulatory capital at December 31, 2011. See Note 16 to the Company's condensed consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.