Noncovered Loans

Noncovered loans include loans originated through our branch network and loan departments as well as acquired loans that are not subject to FDIC loss-sharing agreements.

The following is an analysis of the noncovered loan portfolio by major types of loans (net of unearned income):



	September 30, 2012			December 31, 2011
Noncovered loans:	(in thousands)
Commercial business	$	1,142,737		$	1,031,721
Real estate:
One-to-four family residential	47,656			64,491
Commercial and multifamily residential	1,035,356			998,165
Total real estate	1,083,012			1,062,656
Real estate construction:
One-to-four family residential	50,381			50,208
Commercial and multifamily residential	51,466			36,768
Total real estate construction	101,847			86,976
Consumer	160,771			183,235
Less: Net unearned income	(11,523		)	(16,217		)
Total noncovered loans, net of unearned income	2,476,844			2,348,371
Less: Allowance for loan and lease losses	(51,527		)	(53,041		)
Total noncovered loans, net	$	2,425,317		$	2,295,330
Loans held for sale	$	3,600		$	2,148

At September 30, 2012 and December 31, 2011, the Company had no material foreign activities. Substantially all of the Company’s loans and unfunded commitments are geographically concentrated in its service areas within the states of Washington and Oregon.

The Company and its banking subsidiary have granted loans to officers and directors of the Company and related interests. These loans are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectability. The aggregate dollar amount of these loans was $13.5 million and $9.0 million at September 30, 2012 and December 31, 2011, respectively. During the first nine months of 2012, advances on related party loans were $6.9 million and repayments totaled $2.4 million.

At September 30, 2012 and December 31, 2011, $441.6 million and $462.0 million of commercial and residential real estate loans were pledged as collateral on Federal Home Loan Bank borrowings. The Company has also pledged $61.7 million and $351.3 million of commercial loans to the Federal Reserve Bank for additional borrowing capacity at September 30, 2012 and December 31, 2011, respectively.

The following is an analysis of noncovered, nonaccrual loans as of September 30, 2012 and December 31, 2011:



	September 30, 2012				December 31, 2011
	Recorded Investment Nonaccrual Loans		Unpaid Principal Balance Nonaccrual Loans		Recorded Investment Nonaccrual Loans		Unpaid Principal Balance Nonaccrual Loans
Noncovered loans:	(in thousands)
Commercial business
Secured	$	12,455	$	21,683	$	10,124	$	16,820
Unsecured	109		109		119		719
Real estate:
One-to-four family residential	2,220		2,617		2,696		3,011
Commercial & multifamily residential
Commercial land	3,647		7,581		3,739		7,230
Income property multifamily	6,628		9,233		6,775		9,265
Owner occupied	9,184		12,598		8,971		10,932
Real estate construction:
One-to-four family residential
Land and acquisition	3,332		7,360		7,799		16,703
Residential construction	2,027		2,648		2,986		5,316
Commercial & multifamily residential
Income property multifamily	—		—		7,067		14,912
Consumer	1,987		2,279		3,207		3,960
Total	$	41,589	$	66,108	$	53,483	$	88,868

The following is an aging of the recorded investment of the noncovered loan portfolio as of September 30, 2012 and December 31, 2011:



	Current Loans		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Nonaccrual Loans		Total Loans
September 30, 2012	(in thousands)
Noncovered loans:
Commercial business
Secured	$	1,079,237	$	4,735	$	572	$	—	$	5,307	$	12,455	$	1,096,999
Unsecured	41,414		58		485		—		543		109		42,066
Real estate:
One-to-four family residential	45,173		31		401		—		432		2,220		47,825
Commercial & multifamily residential
Commercial land	39,729		93		420		—		513		3,647		43,889
Income property multifamily	576,969		2,281		—		—		2,281		6,628		585,878
Owner occupied	388,011		1,124		—		—		1,124		9,184		398,319
Real estate construction:
One-to-four family residential
Land and acquisition	14,139		386		1,225		—		1,611		3,332		19,082
Residential construction	27,390		118		1,395		—		1,513		2,027		30,930
Commercial & multifamily residential
Income property multifamily	27,027		—		—		—		—		—		27,027
Owner occupied	23,974		—		—		—		—		—		23,974
Consumer	157,901		848		119		—		967		1,987		160,855
Total	$	2,420,964	$	9,674	$	4,617	$	—	$	14,291	$	41,589	$	2,476,844

	Current Loans		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Nonaccrual Loans		Total Loans
December 31, 2011	(in thousands)
Noncovered loans:
Commercial business
Secured	$	966,563	$	1,741	$	2,989	$	—	$	4,730	$	10,124	$	981,417
Unsecured	46,880		407		—		—		407		119		47,406
Real estate:
One-to-four family residential	60,764		603		—		—		603		2,696		64,063
Commercial & multifamily residential
Commercial land	46,161		781		—		—		781		3,739		50,681
Income property multifamily	524,225		2,872		121		—		2,993		6,775		533,993
Owner occupied	394,691		829		298		—		1,127		8,971		404,789
Real estate construction:
One-to-four family residential
Land and acquisition	17,249		153		—		—		153		7,799		25,201
Residential construction	19,555		1,390		—		—		1,390		2,986		23,931
Commercial & multifamily residential
Income property multifamily	13,810		—		—		—		—		7,067		20,877
Owner occupied	12,790		—		—		—		—		—		12,790
Consumer	179,753		141		122		—		263		3,207		183,223
Total	$	2,282,441	$	8,917	$	3,530	$	—	$	12,447	$	53,483	$	2,348,371

The following is an analysis of impaired loans as of September 30, 2012 and December 31, 2011:



	Recorded Investment of Loans Collectively Measured for Contingency Provision		Recorded Investment of Loans Individually Measured for Specific Impairment		Impaired Loans With Recorded Allowance						Impaired Loans Without Recorded Allowance
					Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance
September 30, 2012	(in thousands)
Noncovered loans:
Commercial business
Secured	$	1,088,513	$	8,486	$	1,498	$	2,086	$	315	$	6,988	$	12,330
Unsecured	41,966		100		100		100		100		—		—
Real estate:
One-to-four family residential	45,849		1,976		353		366		69		1,623		1,832
Commercial & multifamily residential
Commercial land	40,824		3,065		205		214		1		2,860		6,470
Income property multifamily	579,603		6,275		—		—		—		6,275		8,574
Owner occupied	384,110		14,209		1,559		1,657		245		12,650		18,162
Real estate construction:
One-to-four family residential
Land and acquisition	16,263		2,819		—		—		—		2,819		4,813
Residential construction	28,101		2,829		—		—		—		2,829		3,444
Commercial & multifamily residential
Income property multifamily	27,027		—		—		—		—		—		—
Owner occupied	23,974		—		—		—		—		—		—
Consumer	159,812		1,043		—		—		—		1,043		1,049
Total	$	2,436,042	$	40,802	$	3,715	$	4,423	$	730	$	37,087	$	56,674

	Recorded Investment of Loans Collectively Measured for Contingency Provision		Recorded Investment of Loans Individually Measured for Specific Impairment		Impaired Loans With Recorded Allowance						Impaired Loans Without Recorded Allowance
					Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance
December 31, 2011	(in thousands)
Noncovered loans:
Commercial business
Secured	$	972,531	$	8,886	$	2,926	$	2,927	$	954	$	5,960	$	12,109
Unsecured	47,309		97		97		97		97		—		—
Real estate:
One-to-four family residential	61,584		2,479		582		590		96		1,897		2,136
Commercial & multifamily residential
Commercial land	46,882		3,799		—		—		—		3,799		6,773
Income property multifamily	527,362		6,631		687		759		63		5,944		7,700
Owner occupied	390,225		14,564		274		274		185		14,290		18,524
Real estate construction:
One-to-four family residential
Land and acquisition	17,813		7,388		450		948		—		6,938		11,978
Residential construction	18,847		5,084		59		1,509		59		5,025		5,116
Commercial & multifamily residential
Income property multifamily	13,810		7,067		—		—		—		7,067		14,947
Owner occupied	12,790		—		—		—		—		—		—
Consumer	180,930		2,293		151		225		30		2,142		2,639
Total	$	2,290,083	$	58,288	$	5,226	$	7,329	$	1,484	$	53,062	$	81,922

The following table provides additional information on impaired loans for the three and nine month periods indicated.



	Three Months Ended September 30,										Nine Months Ended September 30,
	2012					2011					2012				2011
	Average Recorded Investment Impaired Loans		Interest Recognized on Impaired Loans			Average Recorded Investment Impaired Loans		Interest Recognized on Impaired Loans			Average Recorded Investment Impaired Loans		Interest Recognized on Impaired Loans		Average Recorded Investment Impaired Loans		Interest Recognized on Impaired Loans
Noncovered loans:	(in thousands)
Commercial business
Secured	$	10,306	$	6		$	8,400	$	(36	)	$	10,008	$	14	$	17,251	$	16
Unsecured	118		1			194		(1		)	118		5		148		—
Real estate:
One-to-four family residential	2,014		(9		)	2,236		—			2,140		—		2,498		—
Commercial & multifamily residential
Commercial land	3,079		—			3,790		—			3,242		—		4,380		—
Income property multifamily	7,577		55			7,454		84			7,830		60		9,444		526
Owner occupied	13,185		244			15,799		234			13,668		762		15,427		298
Real estate construction:
One-to-four family residential
Land and acquisition	3,213		—			8,202		38			4,876		—		9,368		176
Residential construction	2,792		12			3,713		—			3,539		17		4,397		—
Commercial & multifamily residential
Income property multifamily	1,877		—			6,800		—			3,961		—		7,064		—
Owner occupied	—		—			—		—			—		—		—		—
Consumer	1,045		11			3,824		12			1,359		33		4,276		13
Total	$	45,206	$	320		$	60,412	$	331		$	50,741	$	891	$	74,253	$	1,029

There were no Troubled Debt Restructurings ("TDR") during the three and nine months ended September 30, 2012. The following is an analysis of loans classified as TDR during the three and nine months ended September 30, 2011:



	Three months ended September 30, 2011
	Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Noncovered loans:	(dollars in thousands)
Commercial business:
Secured	1	$	226	$	226
Total	1	$	226	$	226



	Nine months ended September 30, 2011
	Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Noncovered loans:	(dollars in thousands)
Commercial business:
Secured	3	$	578	$	578
Real estate:
Commercial and multifamily residential:
Income property multifamily	1	623		623
Real estate construction:
One-to-four family residential:
Residential construction	1	36		36
Total	5	$	1,237	$	1,237

The Company's loans classified as TDR are loans that have been modified or the borrower has been granted special concessions due to financial difficulties that, if not for the challenges of the borrower, the Company would not otherwise consider. The Company had commitments to lend $1.2 million and $535 thousand of additional funds on loans classified as TDR as of September 30, 2012 and December 31, 2011, respectively. The TDR modifications or concessions are made to increase the likelihood that these borrowers with financial difficulties will be able to satisfy their debt obligations as amended. Credit losses for loans classified as TDR are measured on the same basis as impaired loans. For impaired loans, an allowance is established when the collateral value less selling costs (or discounted cash flows or observable market price) of the impaired loan is lower than the recorded investment of that loan. The Company did not have any loans modified as TDR within the past twelve months that have defaulted during the nine months ended September 30, 2012.