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-share agreements.

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



	December 31, 2012			December 31, 2011
	(in thousands)
Noncovered loans:
Commercial business	$	1,155,158		$	1,031,721
Real estate:
One-to-four family residential	43,922			64,491
Commercial and multifamily residential	1,061,201			998,165
Total real estate	1,105,123			1,062,656
Real estate construction:
One-to-four family residential	50,602			50,208
Commercial and multifamily residential	65,101			36,768
Total real estate construction	115,703			86,976
Consumer	157,493			183,235
Less: Net unearned income	(7,767		)	(16,217		)
Total noncovered loans, net of unearned income	2,525,710			2,348,371
Less: Allowance for loan and lease losses	(52,244		)	(53,041		)
Total noncovered loans, net	$	2,473,466		$	2,295,330
Loans held for sale	$	2,563		$	2,148

At December 31, 2012 and 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 has 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 $14.2 million and $9.0 million at December 31, 2012 and 2011, respectively. During 2012, advances on related party loans were $7.7 million and repayments totaled $2.5 million.

At December 31, 2012 and 2011, $443.4 million and $462.0 million of commercial and residential real estate loans were pledged as collateral on Federal Home Loan Bank advances. The Company has also pledged $13.8 million and $351.3 million of commercial loans to the Federal Reserve Bank for additional borrowing capacity at December 31, 2012 and 2011, respectively.

Nonaccrual loans totaled $37.4 million and $53.5 million at December 31, 2012 and 2011, respectively. The amount of interest income foregone as a result of these loans being placed on nonaccrual status totaled $3.4 million for 2012, $5.3 million for 2011 and $6.4 million for 2010. There were no loans 90 days past due and still accruing interest as of December 31, 2012 and December 31, 2011. At December 31, 2012 and 2011, there were $346 thousand and $2.0 million, respectively, of commitments of additional funds for loans accounted for on a nonaccrual basis.

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



	December 31, 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	$	9,037	$	17,821	$	10,124	$	16,820
Unsecured	262		262		119		719
Real estate:
One-to-four family residential	2,349		2,672		2,696		3,011
Commercial and multifamily residential:
Commercial land	4,076		7,491		3,739		7,230
Income property	8,520		10,815		6,775		9,265
Owner occupied	6,608		7,741		8,971		10,932
Real estate construction:
One-to-four family residential:
Land and acquisition	3,084		6,704		7,799		16,703
Residential construction	1,816		2,431		2,986		5,316
Commercial and multifamily residential:
Income property	—		—		7,067		14,912
Owner occupied	—		—		—		—
Consumer	1,643		1,940		3,207		3,960
Total	$	37,395	$	57,877	$	53,483	$	88,868

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



	Current Loans		30 - 59 Days Past Due		60 - 89 Days Past Due		Total Past Due		Nonaccrual Loans		Total Loans
December 31, 2012	(in thousands)
Noncovered loans:
Commercial business:
Secured	$	1,091,770	$	4,259	$	1,485	$	5,744	$	9,037	$	1,106,551
Unsecured	44,817		252		12		264		262		45,343
Real estate:
One-to-four family residential	41,508		193		142		335		2,349		44,192
Commercial and multifamily residential:
Commercial land	42,818		311		122		433		4,076		47,327
Income property	603,339		2,726		227		2,953		8,520		614,812
Owner occupied	387,525		1,040		—		1,040		6,608		395,173
Real estate construction:
One-to-four family residential:
Land and acquisition	15,412		—		—		—		3,084		18,496
Residential construction	29,848		—		—		—		1,816		31,664
Commercial and multifamily residential:
Income property	28,342		—		—		—		—		28,342
Owner occupied	36,211		—		—		—		—		36,211
Consumer	155,207		387		362		749		1,643		157,599
Total	$	2,476,797	$	9,168	$	2,350	$	11,518	$	37,395	$	2,525,710
	Current Loans		30 - 59 Days Past Due		60 - 89 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 and multifamily residential:
Commercial land	46,161		781		—		781		3,739		50,681
Income property	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 and multifamily residential:
Income property	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 (see Note 1) as of December 31, 2012 and 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
December 31, 2012	(in thousands)
Noncovered loans:
Commercial business:
Secured	$	1,101,689	$	4,862	$	690	$	1,994	$	113	$	4,172	$	6,769
Unsecured	45,251		92		92		92		92		—		—
Real estate:
One-to-four family residential	42,103		2,089		345		364		112		1,744		1,902
Commercial and multifamily residential:
Commercial land	44,672		2,655		—		—		—		2,655		5,727
Income property	606,656		8,156		2,670		2,727		1,040		5,486		7,860
Owner occupied	383,269		11,904		608		610		38		11,296		14,642
Real estate construction:
One-to-four family residential:
Land and acquisition	15,677		2,819		—		—		—		2,819		4,813
Residential construction	29,707		1,957		—		—		—		1,957		2,570
Commercial and multifamily residential:
Income property	28,342		—		—		—		—		—		—
Owner occupied	36,211		—		—		—		—		—		—
Consumer	157,472		127		—		—		—		127		127
Total	$	2,491,049	$	34,661	$	4,405	$	5,787	$	1,395	$	30,256	$	44,410



	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 and multifamily residential:
Commercial land	46,882		3,799		—		—		—		3,799		6,773
Income property	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 and multifamily residential:
Income property	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 years ended December 31, 2012 and 2011:



	Year ended December 31, 2012				Year Ended December 31, 2011
	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	$	8,978	$	9	$	15,578	$	511
Unsecured	113		6		138		—
Real estate:
One-to-four family residential	2,130		—		2,494		—
Commercial & multifamily residential
Commercial land	3,124		—		4,263		—
Income property	7,895		77		8,881		59
Owner occupied	13,315		1,004		15,254		18
Real estate construction:
One-to-four family residential
Land and acquisition	4,465		—		8,972		116
Residential construction	3,223		11		4,535		—
Commercial & multifamily residential
Income property	3,169		—		7,065		—
Owner occupied	—		—		—		—
Consumer	1,112		7		3,880		15
Total	$	47,524	$	1,114	$	71,060	$	719

The average recorded investment in impaired loans for the year ended December 31, 2010 was $102.6 million. There was no interest income recognized on impaired loans for the year ended December 31, 2010.

The following is an analysis of loans classified as Troubled Debt Restructurings ("TDR") for the years ended December 31, 2012 and 2011:



	Year ended December 31, 2012					Year Ended December 31, 2011
	Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Noncovered loans:	(dollars in thousands)
Commercial business:
Secured	1	$	195	$	194	6	$	659	$	659
Real estate:
One-to-four family residential	—	—		—		1	369		369
Commercial and multifamily residential:
Income property	1	4,279		2,650		2	1,280		1,280
Real estate construction:
One-to-four family residential:
Residential construction	—	—		—		1	36		36
Total	2	$	4,474	$	2,844	10	$	2,344	$	2,344

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 $236 thousand and $535 thousand of additional funds on loans classified as TDR as of December 31, 2012 and 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 that have defaulted during the years ended December 31, 2012 and 2011.