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, 2013			December 31, 2012
Noncovered loans:	(in thousands)
Commercial business	$	1,569,343		$	1,155,158
Real estate:
One-to-four family residential	106,686			43,922
Commercial and multifamily residential	2,048,910			1,061,201
Total real estate	2,155,596			1,105,123
Real estate construction:
One-to-four family residential	53,158			50,602
Commercial and multifamily residential	128,120			65,101
Total real estate construction	181,278			115,703
Consumer	362,808			157,493
Less: Net unearned income	(75,293		)	(7,767		)
Total noncovered loans, net of unearned income	4,193,732			2,525,710
Less: Allowance for loan and lease losses	(55,844		)	(52,244		)
Total noncovered loans, net	$	4,137,888		$	2,473,466
Loans held for sale	$	840		$	2,563

At September 30, 2013 and December 31, 2012, 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 $14.1 million at September 30, 2013 and $14.2 million at December 31, 2012. During the first nine months of 2013, advances on related party loans totaled $1.9 million and repayments totaled $2.0 million.

At September 30, 2013 and December 31, 2012, $649.8 million and $443.4 million of commercial and residential real estate loans were pledged as collateral on Federal Home Loan Bank borrowings and additional borrowing capacity. The Company has also pledged $49.4 million and $13.8 million of commercial loans to the Federal Reserve Bank for additional borrowing capacity at September 30, 2013 and December 31, 2012, respectively.

The following is an analysis of noncovered, nonaccrual loans as of September 30, 2013 and December 31, 2012:



	September 30, 2013				December 31, 2012
	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	$	11,839	$	18,194	$	9,037	$	17,821
Unsecured	156		181		262		262
Real estate:
One-to-four family residential	2,220		4,058		2,349		2,672
Commercial & multifamily residential
Commercial land	890		1,299		4,076		7,491
Income property	7,756		11,560		8,520		10,815
Owner occupied	5,379		7,271		6,608		7,741
Real estate construction:
One-to-four family residential
Land and acquisition	3,226		8,134		3,084		6,704
Residential construction	459		1,941		1,816		2,431
Consumer	4,036		6,012		1,643		1,940
Total	$	35,961	$	58,650	$	37,395	$	57,877

The following is an aging of the recorded investment of the noncovered loan portfolio as of September 30, 2013 and December 31, 2012:



	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, 2013	(in thousands)
Noncovered loans:
Commercial business
Secured	$	1,465,682	$	6,520	$	3,306	$	1	$	9,827	$	11,839	$	1,487,348
Unsecured	74,756		72		4		—		76		156		74,988
Real estate:
One-to-four family residential	99,413		2,232		224		—		2,456		2,220		104,089
Commercial & multifamily residential
Commercial land	133,942		—		—		—		—		890		134,832
Income property	1,125,012		7,687		—		—		7,687		7,756		1,140,455
Owner occupied	728,002		5,465		2,048		—		7,513		5,379		740,894
Real estate construction:
One-to-four family residential
Land and acquisition	9,014		—		—		—		—		3,226		12,240
Residential construction	39,928		—		—		—		—		459		40,387
Commercial & multifamily residential
Income property	88,040		—		—		—		—		—		88,040
Owner occupied	39,064		—		—		—		—		—		39,064
Consumer	325,614		1,375		369		1		1,745		4,036		331,395
Total	$	4,128,467	$	23,351	$	5,951	$	2	$	29,304	$	35,961	$	4,193,732

	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, 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 & 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 & 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

The following is an analysis of impaired loans as of September 30, 2013 and December 31, 2012:



	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, 2013	(in thousands)
Noncovered loans:
Commercial business
Secured	$	1,482,076	$	5,272	$	573	$	637	$	241	$	4,698	$	5,900
Unsecured	74,945		43		43		43		43		—		—
Real estate:
One-to-four family residential	102,547		1,542		335		358		103		1,207		2,127
Commercial & multifamily residential
Commercial land	134,266		566		—		—		—		566		899
Income property	1,131,432		9,023		—		—		—		9,023		13,319
Owner occupied	730,787		10,107		601		599		26		9,507		13,207
Real estate construction:
One-to-four family residential
Land and acquisition	9,744		2,496		115		114		73		2,381		3,149
Residential construction	40,387		—		—		—		—		—		—
Commercial & multifamily residential
Income property	88,040		—		—		—		—		—		—
Owner occupied	39,064		—		—		—		—		—		—
Consumer	331,273		122		—		—		—		122		121
Total	$	4,164,561	$	29,171	$	1,667	$	1,751	$	486	$	27,504	$	38,722

	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 & 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 & 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

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,
	2013					2012					2013				2012
	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	$	6,631	$	(25	)	$	10,306	$	6		$	5,774	$	12	$	10,008	$	14
Unsecured	47		1			118		1			68		2		118		5
Real estate:
One-to-four family residential	1,537		16			2,014		(9		)	1,677		47		2,140		—
Commercial & multifamily residential
Commercial land	1,456		48			3,079		—			2,085		48		3,242		—
Income property	10,358		22			7,577		55			9,534		168		7,830		60
Owner occupied	9,822		231			13,185		244			10,721		740		13,668		762
Real estate construction:
One-to-four family residential
Land and acquisition	2,889		1			3,213		—			2,794		4		4,876		—
Residential construction	—		—			2,792		12			526		—		3,539		17
Commercial & multifamily residential
Income property	—		—			1,877		—			—		—		3,961		—
Consumer	423		2			1,045		11			275		5		1,359		33
Total	$	33,163	$	296		$	45,206	$	320		$	33,454	$	1,026	$	50,741	$	891

There were no Troubled Debt Restructurings ("TDR") during the three months ended September 30, 2013 or nine months ended September 30, 2012. The following is an analysis of loans classified as TDR during the nine months ended September 30, 2013:



	Nine months ended September 30, 2013
	Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Noncovered loans:	(dollars in thousands)
Commercial business:
Secured	1	$	343	$	343
Real estate:
Commercial and multifamily residential:
Commercial land	1	137		137
Income property	3	943		943
Owner occupied	1	172		172
Real estate construction:
One-to-four family residential:
Land and acquisition	1	117		117
Total	7	$	1,712	$	1,712

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 $1.7 million and $236 thousand of additional funds on loans classified as TDR as of September 30, 2013 and December 31, 2012, 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, 2013.