Loans

12 Months Ended

Dec. 31, 2019

Loans and Leases Receivable, Net Amount [Abstract]

Financing Receivables [Text Block]

Loans

The Company’s loan portfolio includes originated and purchased loans. Originated loans and purchased loans for which there was no evidence of credit deterioration at their acquisition date and it was probable that we would be able to collect all contractually required payments are referred to collectively as loans, excluding PCI loans. Purchased loans for which there was, at acquisition date, evidence of credit deterioration since their origination and it was probable that we would be unable to collect all contractually required payments are referred to as PCI loans.

The following is an analysis of the loan portfolio by segment (net of unearned income):

	December 31,
	2019									2018
	Loans, excluding PCI loans			PCI Loans			Total			Loans, excluding PCI loans			PCI Loans			Total
	(in thousands)
Commercial business	$	3,602,597		$	7,863		$	3,610,460		$	3,438,422		$	9,240		$	3,447,662
Real estate:
One-to-four family residential	265,144			7,203			272,347			238,367			8,017			246,384
Commercial and multifamily residential	4,183,961			54,212			4,238,173			3,846,027			62,910			3,908,937
Total real estate	4,449,105			61,415			4,510,520			4,084,394			70,927			4,155,321
Real estate construction:
One-to-four family residential	192,762			—			192,762			217,790			153			217,943
Commercial and multifamily residential	163,103			—			163,103			284,394			534			284,928
Total real estate construction	355,865			—			355,865			502,184			687			502,871
Consumer	292,697			8,238			300,935			318,945			8,906			327,851
Less: Net unearned income	(34,315		)	—			(34,315		)	(42,194		)	—			(42,194		)
Total loans, net of unearned income	8,665,949			77,516			8,743,465			8,301,751			89,760			8,391,511
Less: ALLL	(81,124		)	(2,844		)	(83,968		)	(79,758		)	(3,611		)	(83,369		)
Total loans, net	$	8,584,825		$	74,672		$	8,659,497		$	8,221,993		$	86,149		$	8,308,142
Loans held for sale	$	17,718		$	—		$	17,718		$	3,849		$	—		$	3,849

At December 31, 2019 and 2018, 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, Oregon and Idaho.

At December 31, 2019 and 2018, $3.24 billion and $3.22 billion, respectively, of commercial and residential real estate loans were pledged as collateral on FHLB advances. The Company has also pledged $151.3 million and $82.0 million of commercial loans to the FRB for additional borrowing capacity at December 31, 2019 and 2018, respectively.

Nonaccrual loans totaled $33.1 million and $54.8 million at December 31, 2019 and 2018, respectively. The amount of interest income foregone as a result of these loans being placed on nonaccrual status totaled $2.0 million for 2019, $3.6 million for 2018 and $2.4 million for 2017. There were no loans 90 days past due and still accruing interest as of December 31, 2019 and 2018. At December 31, 2019 and 2018, there were $2.0 million and $2.1 million, respectively, of commitments of additional funds for loans accounted for on a nonaccrual basis.

The following is an analysis of nonaccrual loans as of December 31, 2019 and 2018:

	December 31,
	2019				2018
	Recorded Investment Nonaccrual Loans		Unpaid Principal Balance Nonaccrual Loans		Recorded Investment Nonaccrual Loans		Unpaid Principal Balance Nonaccrual Loans
	(in thousands)
Commercial business:
Secured	$	26,615	$	38,278	$	35,504	$	45,072
Unsecured	359		360		9		9
Real estate:
One-to-four family residential	591		632		1,158		1,178
Commercial and multifamily residential:
Commercial land	1,985		1,994		2,261		2,270
Income property	205		206		2,721		3,062
Owner occupied	1,287		1,325		9,922		10,300
Real estate construction:
One-to-four family residential:
Land and acquisition	—		—		318		318
Residential construction	—		59		—		—
Consumer	2,018		2,355		2,949		3,149
Total	$	33,060	$	45,209	$	54,842	$	65,358

Loans, excluding PCI loans

The following is an aging of the recorded investment of the loan portfolio as of December 31, 2019 and 2018:

	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, 2019	(in thousands)
Commercial business:
Secured	$	3,422,313	$	7,684	$	5,035	$	—	$	12,719	$	26,615	$	3,461,647
Unsecured	128,852		392		80		—		472		359		129,683
Real estate:
One-to-four family residential	261,886		2,162		256		—		2,418		591		264,895
Commercial and multifamily residential:
Commercial land	300,580		625		—		—		625		1,985		303,190
Income property	2,057,359		1,797		—		—		1,797		205		2,059,361
Owner occupied	1,795,771		4,287		—		—		4,287		1,287		1,801,345
Real estate construction:
One-to-four family residential:
Land and acquisition	1,364		—		—		—		—		—		1,364
Residential construction	189,350		951		—		—		951		—		190,301
Commercial and multifamily residential:
Income property	88,389		—		—		—		—		—		88,389
Owner occupied	73,203		—		—		—		—		—		73,203
Consumer	290,174		284		95		—		379		2,018		292,571
Total	$	8,609,241	$	18,182	$	5,466	$	—	$	23,648	$	33,060	$	8,665,949
	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, 2018	(in thousands)
Commercial business:
Secured	$	3,267,709	$	5,864	$	3,624	$	—	$	9,488	$	35,504	$	3,312,701
Unsecured	111,868		240		—		—		240		9		112,117
Real estate:
One-to-four family residential	233,941		694		233		—		927		1,158		236,026
Commercial and multifamily residential:
Commercial land	283,416		—		—		—		—		2,261		285,677
Income property	1,910,505		5,009		2,241		—		7,250		2,721		1,920,476
Owner occupied	1,606,085		1,744		—		—		1,744		9,922		1,617,751
Real estate construction:
One-to-four family residential:
Land and acquisition	4,099		—		—		—		—		318		4,417
Residential construction	212,303		93		—		—		93		—		212,396
Commercial and multifamily residential:
Income property	194,912		—		—		—		—		—		194,912
Owner occupied	79,805		7,258		—		—		7,258		—		87,063
Consumer	314,008		1,057		201		—		1,258		2,949		318,215
Total	$	8,218,651	$	21,959	$	6,299	$	—	$	28,258	$	54,842	$	8,301,751

The following is an analysis of the impaired loans (see Note 1, “Summary of Significant Accounting Policies,”) as of December 31, 2019 and 2018:

	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, 2019	(in thousands)
Commercial business:
Secured	$	3,437,564	$	24,083	$	3,286	$	3,851	$	93	$	20,797	$	28,658
Unsecured	129,671		12		12		12		—		—		—
Real estate:
One-to-four family residential	264,513		382		299		588		5		83		182
Commercial and multifamily residential:
Commercial land	300,973		2,217		1,592		1,601		312		625		663
Income property	2,059,361		—		—		—		—		—		—
Owner occupied	1,797,682		3,663		3,663		5,233		29		—		—
Real estate construction:
One-to-four family residential:
Land and acquisition	1,364		—		—		—		—		—		—
Residential construction	190,301		—		—		—		—		—		—
Commercial and multifamily residential:
Income property	88,389		—		—		—		—		—		—
Owner occupied	73,203		—		—		—		—		—		—
Consumer	290,934		1,637		483		637		22		1,154		1,310
Total	$	8,633,955	$	31,994	$	9,335	$	11,922	$	461	$	22,659	$	30,813

	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, 2018	(in thousands)
Commercial business:
Secured	$	3,286,416	$	26,285	$	6,350	$	8,460	$	2,023	$	19,935	$	24,404
Unsecured	112,097		20		20		20		—		—		—
Real estate:
One-to-four family residential	235,138		888		325		798		8		563		575
Commercial and multifamily residential:
Commercial land	283,451		2,226		—		—		—		2,226		2,272
Income property	1,917,522		2,954		99		165		1		2,855		3,011
Owner occupied	1,605,042		12,709		3,231		4,666		69		9,478		9,750
Real estate construction:
One-to-four family residential
Land and acquisition	4,417		—		—		—		—		—		—
Residential construction	212,396		—		—		—		—		—		—
Commercial and multifamily residential:
Income property	194,912		—		—		—		—		—		—
Owner occupied	87,063		—		—		—		—		—		—
Consumer	314,193		4,022		3,326		3,584		31		696		704
Total	$	8,252,647	$	49,104	$	13,351	$	17,693	$	2,132	$	35,753	$	40,716

The following table provides additional information on impaired loans for the years ended December 31, 2019, 2018 and 2017:

	Years Ended December 31,
	2019				2018				2017
	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
	(in thousands)
Commercial business
Secured	$	24,682	$	202	$	39,701	$	81	$	20,282	$	60
Unsecured	16		1		191		2		5		—
Real estate:
One-to-four family residential	665		42		748		42		730		49
Commercial and multifamily residential
Commercial land	2,606		31		2,371		34		2,079		—
Income property	1,121		—		3,284		130		4,314		51
Owner occupied	10,681		168		9,730		720		5,335		445
Real estate construction:
One-to-four family residential
Land and acquisition	—		—		—		—		3		—
Residential construction	—		—		484		—		309		—
Owner occupied	—		—		3,240		—		1,620		203
Consumer	2,960		8		5,712		129		5,973		163
Total	$	42,731	$	452	$	65,461	$	1,138	$	40,650	$	971

The following is an analysis of loans classified as TDR for the years ended December 31, 2019, 2018 and 2017:

	Years Ended December 31,
	2019					2018					2017
	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		Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Commercial business:
Secured	11	$	6,642	$	6,642	12	$	18,379	$	18,379	10	$	5,655	$	5,655
Unsecured	—	—		—		—	—		—		1	26		26
Real estate:
One-to-four family residential	1	45		45		—	—		—		3	583		583
Commercial and multifamily residential:
Commercial land	—	—		—		—	—		—		1	687		687
Income property	1	217		217		1	891		891		1	1,152		1,152
Owner occupied	—	—		—		—	—		—		1	78		78
Real estate construction:
Commercial and multifamily residential:
Owner occupied	—	—		—		—	—		—		1	4,050		4,050
Consumer	11	444		444		21	2,777		2,777		42	5,891		5,891
Total	24	$	7,348	$	7,348	34	$	22,047	$	22,047	60	$	18,122	$	18,122

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 $1.1 million of commitments to lend additional funds on loans classified as TDR as of December 31, 2019 as compared to $2.1 million of similar commitments at December 31, 2018. 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. The concessions granted in the restructurings, summarized in the table above, largely consisted of maturity extensions, interest rate modifications or a combination of both. In limited circumstances, a reduction in the principal balance of the loan could also be made as a concession. 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 have one $26 thousand consumer loan that defaulted within 12 months of being modified as a TDR during the year ended December 31, 2019. This defaulted TDR loan did not impact the allowance for loan loss as it paid off prior to year end. The Company did not experience any similar defaults during the years ended December 31, 2018 and 2017.

PCI Loans

PCI loans are accounted for under ASC 310-30 and initially measured at fair value based on expected future cash flows over the life of the loans. Loans that have common risk characteristics are aggregated into pools. The Company re-measures contractual and expected cash flows, at the pool-level, on a quarterly basis.

Contractual cash flows are calculated based upon the loan pool terms after applying a prepayment factor. Calculation of the applied prepayment factor for contractual cash flows is the same as described below for expected cash flows.

Inputs to the determination of expected cash flows include cumulative default and prepayment data as well as loss severity and recovery lag information. Cumulative default and prepayment data are calculated via a transition matrix. The transition matrix is a matrix of probability values that specifies the probability of a loan pool transitioning into a particular delinquency state (e.g. 0-30 days past due, 31 to 60 days, etc.) given its delinquency state at the re-measurement date. Loss severity factors are based upon either actual charge-off data within the loan pools or industry averages, and recovery lags are based upon the collateral within the loan pools.

The excess of cash flows expected to be collected over the initial fair value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated life of the acquired loans using the effective yield method. Other adjustments to the accretable yield include changes in the estimated remaining life of the acquired loans, changes in expected cash flows and changes of indices for acquired loans with variable interest rates.

The following is an analysis of our PCI loans, net of related allowance for losses and remaining valuation discounts as of December 31, 2019 and 2018:

	December 31,
	2019		2018
	(in thousands)
Commercial business	$	8,083	$	9,672
Real estate:
One-to-four family residential	8,453		9,848
Commercial and multifamily residential	56,752		66,340
Total real estate	65,205		76,188
Real estate construction:
One-to-four family residential	—		153
Commercial and multifamily residential	—		507
Total real estate construction	—		660
Consumer	8,984		9,765
Subtotal of PCI loans	82,272		96,285
Less:
Valuation discount resulting from acquisition accounting	4,756		6,525
ALLL	2,844		3,611
PCI loans, net of valuation discounts and allowance for loan losses	$	74,672	$	86,149

The following table shows the changes in accretable yield for acquired loans for the years ended December 31, 2019, 2018, and 2017:

	Years Ended December 31,
	2019			2018			2017
	(in thousands)
Balance at beginning of period	$	21,949		$	31,176		$	45,191
Accretion	(6,053		)	(8,194		)	(12,357		)
Disposals	46			(387		)	(158		)
Reclassifications from (to) nonaccretable difference	3,719			(646		)	(1,500		)
Balance at end of period	$	19,661		$	21,949		$	31,176

The Company did not acquire any loans accounted for under ASC 310-30 during 2019 or 2018.