Allowance for Loan Losses

The allowance for loan losses is maintained at a level deemed appropriate by management to provide for probable incurred credit losses in the loan portfolio.

A summary of the changes in the noncovered loans’ allowance for loan losses for the years ended December 31, 2014, 2013 and 2012 are as follows:



	Years Ended December 31,
	2014			2013			2012
	(In thousands)
Balance at the beginning of the year	$	22,657		$	24,242		$	26,952
Charge-offs	(3,643		)	(4,298		)	(6,017		)
Recoveries of loans previously charged-off	907			929			1,737
Provision for loan losses	2,232			1,784			1,570
Balance at the end of the year	$	22,153		$	22,657		$	24,242

A summary of the changes in the covered loans’ allowance for loan losses for the years ended December 31, 2014, 2013 and 2012 are as follows:



	Years Ended December 31,
	2014			2013			2012
	(In thousands)
Balance at the beginning of the year	$	6,167		$	4,352		$	3,963
Charge-offs	(2,954		)	(73		)	(57		)
Recoveries of loans previously charged-off	1			—			—
Provision for loan losses	2,362			1,888			446
Balance at the end of the year	$	5,576		$	6,167		$	4,352

The covered loans acquired in the Cowlitz Acquisition and Washington Banking Merger (including Washington Banking's prior acquisitions of City Bank and North County Bank and related covered loans) are subject to the Company’s internal credit review. If and when credit deterioration occurs subsequent to the acquisition dates, a provision for loan losses will be charged to earnings for the full amount of the covered loan balance without regard to the FDIC shared-loss agreements. The portion of the estimated loss reimbursable from the FDIC is recorded in noninterest income and increases the FDIC indemnification asset.

The following table details the activity in the allowance for loan losses for the year ended December 31, 2014 and the balance in the allowance for loan losses disaggregated on the basis of the Company’s impairment method as of December 31, 2014:



	Commercial and industrial			Owner- occupied commercial real estate			Non-owner occupied commercial real estate			One-to-four family residential			Real estate construction and land development: one-to-four family residential			Real estate construction and land development: five or more family residential and commercial properties		Consumer			Unallocated		Total
	(In thousands)
Allowance for loan losses for the year ended December 31, 2014:
December 31, 2013	$	13,478		$	4,049		$	5,326		$	1,100		$	1,720		$	953	$	1,597		$	601	$	28,824
Charge-offs	(4,504		)	(337		)	(411		)	(31		)	(345		)	—		(969		)	—		(6,597		)
Recoveries	716			—			—			7			43			—		142			—		908
Provisions for loan losses	863			383			623			124			368			19		1,999			215		4,594
December 31, 2014	$	10,553		$	4,095		$	5,538		$	1,200		$	1,786		$	972	$	2,769		$	816	$	27,729
Allowance for loan losses as of December 31, 2014 allocated to:
Noncovered loans individually evaluated for impairment	$	1,325		$	684		$	465		$	75		$	396		$	234	$	56		$	—	$	3,235
Noncovered loans collectively evaluated for impairment	6,449			1,629			2,541			530			322			650		1,931			816		14,868
Covered loans individually evaluated for impairment	9			295			66			—			51			—		2			—		423
Covered loans collectively evaluated for impairment	108			14			6			8			—			—		12			—		148
Noncovered PCI loans collectively evaluated for impairment	2,191			330			353			207			264			88		617			—		4,050
Covered PCI loans collectively evaluated for impairment	471			1,143			2,107			380			753			—		151			—		5,005
December 31, 2014	$	10,553		$	4,095		$	5,538		$	1,200		$	1,786		$	972	$	2,769		$	816	$	27,729

The following table details the activity in the allowance for loan losses for the year ended December 31, 2013 and the balance in the allowance for loan losses disaggregated on the basis of the Company’s impairment method as of December 31, 2013:



	Commercial and industrial			Owner- occupied commercial real estate			Non-owner occupied commercial real estate			One-to-four family residential			Real estate construction and land development: one-to-four family residential			Real estate construction and land development: five or more family residential and commercial properties			Consumer			Unallocated			Total
	(In thousands)
Allowance for loan losses for the year ended December 31, 2013:
December 31, 2012	$	9,912		$	4,021		$	5,369		$	1,221		$	3,131		$	2,309		$	1,761		$	870		$	28,594
Charge-offs	(2,826		)	(247		)	—			(52		)	(423		)	(142		)	(681		)	—			(4,371		)
Recoveries	248			560			—			—			—			32			89			—			929
Provisions for / (reallocation of) loan losses	6,144			(285		)	(43		)	(69		)	(988		)	(1,246		)	428			(269		)	3,672
December 31, 2013	$	13,478		$	4,049		$	5,326		$	1,100		$	1,720		$	953		$	1,597		$	601		$	28,824

Allowance for loan losses as of December 31, 2013 allocated to:
Noncovered loans individually evaluated for impairment	$	2,716		$	595		$	364		$	—		$	211		$	—		$	153		$	—		$	4,039
Noncovered loans collectively evaluated for impairment	6,727			2,101			2,516			570			429			855			575			601			14,374
Covered loans individually evaluated for impairment	629			—			—			31			—			—			—			—			660
Covered loans collectively evaluated for impairment	18			7			14			13			—			—			57			—			109
Noncovered PCI loans collectively evaluated for impairment	2,294			348			359			216			291			98			638			—			4,244
Covered PCI loans collectively evaluated for impairment	1,094			998			2,073			270			789			—			174			—			5,398
December 31, 2013	$	13,478		$	4,049		$	5,326		$	1,100		$	1,720		$	953		$	1,597		$	601		$	28,824

The following table details the activity in the allowance for loan losses for the year ended December 31, 2012:



	Commercial and industrial			Owner- occupied commercial real estate			Non-owner occupied commercial real estate			One-to-four family residential			Real estate construction and land development: one-to-four family residential			Real estate construction and land development: five or more family residential and commercial properties			Consumer			Unallocated			Total
	(In thousands)
Allowance for loan losses for the year ended December 31, 2012:
December 31, 2011	$	11,805		$	2,979		$	4,394		$	794		$	4,823		$	3,800		$	1,410		$	910		$	30,915
Charge-offs	(2,292		)	(1,142		)	(292		)	(391		)	(835		)	(445		)	(677		)	—			(6,074		)
Recoveries	1,560			8			11			—			125			—			33			—			1,737
Provisions for / (reallocation of) loan losses	(1,161		)	2,176			1,256			818			(982		)	(1,046		)	995			(40		)	2,016
December 31, 2012	$	9,912		$	4,021		$	5,369		$	1,221		$	3,131		$	2,309		$	1,761		$	870		$	28,594

The following table details the recorded investment balance of the loan receivables disaggregated on the basis of the Company’s impairment method as of December 31, 2014:



	Commercial and industrial		Owner- occupied commercial real estate		Non-owner occupied commercial real estate		One-to-four family residential		Real estate construction and land development: one-to-four family residential		Real estate construction and land development: five or more family residential and commercial properties		Consumer		Total
	(In thousands)
Noncovered loans individually evaluated for impairment	$	9,040	$	2,781	$	7,305	$	245	$	4,524	$	2,056	$	205	$	26,156
Noncovered loans collectively evaluated for impairment	524,263		516,753		598,267		61,060		38,002		56,341		243,063		2,037,749
Covered loans individually evaluated for impairment	2,334		1,132		424		—		179		—		6		4,075
Covered loans collectively evaluated for impairment	9,642		37,446		6,198		2,512		959		1,758		6,248		64,763
Noncovered PCI loans collectively evaluated for impairment	18,040		16,208		11,185		2,235		4,223		2,963		7,055		61,909
Covered PCI loans collectively evaluated for impairment	7,134		20,666		20,257		3,478		1,308		1,802		2,717		57,362
Total gross loans receivable as of December 31, 2014	$	570,453	$	594,986	$	643,636	$	69,530	$	49,195	$	64,920	$	259,294	$	2,252,014

The following table details the recorded investment balance of the loan receivables disaggregated on the basis of the Company’s impairment method as of December 31, 2013:



	Commercial and industrial		Owner- occupied commercial real estate		Non-owner occupied commercial real estate		One-to-four family residential		Real estate construction and land development: one-to-four family residential		Real estate construction and land development: five or more family residential and commercial properties		Consumer		Total
	(In thousands)
Noncovered loans individually evaluated for impairment	$	10,990	$	2,998	$	7,423	$	592	$	4,684	$	2,404	$	778	$	29,869
Noncovered loans collectively evaluated for impairment	308,771		273,192		385,771		38,722		15,008		44,894		38,592		1,104,950
Covered loans individually evaluated for impairment	3,761		—		—		450		—		—		7		4,218
Covered loans collectively evaluated for impairment	2,249		13,443		2,438		797		—		—		1,733		20,660
Noncovered PCI loans collectively evaluated for impairment	16,779		5,119		6,785		3,768		32		1,357		2,177		36,017
Covered PCI loans collectively evaluated for impairment	8,680		10,923		12,187		3,530		1,556		—		2,000		38,876
Total gross loans receivable as of December 31, 2013	$	351,230	$	305,675	$	414,604	$	47,859	$	21,280	$	48,655	$	45,287	$	1,234,590