4.	Dental Loan Portfolio:

To assist in understanding the concentrations and risks associated with the Bank’s loan portfolio, the following Note has been included to provide additional information relating to the Bank’s dental lending portfolio. At December 31, 2012 and 2011, loans to dental professionals totaled $270,782 and $208,489, respectively and represented 31.1 and 25.4 percent of outstanding loans. As of December 31, 2012 and 2011, dental loans supported by government guarantees totaled $18,834 and $21,048. This represented 6.96 percent and 10.01 percent of the outstanding dental loan balances.

The Company defines a “dental loan” as loan to dental professionals for the purpose of practice expansion, acquisition or other purpose, supported by the cash flows of a dental practice.

Loan Classification

Major classifications of Dental Loans, at December 31, 2012, and 2011, are as follows:


	December 31,
	2012		2011
Real estate secured loans:
Owner-occupied commercial	$	59,327	$	35,949
Other dental real estate loans		3,103		12,284

Total permanent real estate loans		62,430		48,233
Dental construction loans		2,093		1,993

Total real estate loans		64,523		50,226

Commercial loans		206,259		158,263

Gross loans	$	270,782	$	208,489

Market Area

The Bank’s defined “market area” is within the states of Oregon and Washington west of the Cascade Mountain Range. This area is serviced by branch locations in Eugene, Portland and Seattle. The Company also makes out-of-market dental loans throughout the United States. Out-of-market loan relationships are maintained and serviced by Bank personnel primarily located in Portland.

The following table represents the dental lending by borrower location:


	December 31,
	2012		2011
In Market	$	191,908	$	166,133
Out-of-Market		78,874		42,356

Total	$	270,782	$	208,489

Allowance

The allowance for loan losses identified for the Dental Loan Portfolio is established as an amount that management considers adequate to absorb possible losses on existing loans within the Dental Portfolio. The allowance related to the Dental Loan Portfolio consists of general and specific components. The general component is based upon all Dental Loans collectively evaluated for impairment, including qualitative conditions associated with; loan type, out-of-market location, start-up financing, practice acquisition financing and specialty practice financing. The specific component is based upon Dental Loans individually evaluated for impairment.


	Twelve months ended December 31,
	2012			2011
Balance, beginning of period	$	1,824		$	1,916
Provision charged to income		1,315			313
Loans charged against allowance		(488	)		(405	)
Recoveries credited to allowance		32			—

Balance, end of period	$	2,683		$	1,824

Credit Quality

Please refer to Note 3 for additional information on the definitions of the credit quality indicators.

The following tables present the Company’s dental loan portfolio information by market and credit grade at December 31, 2012 and 2011:

Dental Credit Quality Indicators

As of December 31, 2012


	Loan Grade
	Pass		Special Mention		Substandard		Doubtful		Totals
In Market	$	184,872	$	—	$	7,036	$	—	$	191,908
Out-of-Market		78,480		—		394		—		78,874

Total	$	263,352	$	—	$	7,430	$	—	$	270,782

As of December 31, 2011


	Loan Grade
	Pass		Special Mention		Substandard		Doubtful		Totals
In Market	$	162,435	$	—	$	3,698	$	—	$	166,133
Out-of-Market		42,356		—		—		—		42,356

Total	$	204,791	$	—	$	3,698	$	—	$	208,489

Past Due and Nonaccrual Loans

Please refer to Note 3 for additional information on the definitions of “past due.”

The following tables present an aged analysis of the dental loans by market, including nonaccrual loans at December 31, 2012, and 2011:

Aged Analysis of Dental Loans Receivable

As of December 31, 2012


	30-59 Days Past Due Still Accruing		60-89 Days Past Due Still Accruing		Greater Than 90 Days Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Total Current		Total Loans Receivable
In Market	$	—	$	—	$	—	$	2,499	$	2,499	$	189,409	$	191,908
Out-of-Market		—		—		—		—		—		78,874		78,874

Total	$	—	$	—	$	—	$	2,499	$	2,499	$	268,283	$	270,782

As of December 31, 2011


	30-59 Days Past Due Still Accruing		60-89 Days Past Due Still Accruing		Greater Than 90 Days Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Total Current		Total Loans Receivable
In Market	$	634	$	—	$	—	$	744	$	1,378	$	164,755	$	166,133
Out-of-Market		—		—		—		—		—		42,356		42,356

Total	$	634	$	—	$	—	$	744	$	1,378	$	207,111	$	208,489