Purchased Receivables

We purchase accounts receivable from our business customers and provide them with short-term working capital. We provide this service to our customers in Alaska and in Washington and the greater west coast through Northrim Funding Services. Our purchased receivable activity is guided by policies that outline risk management, documentation, and approval limits. The policies are reviewed and approved annually by the Board of Directors.

Purchased receivables are carried at their principal amount outstanding, net of a reserve for anticipated losses that have not yet been identified, and have a maturity of less than one year. Purchased receivable balances are charged against this reserve when management believes that collection of principal is unlikely. Management evaluates the adequacy of the reserve for purchased receivable losses based on historical loss experience by segment and class of receivable and its assessment of current economic conditions. As of March 31, 2014, the Company has one segment and class of purchased receivables. There are no purchased receivables past due at March 31, 2014 or December 31, 2013, respectively, and there were no restructured purchased receivables at March 31, 2014 or December 31, 2013.

Income on purchased receivables is accrued and recognized on the principal amount outstanding using an effective interest method except when management believes doubt exists as to the collectability of the income or principal. As of March 31, 2014, the Company is accruing income on all purchased receivable balances outstanding.

The following table summarizes the components of net purchased receivables for the periods indicated:



(In Thousands)	March 31, 2014			December 31, 2013
Purchased receivables		$10,136			$16,298
Reserve for purchased receivable losses	(236		)	(273		)
Total		$9,900			$16,025

The following table sets forth information regarding changes in the purchased receivable reserve for the periods indicated:



(In Thousands)	March 31, 2014			December 31, 2013
Balance at beginning of period		$273			$323
Charge-offs	—			(150		)
Recoveries	—			—
Charge-offs net of recoveries	—			(150		)
Reserve of purchased receivables	(37		)	100
Balance at end of period		$236			$273

The Company recorded one partial charge-off for $150,000 in 2013. The remaining purchased receivables related to this relationship are not past due and are currently performing.