Loans

9 Months Ended

Sep. 30, 2014

Loans [Abstract]

Loans

Loans

The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on our risk classification criteria:

(In Thousands)	Commercial		Real estate construction one-to-four family		Real estate construction other		Real estate term owner occupied		Real estate term non-owner occupied		Real estate term other		Consumer secured by 1st deeds of trust		Consumer other		Total
September 30, 2014
AQR Pass		$311,714		$40,144		$65,212		$111,148		$276,870		$51,087		$31,511		$33,206		$920,892
AQR Special Mention	3,889		—		788		6,174		3,432		582		405		42		15,312
AQR Substandard	1,712		191		—		1,240		1,137		151		622		50		5,103
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$317,315		$40,335		$66,000		$118,562		$281,439		$51,820		$32,538		$33,298		$941,307
Less: Unearned origination fees, net of origination costs																	(4,648		)
Total loans																		$936,659
December 31, 2013
AQR Pass		$293,803		$28,227		$31,633		$84,191		$251,384		$28,684		$15,877		$17,694		$751,493
AQR Special Mention	6,022		1,934		966		6,235		2,620		—		397		196		18,370
AQR Substandard	513		—		—		672		1,320		1,292		209		168		4,174
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$300,338		$30,161		$32,599		$91,098		$255,324		$29,976		$16,483		$18,058		$774,037
Less: Unearned origination fees, net of origination costs																	(4,021		)
Total loans																		$770,016

Loans are carried at their principal amount outstanding, net of charge-offs, unamortized fees and direct loan origination costs.  Loan balances are charged-off to the allowance for loan losses ("Allowance") when management believes that collection of principal is unlikely.  Interest income on loans is accrued and recognized on the principal amount outstanding except for loans in a nonaccrual status.  All classes of loans are placed on nonaccrual and considered impaired when management believes doubt exists as to the collectability of the interest or principal.  Cash payments received on nonaccrual loans are directly applied to the principal balance.  Generally, a loan may be returned to accrual status when the delinquent principal and interest is brought current in accordance with the terms of the loan agreement.  Additionally, certain ongoing performance criteria, which generally includes a performance period of six months, must be met in order for a loan to be returned to accrual status.  Loans are reported as past due when installment payments, interest payments, or maturity payments are past due based on contractual terms.

Nonaccrual loans totaled $2.8 million and  $1.8 million at September 30, 2014 and December 31, 2013, respectively. Nonaccrual loans at the periods indicated, by segment, are presented below:

(In  Thousands)	September 30, 2014		December 31, 2013
Commercial		$379		$222
Real estate construction one-to-four family	191		—
Real estate construction other	—		—
Real estate term owner occupied	370		—
Real estate term non-owner occupied	1,137		151
Real estate term other	—		1,136
Consumer secured by 1st deeds of trust	623		187
Consumer other	50		119
Total		$2,750		$1,815

Past due loans and nonaccrual loans at the periods indicated are presented below by loan class:

(In Thousands)	30-59 Days Past Due Still Accruing		60-89 Days Past Due Still Accruing		Greater Than 90 Days Still Accruing		Nonaccrual		Total Past Due		Current		Total
September 30, 2014
AQR Pass		$731		$190		$—		$—		$921		$919,971		$920,892
AQR Special Mention	180		—		—		—		180		15,132		15,312
AQR Substandard	—		—		11		2,750		2,761		2,342		5,103
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$911		$190		$11		$2,750		$3,862		$937,445		$941,307
Less: Unearned origination fees,  net of origination costs													(4,648		)
Total														$936,659
December 31, 2013
AQR Pass		$672		$—		$—		$127		$799		$750,694		$751,493
AQR Special Mention	385		—		—		—		385		17,985		18,370
AQR Substandard	—		—		—		1,688		1,688		2,486		4,174
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$1,057		$—		$—		$1,815		$2,872		$771,165		$774,037
Less: Unearned origination fees,  net of origination costs													(4,021		)
Total														$770,016

The Company considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate, except that if the loan is collateral dependent, the impairment is measured by using the fair value of the loan’s collateral.  Nonperforming loans greater than $50,000 are individually evaluated for impairment based upon the borrower’s overall financial condition, resources, and payment record, and the prospects for support from any financially responsible guarantors.

At September 30, 2014 and December 31, 2013, the recorded investment in loans that are considered to be impaired was $10.6 million and $8.8 million, respectively.  The following table presents information about impaired loans by class as of the periods indicated:

(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
September 30, 2014
With no related allowance recorded
Commercial - AQR pass		$54		$54		$—
Commercial - AQR special mention	355		355		—
Commercial - AQR substandard	1,629		1,773		—
Real estate term owner occupied- AQR pass	504		504		—
Real estate term owner occupied- AQR special mention	275		275		—
Real estate term owner occupied- AQR substandard	1,201		1,201		—
Real estate term non-owner occupied- AQR pass	568		568		—
Real estate term non-owner occupied- AQR special mention	3,074		3,074		—
Real estate term non-owner occupied- AQR substandard	1,095		1,095		—
Real estate term other - AQR special mention	788		788		—
Real estate term other - AQR substandard	342		342		—
Consumer secured by 1st deeds of trust - AQR pass	84		84		—
Consumer secured by 1st deeds of trust - AQR substandard	457		470		—
Consumer other - AQR substandard	—		—		—
Subtotal		$10,426		$10,583		$—

With an allowance recorded
Consumer secured by 1st deeds of trust - AQR substandard	$165	$171	$8
Subtotal	$165	$171	$8

Commercial - AQR pass		$54		$54		$—
Commercial - AQR special mention	355		355		—
Commercial - AQR substandard	1,629		1,773		—
Real estate term owner-occupied - AQR pass	504		504		—
Real estate term owner-occupied - AQR special mention	275		275		—
Real estate term owner-occupied - AQR substandard	1,201		1,201		—
Real estate term non-owner occupied - AQR pass	568		568		—
Real estate term non-owner occupied - AQR special mention	3,074		3,074		—
Real estate term non-owner occupied - AQR substandard	1,095		1,095		—
Real estate term other - AQR special mention	788		788		—
Real estate term other - AQR substandard	342		342		—
Consumer secured by 1st deeds of trust - AQR pass	84		84		—
Consumer secured by 1st deeds of trust - AQR substandard	622		641		8
Consumer other - AQR substandard	—		—		—
Total		$10,591		$10,754		$8

(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
December 31, 2013
With no related allowance recorded
Commercial - AQR pass		$181		$181		$—
Commercial - AQR special mention	314		314		—
Commercial - AQR substandard	343		488		—
Real estate construction one-to-four family - AQR special mention	353		353		—
Real estate construction other - AQR pass	1,686		1,686		—
Real estate construction other - AQR special mention	834		834		—
Real estate term owner occupied - AQR pass	512		512		—
Real estate term owner occupied - AQR special mention	484		484		—
Real estate term owner occupied - AQR substandard	672		672		—
Real estate term non-owner occupied - AQR special mention	786		786		—
Real estate term non-owner occupied - AQR substandard	955		955		—
Real estate term other - AQR substandard	1,292		1,571		—
Consumer secured by 1st deeds of trust - AQR pass	88		88		—
Consumer other - AQR substandard	65		65		—
Subtotal		$8,565		$8,989		$—

With an allowance recorded
Consumer secured by 1st deeds of trust - AQR substandard	$186	$186	$11
Subtotal	$186	$186	$11

Commercial - AQR pass		$181		$181		$—
Commercial - AQR special mention	314		314		—
Commercial - AQR substandard	343		488		—
Real estate construction one-to-four family - AQR special mention	353		353		—
Real estate construction other - AQR pass	1,686		1,686		—
Real estate construction other - AQR special mention	834		834		—
Real estate term owner occupied - AQR pass	512		512		—
Real estate term owner occupied - AQR special mention	484		484		—
Real estate term owner occupied - AQR substandard	672		672		—
Real estate term non-owner occupied - AQR special mention	786		786		—
Real estate term non-owner occupied - AQR substandard	955		955		—
Real estate term other - AQR substandard	1,292		1,571		—
Consumer secured by 1st deeds of trust - AQR pass	88		88		—
Consumer secured by 1st deeds of trust - AQR substandard	186		186		11
Consumer other - AQR substandard	65		65		—
Total		$8,751		$9,175		$11

The unpaid principal balance included in the table above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes. 

The following table summarizes our average recorded investment and interest income recognized on impaired loans for the three month periods ended September 30,2014 and 2013, respectively:

Three Months Ended September 30,	2014						2013
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass		$323			$1			$183			$4
Commercial - AQR special mention	358			10			327			8
Commercial - AQR substandard	1,661			65			646			5
Real estate construction one-to-four family - AQR pass	—			—			470			—
Real estate construction one-to-four family - AQR special mention	—			—			353			—
Real estate construction other - AQR pass	—			—			2,123			—
Real estate construction other - AQR special mention	—			—			797			29
Real estate term owner occupied- AQR pass	505			12			517			12
Real estate term owner occupied- AQR special mention	276			6			917			19
Real estate term owner occupied- AQR substandard	1,218			24			380			6
Real estate term non-owner occupied- AQR pass	591			19			356			6
Real estate term non-owner occupied- AQR special mention	3,103			168			816			23
Real estate term non-owner occupied- AQR substandard	1,118			—			1,347			20
Real estate term other - AQR special mention	795			30			—			—
Real estate term other - AQR substandard	424			3			1,386			4
Consumer secured by 1st deeds of trust - AQR pass	84			1			90			1
Consumer secured by 1st deeds of trust - AQR substandard	467			—			—			—
Consumer other - AQR substandard	—			—			68			—
Subtotal		$10,923			$339			$10,776			$137

With an allowance recorded
Commercial - AQR doubtful		$—		$—		$255		$—
Consumer secured by 1st deeds of trust - AQR substandard	165		—		192		—
Consumer other - AQR substandard	—		—		158		—
Subtotal		$165		$—		$605		$—

Total
Commercial - AQR pass		$323		$1		$183		$4
Commercial - AQR special mention	358		10		327		8
Commercial - AQR substandard	1,661		65		646		5
Commercial - AQR doubtful	—		—		255		—
Real estate construction one-to-four family - AQR pass	—		—		470		—
Real estate construction one-to-four family - AQR special mention	—		—		353		—
Real estate construction other - AQR pass	—		—		2,123		—
Real estate construction other - AQR special mention	—		—		797		29
Real estate term owner-occupied - AQR pass	505		12		517		12
Real estate term owner-occupied - AQR special mention	276		6		917		19
Real estate term owner-occupied - AQR substandard	1,218		24		380		6
Real estate term non-owner occupied - AQR pass	591		19		356		6
Real estate term non-owner occupied - AQR special mention	3,103		168		816		23
Real estate term non-owner occupied - AQR substandard	1,118		—		1,347		20
Real estate term other - AQR special mention	795		30		—		—
Real estate term other - AQR substandard	424		3		1,386		4
Consumer secured by 1st deeds of trust - AQR pass	84		1		90		1
Consumer secured by 1st deeds of trust - AQR substandard	632		—		192		—
Consumer other - AQR substandard	—		—		226		—
Total Impaired Loans		$11,088		$339		$11,381		$137

Nine Months Ended September 30,	2014						2013
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass		$130			$2			$123			$8
Commercial - AQR special mention	281			20			381			28
Commercial - AQR substandard	1,538			72			814			25
Real estate construction one-to-four family - AQR pass	—			—			158			—
Real estate construction one-to-four family - AQR special mention	116			6			431			—
Real estate construction other - AQR pass	—			—			2,371			—
Real estate construction other - AQR special mention	271			29			269			29
Real estate term owner occupied- AQR pass	508			39			347			23
Real estate term owner occupied- AQR special mention	307			15			980			57
Real estate term owner occupied- AQR substandard	1,168			51			223			6
Real estate term owner occupied- AQR loss	—			—			134			—
Real estate term non-owner occupied- AQR pass	607			74			120			6
Real estate term non-owner occupied- AQR special mention	2,447			209			857			61
Real estate term non-owner occupied- AQR substandard	1,062			—			1,468			65
Real estate term other - AQR special mention	655			77			—			—
Real estate term other - AQR substandard	245			10			1,490			17
Consumer secured by 1st deeds of trust - AQR pass	85			3			91			4
Consumer secured by 1st deeds of trust - AQR special mention	—			—			28			1
Consumer secured by 1st deeds of trust - AQR substandard	284			—			—			—
Consumer other - AQR substandard	38			—			176			3
Subtotal		$9,742			$607			$10,461			$333

With an allowance recorded
Commercial - AQR special mention		$61		$6		$—		$—
Commercial - AQR substandard	198		—		146		—
Commercial - AQR doubtful	—		—		86		—
Commercial - AQR loss	—		—		61		—
Real estate construction one-to-four family - AQR substandard	—		—		510		—
Consumer secured by 1st deeds of trust - AQR substandard	234		—		195		—
Subtotal		$493		$6		$998		$—

Total
Commercial - AQR pass		$130		$2		$123		$8
Commercial - AQR special mention	342		26		381		28
Commercial - AQR substandard	1,736		72		960		25
Commercial - AQR doubtful	—		—		86		—
Commercial - AQR loss	—		—		61		—
Real estate construction one-to-four family - AQR pass	—		—		158		—
Real estate construction one-to-four family - AQR special mention	116		6		431		—
Real estate construction one-to-four family - AQR substandard	—		—		510		—
Real estate construction other - AQR pass	—		—		2,371		—
Real estate construction other - AQR special mention	271		29		269		29
Real estate term owner-occupied - AQR pass	508		39		347		23
Real estate term owner-occupied - AQR special mention	307		15		980		57
Real estate term owner-occupied - AQR substandard	1,168		51		223		6
Real estate term owner-occupied - AQR loss	—		—		134		—
Real estate term non-owner occupied - AQR pass	607		74		120		6
Real estate term non-owner occupied - AQR special mention	2,447		209		857		61
Real estate term non-owner occupied - AQR substandard	1,062		—		1,468		65
Real estate term other - AQR special mention	655		77		—		—
Real estate term other - AQR substandard	245		10		1,490		17
Consumer secured by 1st deeds of trust - AQR pass	85		3		91		4
Consumer secured by 1st deeds of trust - AQR special mention	—		—		28		1
Consumer secured by 1st deeds of trust - AQR substandard	518		—		195		—
Consumer other - AQR substandard	38		—		229		3
Total Impaired Loans		$10,235		$613		$11,512		$333

As described in Note 3 above, the Company acquired eighteen purchased credit impaired loans from Alaska Pacific on April 1, 2014 subject to the requirements of FASB ASC  310-30 Loans and Debt Securities Acquired with Deteriorated Credit Quality. This group of loans consists primarily of commercial and commercial real estate loans, and unlike a pool of consumer mortgages, it is not practicable for the Company to analyze the accretable yield of these loans. As such, the Company has elected the cost recovery method of income recognition for these loans, and thus no accretable difference has been identified for these loans. At the acquisition date, April 1, 2014, the fair value of this group of loans was $3.9 million. The carrying value of these loans as of September 30, 2014 is $3.6 million.

Loans classified as troubled debt restructurings (“TDR”) totaled $8.3 million and  $7.9 million at September 30, 2014 and December 31, 2013, respectively.  A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise.  The Company has granted a variety of concessions to borrowers in the form of loan modifications.  The modifications granted can generally be described in the following categories:

Rate Modification:  A modification in which the interest rate is changed.

Term Modification:  A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Payment Modification:  A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category.

Combination Modification:  Any other type of modification, including the use of multiple categories above. 

AQR pass graded loans included above in the impaired loan data are loans classified as TDRs. By definition, TDRs are considered impaired loans. All of the Company's TDRs are included in impaired loans.

The following table presents newly restructured loans that occurred during the nine months ended September 30, 2014 and restructured loans acquired from Alaska Pacific Bank on April 1, 2014:

	Accrual Status		Nonaccrual Status		Total Modifications
(In Thousands)
New Troubled Debt Restructurings
Commercial - AQR special mention	$	111	$	—	$	111
Commercial - AQR substandard	253		—		253
Real estate owner occupied - AQR substandard	—		241		241
Real estate non-owner occupied - AQR special mention	2,119		—		2,119
Real estate non-owner occupied - AQR substandard	—		1,094		1,094
Real estate other - AQR substandard	—		—		—
Consumer secured by 1st deeds of trust - AQR substandard	—		124		124
Subtotal	$	2,483	$	1,459	$	3,942
Existing Troubled Debt Restructurings	4,170		191		4,361
Total	$	6,653	$	1,650	$	8,303

The following table presents newly restructured loans that occurred during the nine months ended September 30, 2014 and restructured loans acquired from Alaska Pacific Bank on April 1, 2014, by concession (terms modified):

		September 30, 2014
	Number of Contracts	Rate Modification		Term Modification		Payment Modification		Combination Modification		Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR special mention	1		$—		$—		$113		$—		$113
Commercial - AQR substandard	1	—		256		—		—		256
Real estate owner occupied - AQR substandard	2	—		—		—		255		255
Real estate non-owner occupied - AQR special mention	3	—		—		—		2,181		2,181
Real estate non-owner occupied - AQR substandard	3	—		—		—		1,191		1,191
Consumer secured by 1st deeds of trust - AQR substandard	1	—		—		—		133		133
Total	11		$—		$256		$113		$3,760		$4,129
Post-Modification Outstanding Recorded Investment:
Commercial - AQR special mention	1		$—		$—		$111		$—		$111
Commercial - AQR substandard	1	—		253		—		—		253
Real estate owner occupied - AQR substandard	2	—		—		—		241		241
Real estate non-owner occupied - AQR special mention	3	—		—		—		2,119		2,119
Real estate non-owner occupied - AQR substandard	3	—		—		—		1,094		1,094
Consumer secured by 1st deeds of trust - AQR substandard	1	—		—		—		124		124
Total	11		$—		$253		$111		$3,578		$3,942

The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs. There were no charge offs in the nine months ended September 30, 2014 on loans that were later classified as TDRs.

All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the Allowance. There were no TDRs with specific impairment at September 30, 2014 and December 31, 2013, respectively.

     At September 30, 2014, the Company had no TDRs that subsequently defaulted within the twelve month period ending September 30, 2014.At December 31, 2013, the Company had no TDRs that subsequently defaulted within the twelve month period ending December 31, 2013.