Loans

3 Months Ended

Mar. 31, 2015

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
March 31, 2015
AQR Pass		$307,514		$41,272		$92,382		$103,593		$291,821		$39,716		$29,833		$30,242		$936,373
AQR Special Mention	11,601		—		—		5,780		2,094		—		398		43		19,916
AQR Substandard	5,318		—		—		594		1,668		433		643		81		8,737
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$324,433		$41,272		$92,382		$109,967		$295,583		$40,149		$30,874		$30,366		$965,026
Less: Unearned origination fees, net of origination costs																	(4,462		)
Total loans																		$960,564
December 31, 2014
AQR Pass		$291,020		$34,651		$91,195		$103,049		$282,774		$36,705		$31,118		$31,399		$901,911
AQR Special Mention	11,618		—		—		5,817		2,095		39		396		47		20,012
AQR Substandard	3,905		191		—		606		1,747		150		486		47		7,132
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$306,543		$34,842		$91,195		$109,472		$286,616		$36,894		$32,000		$31,493		$929,055
Less: Unearned origination fees, net of origination costs																	(4,551		)
Total loans																		$924,504

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 $4.8 million and  $4.7 million at March 31, 2015 and December 31, 2014, respectively. Nonaccrual loans at the periods indicated, by segment, are presented below:

(In  Thousands)	March 31, 2015		December 31, 2014
Commercial		$2,538		$2,031
Real estate construction one-to-four family	—		191
Real estate construction other	—		—
Real estate term owner occupied	127		135
Real estate term non-owner occupied	1,668		1,746
Real estate term other	—		39
Consumer secured by 1st deeds of trust	477		485
Consumer other	—		47
Total		$4,810		$4,674

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
March 31, 2015
AQR Pass		$1,246		$55		$—		$—		$1,301		$935,072		$936,373
AQR Special Mention	49		—		—		—		49		19,867		19,916
AQR Substandard	166		565		—		4,810		5,541		3,196		8,737
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$1,461		$620		$—		$4,810		$6,891		$958,135		$965,026
Less: Unearned origination fees,  net of origination costs													(4,462		)
Total														$960,564
December 31, 2014
AQR Pass		$696		$545		$—		$—		$1,241		$900,670		$901,911
AQR Special Mention	—		—		—		—		—		20,012		20,012
AQR Substandard	40		—		—		4,674		4,714		2,418		7,132
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$736		$545		$—		$4,674		$5,955		$923,100		$929,055
Less: Unearned origination fees,  net of origination costs													(4,551		)
Total														$924,504

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 March 31, 2015 and December 31, 2014, the recorded investment in loans that are considered to be impaired was $12.8 million and $11.3 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
March 31, 2015
With no related allowance recorded
Commercial - AQR special mention		$166		$166		$—
Commercial - AQR substandard	2,729		2,874		—
Real estate construction other - AQR pass	755		755		—
Real estate term owner occupied- AQR pass	498		498		—
Real estate term owner occupied- AQR special mention	271		271		—
Real estate term owner occupied- AQR substandard	549		549		—
Real estate term non-owner occupied- AQR pass	543		543		—
Real estate term non-owner occupied- AQR special mention	2,087		2,087		—
Real estate term non-owner occupied- AQR substandard	1,668		1,668		—
Real estate term other - AQR substandard	149		149		—
Consumer secured by 1st deeds of trust - AQR pass	81		81		—
Consumer secured by 1st deeds of trust - AQR substandard	605		618		—
Subtotal		$10,101		$10,259		$—

With an allowance recorded
Commercial - AQR substandard		$2,442		$2,442		$361
Real estate term other - AQR substandard	284		284		55
Subtotal		$2,726		$2,726		$416

Commercial - AQR special mention		$166		$166		$—
Commercial - AQR substandard	5,171		5,316		361
Real estate construction other - AQR pass	755		755		—
Real estate term owner-occupied - AQR pass	498		498		—
Real estate term owner-occupied - AQR special mention	271		271		—
Real estate term owner-occupied - AQR substandard	549		549		—
Real estate term non-owner occupied - AQR pass	543		543		—
Real estate term non-owner occupied - AQR special mention	2,087		2,087		—
Real estate term non-owner occupied - AQR substandard	1,668		1,668		—
Real estate term other - AQR substandard	433		433		55
Consumer secured by 1st deeds of trust - AQR pass	81		81		—
Consumer secured by 1st deeds of trust - AQR substandard	605		618		—
Total		$12,827		$12,985		$416

(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
December 31, 2014
With no related allowance recorded
Commercial - AQR special mention		$170		$170		$—
Commercial - AQR substandard	3,000		3,045		—
Real estate construction one-to-four family - AQR special mention	191		191		—
Real estate construction other - AQR pass	772		772		—
Real estate term owner occupied - AQR pass	501		501		—
Real estate term owner occupied - AQR special mention	273		273		—
Real estate term owner occupied - AQR substandard	558		558		—
Real estate term non-owner occupied - AQR pass	549		549		—
Real estate term non-owner occupied - AQR special mention	2,088		2,088		—
Real estate term non-owner occupied - AQR substandard	1,709		1,709		—
Real estate term other - AQR substandard	150		150		—
Consumer secured by 1st deeds of trust - AQR pass	82		82		—
Consumer secured by 1st deeds of trust - AQR special mention	448		461		—
Subtotal		$10,491		$10,549		$—

With an allowance recorded
Commercial - AQR substandard	$806	$806	$75
Subtotal	$806	$806	$75

Commercial - AQR special mention		$170		$170		$—
Commercial - AQR substandard	3,806		3,851		75
Real estate construction one-to-four family - AQR special mention	191		191		—
Real estate construction other - AQR pass	772		772		—
Real estate term owner occupied - AQR pass	501		501		—
Real estate term owner occupied - AQR special mention	273		273		—
Real estate term owner occupied - AQR substandard	558		558		—
Real estate term non-owner occupied - AQR pass	549		549		—
Real estate term non-owner occupied - AQR special mention	2,088		2,088		—
Real estate term non-owner occupied - AQR substandard	1,709		1,709		—
Real estate term other - AQR substandard	150		150		—
Consumer secured by 1st deeds of trust - AQR pass	82		82		—
Consumer secured by 1st deeds of trust - AQR special mention	448		461		—
Total		$11,297		$11,355		$75

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 March 31,2015 and 2014, respectively:

Three Months Ended March 31,	2015						2014
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR special mention		$168			$3			$132			$1
Commercial - AQR substandard	3,040			29			393			4
Real estate construction one-to-four family - AQR special mention	—			—			353			6
Real estate construction other - AQR pass	763			30			—			—
Real estate construction other - AQR special mention	—			—			823			30
Real estate term owner occupied- AQR pass	499			12			511			11
Real estate term owner occupied- AQR special mention	272			5			281			6
Real estate term owner occupied- AQR substandard	640			9			869			13
Real estate term non-owner occupied- AQR pass	546			19			618			19
Real estate term non-owner occupied- AQR special mention	2,175			44			979			15
Real estate term non-owner occupied- AQR substandard	2,371			—			—			—
Real estate term other - AQR substandard	150			3			154			3
Consumer secured by 1st deeds of trust - AQR pass	81			1			87			1
Consumer secured by 1st deeds of trust - AQR substandard	677			—			—			—
Consumer other - AQR substandard	—			—			61			—
Subtotal		$11,382			$155			$5,261			$109

With an allowance recorded
Commercial - AQR special mention		$—		$—		$185		$6
Commercial - AQR substandard	2,245		—		600		—
Real estate term other - AQR substandard	284		—		—		—
Consumer secured by 1st deeds of trust - AQR substandard	—		—		185		—
Subtotal		$2,529		$—		$970		$6

Total
Commercial - AQR special mention		$168		$3		$317		$7
Commercial - AQR substandard	5,285		29		993		4
Real estate construction one-to-four family - AQR special mention	—		—		353		6
Real estate construction other - AQR pass	763		30		—		—
Real estate construction other - AQR special mention	—		—		823		30
Real estate term owner-occupied - AQR pass	499		12		511		11
Real estate term owner-occupied - AQR special mention	272		5		281		6
Real estate term owner-occupied - AQR substandard	640		9		869		13
Real estate term non-owner occupied - AQR pass	546		19		618		19
Real estate term non-owner occupied - AQR special mention	2,175		44		979		15
Real estate term non-owner occupied - AQR substandard	2,371		—		—		—
Real estate term other - AQR substandard	434		3		154		3
Consumer secured by 1st deeds of trust - AQR pass	81		1		87		1
Consumer secured by 1st deeds of trust - AQR substandard	677		—		185		—
Consumer other - AQR substandard	—		—		61		—
Total Impaired Loans		$13,911		$155		$6,231		$115

As described in Note 3 above, the Company acquired 18 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 March 31, 2015 is $2.8 million.

Loans classified as troubled debt restructurings (“TDR”) totaled $9.0 million and  $7.7 million at March 31, 2015 and December 31, 2014, 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 three months ended March 31, 2015:

	Accrual Status		Nonaccrual Status		Total Modifications
(In Thousands)
New Troubled Debt Restructurings
Commercial - AQR substandard		$150		$1,204		$1,354
Subtotal		$150		$1,204		$1,354
Existing Troubled Debt Restructurings	5,638		2,041		7,679
Total		$5,788		$3,245		$9,033

The following table presents newly restructured loans that occurred during the three months ended March 31, 2015, by concession (terms modified):

		March 31, 2015
	Number of Contracts	Rate Modification		Term Modification		Payment Modification		Combination Modification		Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	2		$—		$—		$—		$900		$900
Total	2		$—		$—		$—		$900		$900
Post-Modification Outstanding Recorded Investment:
Commercial - AQR substandard	2		$—		$—		$—		$1,354		$1,354
Total	2		$—		$—		$—		$1,354		$1,354

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 three months ended March 31, 2015 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 two TDRs with a total recorded investment of $1.4 million and a specific impairment amount totaling $215,000 at March 31, 2015 and no TDRs with specific impairment at December 31, 2014, respectively.

The loans in the following table are past due, and they are nonaccrual loans. The following table presents TDRs that occurred during the last twelve months that subsequently defaulted, for the periods ending March 31, 2015 and 2014, respectively:

		March 31, 2015			March 31, 2014
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
(In  Thousands)
Troubled Debt Restructurings that Subsequently Defaulted:
Real estate construction one-to-four family - AQR special mention	—		$—	1		$353
Total	—		$—	1		$353

     At March 31, 2015, the Company had no TDRs that subsequently defaulted within the twelve month period ending March 31, 2015. At December 31, 2014, the Company had no TDRs that subsequently defaulted within the twelve month period ending December 31, 2014.