Bank subsidiary (Tables)

12 Months Ended

Dec. 31, 2012

Bank subsidiary

Schedule of statements of income data

Consolidated Statements of Income Data

Years ended December 31	2012	2011	2010
(in thousands)
Interest income
Interest and fees on loans	$176,057	$184,485	$195,192
Interest on investment and mortgage-related securities	13,822	14,568	14,946
Total interest income	189,879	199,053	210,138
Interest expense
Interest on deposit liabilities	6,423	8,983	14,696
Interest on other borrowings	4,869	5,486	5,653
Total interest expense	11,292	14,469	20,349
Net interest income	178,587	184,584	189,789
Provision for loan losses	12,883	15,009	20,894
Net interest income after provision for loan losses	165,704	169,575	168,895
Noninterest income
Fees from other financial services	31,361	28,881	27,280
Fee income on deposit liabilities	17,775	18,026	26,369
Fee income on other financial products	6,577	6,704	6,487
Gain on sale of loans	14,628	5,028	6,338
Net gains on sale of securities	134	371	–
Other income, net	5,185	6,344	6,081
Total noninterest income	75,660	65,354	72,555
Noninterest expense
Compensation and employee benefits	75,979	71,137	71,476
Occupancy	17,179	17,154	16,548
Data processing	10,098	8,155	13,213
Services	9,866	7,396	6,594
Equipment	7,105	6,903	6,620
Office supplies, printing and postage	3,870	3,934	3,928
Marketing	3,260	3,001	2,418
Communication	1,809	1,764	2,221
Other expense	23,177	23,949	25,920
Total noninterest expense	152,343	143,393	148,938
Income before income taxes	89,021	91,536	92,512
Income taxes	30,384	31,693	34,056
Net income	$58,637	$  59,843	$  58,456

Schedule of statements of comprehensive income data

Consolidated Statements of Comprehensive Income

Years ended December 31	2012		2011		2010
(in thousands)
Net income	$58,637		$  59,843		$  58,456
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) on securities arising during the period, net of (taxes) benefits of ($631), ($4,343) and $789, for 2012, 2011 and 2010, respectively	956		6,578		(1,196	)
Less: reclassification adjustment for net realized gains included in net income, net of taxes of $53, $148 and nil for 2012, 2011 and 2010, respectively	(81	)	(224	)	–
Retirement benefit plans:
Net gains (losses) arising during the period, net of (taxes) benefits of $5,240, $6,577 and ($3,007) for 2012, 2011 and 2010, respectively	(7,936	)	(9,960	)	4,554
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of (taxes) benefits of $684, $346 and ($13) for 2012, 2011 and 2010, respectively	1,036		523		(20	)
Other comprehensive income (loss), net of taxes	(6,025	)	(3,083	)	3,338
Comprehensive income	$ 52,612		$  56,760		$  61,794

Schedule of balance sheets data

Consolidated Balance Sheet Data

December 31	2012		2011
(in thousands)
Assets
Cash and cash equivalents	$   184,430		$   219,678
Available-for-sale investment and mortgage-related securities	671,358		624,331
Investment in stock of Federal Home Loan Bank of Seattle	96,022		97,764
Loans receivable held for investment	3,779,218		3,680,724
Allowance for loan losses	(41,985	)	(37,906	)
Loans receivable held for investment, net	3,737,233		3,642,818
Loans held for sale, at lower of cost or fair value	26,005		9,601
Other	244,435		233,592
Goodwill	82,190		82,190
Total assets	$5,041,673		$4,909,974
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing	$1,164,308		$  993,828
Deposit liabilities–interest-bearing	3,065,608		3,076,204
Other borrowings	195,926		233,229
Other	117,752		118,078
Total liabilities	4,543,594		4,421,339
Commitments and contingencies (see “Litigation” below)
Common stock	333,712		331,880
Retained earnings	179,763		166,126
Accumulated other comprehensive loss, net of tax benefits	(15,396	)	(9,371	)
Total shareholder’s equity	498,079		488,635
Total liabilities and shareholder’s equity	$5,041,673		$4,909,974
Other assets
Bank-owned life insurance	$125,726		$121,470
Premises and equipment, net	62,458		52,940
Prepaid expenses	13,199		15,297
Accrued interest receivable	13,228		14,190
Mortgage-servicing rights	10,818		8,227
Real estate acquired in settlement of loans, net	6,050		7,260
Other	12,956		14,208
	$244,435		$233,592
Other liabilities
Accrued expenses	$17,103		$21,216
Federal and state income taxes payable	35,408		35,002
Cashier’s checks	23,478		22,802
Advance payments by borrowers	9,685		10,100
Other	32,078		28,958
	$117,752		$118,078

Schedule of the book value and aggregate fair value by major security type

December 31, 2012

		Gross	Gross		Estimated	Gross unrealized losses
	Amortized	unrealized	unrealized		fair	Less than 12 months			12 months or longer
(dollars in thousands)	cost	gains	losses		value	Fair value	Amount		Fair value	Amount
Available-for-sale
Federal agency obligations	$168,324	$  3,167	$    –		$171,491	$        –	$     –		$  –	$  –
Mortgage-related securities- FNMA, FHLMC and GNMA	407,175	10,412	(204	)	417,383	32,269	(204	)	–	–
Municipal bonds	77,993	4,491	–		82,484	–	–		–	–
	$653,492	$18,070	$(204	)	$671,358	$32,269	$(204	)	$  –	$  –

December 31, 2011

		Gross	Gross		Estimated	Gross unrealized losses
	Amortized	unrealized	unrealized		fair	Less than 12 months			12 months or longer
(dollars in thousands)	cost	gains	losses		value	Fair value	Amount		Fair value	Amount
Available-for-sale
Federal agency obligations	$218,342	$  2,393	$  (8	)	$220,727	$  19,992	$  (8	)	$  –	$  –
Mortgage-related securities-FNMA, FHLMC and GNMA	334,183	10,699	(17	)	344,865	11,994	(17	)	–	–
Municipal bonds	55,393	3,346	–		58,739	–	–		–	–
	$607,918	$16,438	$(25	)	$624,331	$31,986	$(25	)	$  –	$  –

Schedule of contractual maturities of available-for-sale securities

	Amortized	Fair
(in thousands)	Cost	value
Due in one year or less	$  28,120	$  28,283
Due after one year through five years	102,549	104,453
Due after five years through ten years	89,666	94,895
Due after ten years	25,982	26,344
	246,317	253,975
Mortgage-related securities-FNMA,FHLMC and GNMA	407,175	417,383
Total available-for-sale securities	$653,492	$671,358

Schedule of loans receivable

December 31	2012	2011
(in thousands)
Real estate loans:
Residential 1-4 family	$1,866,450	$1,926,774
Commercial real estate	375,677	331,931
Home equity line of credit	630,175	535,481
Residential land	25,815	45,392
Commercial construction	43,988	41,950
Residential construction	6,171	3,327
Total real estate loans	2,948,276	2,884,855
Commercial loans	721,349	716,427
Consumer loans	121,231	93,253
Total loans	3,790,856	3,694,535
Deferred loan fees, net and unamortized discounts	(11,638)	(13,811)
Allowance for loan losses	(41,985)	(37,906)
Total loans, net	$3,737,233	$3,642,818

Schedule of allowance for loan losses

	Residential	Commercial real	Home equity line	Residen- tial	Commercial	Residential	Commer- cial	Consu- mer	Unallo-
(in thousands)	1-4 family	estate	of credit	land	construction	construction	loans	loans	cated	Total
December 31, 2012
Allowance for loan losses:
Beginning balance	$6,500	$1,688	$4,354	$3,795	$1,888	$4	$14,867	$3,806	$1,004	$ 37,906
Charge-offs	(3,183)	–	(716)	(2,808)	–	–	(3,606)	(2,517)	–	(12,830)
Recoveries	1,328	–	108	1,443	–	–	649	498	–	4,026
Provision	1,423	1,277	747	1,845	135	5	4,021	2,232	1,198	12,883
Ending balance	$6,068	$2,965	$4,493	$4,275	$2,023	$9	$15,931	$4,019	$2,202	$41,985
Ending balance: individually evaluated for impairment	$384	$535	$–	$3,221	$–	$–	$2,659	$–	$–	$6,799
Ending balance: collectively evaluated for impairment	$5,684	$2,430	$4,493	$1,054	$2,023	$9	$13,272	$4,019	$2,202	$35,186
Financing Receivables:
Ending balance	$1,866,450	$375,677	$630,175	$25,815	$43,988	$6,171	$721,349	$121,231	$–	$3,790,856
Ending balance: individually evaluated for impairment	$25,279	$6,751	$1,560	$18,563	$–	$–	$20,298	$22	$–	$72,473
Ending balance: collectively evaluated for impairment	$1,841,171	$368,926	$628,615	$7,252	$43,988	$6,171	$701,051	$121,209	$–	$3,718,383
December 31, 2011
Allowance for loan losses:
Beginning balance	$6,497	$1,474	$4,269	$6,411	$1,714	$  7	$16,015	$3,325	$ 934	$ 40,646
Charge-offs	(5,528)	–	(1,439)	(4,071)	–	–	(5,335)	(3,117)	–	(19,490)
Recoveries	110	–	25	170	–	–	869	567	–	1,741
Provision	5,421	214	1,499	1,285	174	(3)	3,318	3,031	70	15,009
Ending balance	$6,500	$1,688	$4,354	$3,795	$1,888	$  4	$14,867	$3,806	$1,004	$ 37,906
Ending balance: individually evaluated for impairment	$203	$ –	$ –	$2,525	$–	$ –	$976	$ –	$ –	$3,704
Ending balance: collectively evaluated for impairment	$6,297	$1,688	$4,354	$1,270	$1,888	$  4	$13,891	$3,806	$1,004	$34,202
Financing Receivables:
Ending balance	$1,926,774	$331,931	$535,481	$45,392	$41,950	$3,327	$716,427	$93,253	$ –	$3,694,535
Ending balance: individually evaluated for impairment	$26,012	$13,397	$1,450	$39,364	$ –	$ –	$48,241	$24	$ –	$128,488
Ending balance: collectively evaluated for impairment	$1,900,762	$318,534	$534,031	$6,028	$41,950	$3,327	$668,186	$93,229	$ –	$3,566,047

Schedule of changes in allowance for loan losses

(dollars in thousands)	2012	2011	2010
Allowance for loan losses, January 1	$37,906	$40,646	$41,679
Provision for loan losses	12,883	15,009	20,894
Charge-offs, net of recoveries
Real estate loans	3,828	10,733	14,276
Other loans	4,976	7,016	7,651
Net charge-offs	8,804	17,749	21,927
Allowance for loan losses, December 31	$41,985	$37,906	$40,646
Ratio of net charge-offs to average loans outstanding	0.24%	0.49%	0.61%

Schedule of credit risk profile by internally assigned grade for loans

December 31	2012			2011
(in thousands)	Commercial real estate	Commercial construction	Commercial	Commercial real estate	Commercial construction	Commercial
Grade:
Pass	$314,182	$39,063	$638,854	$308,843	$41,950	$650,234
Special mention	25,437	4,925	24,511	8,594	–	14,660
Substandard	29,308	–	53,538	11,058	–	47,607
Doubtful	6,750	–	4,446	3,436	–	3,926
Loss	–	–	–	–	–	–
Total	$375,677	$43,988	$721,349	$331,931	$41,950	$716,427

Schedule of credit risk profile based on payment activity for loans

(in thousands)	30-59 days past due	60-89 days past due	Greater than 90 days	Total past due	Current	Total financing receivables	Recorded Investment> 90 days and accruing
December 31, 2012
Real estate loans:
Residential 1-4 family	$ 6,353	$1,741	$24,054	$32,148	$1,834,302	$1,866,450	$  –
Commercial real estate	85	–	6,750	6,835	368,842	375,677	–
Home equity line of credit	1,077	142	1,319	2,538	627,637	630,175	–
Residential land	2,851	75	7,788	10,714	15,101	25,815	–
Commercial construction	–	–	–	–	43,988	43,988	–
Residential construction	–	–	–	–	6,171	6,171	–
Commercial loans	3,052	2,814	1,098	6,964	714,385	721,349	131
Consumer loans	598	348	424	1,370	119,861	121,231	242
Total loans	$14,016	$5,120	$41,433	$60,569	$3,730,287	$3,790,856	$373
December 31, 2011
Real estate loans:
Residential 1-4 family	$10,391	$4,583	$28,113	$43,087	$1,883,687	$1,926,774	$    –
Commercial real estate	–	–	–	–	331,931	331,931	–
Home equity line of credit	1,671	494	1,421	3,586	531,895	535,481	–
Residential land	2,352	575	13,037	15,964	29,428	45,392	205
Commercial construction	–	–	–	–	41,950	41,950	–
Residential construction	–	–	–	–	3,327	3,327	–
Commercial loans	226	733	1,340	2,299	714,128	716,427	28
Consumer loans	553	344	486	1,383	91,870	93,253	308
Total loans	$15,193	$6,729	$44,397	$66,319	$3,628,216	$3,694,535	$ 541

Schedule of credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due

December 31	2012		2011
	Nonaccrual loans	Accruing loans 90 days or more past due	Nonaccrual loans	Accruing loans 90 days or more past due
(in thousands)
Real estate loans:
Residential 1–4 family	$26,721	$  –	$28,298	$  –
Commercial real estate	6,750	–	3,436	–
Home equity line of credit	2,349	–	2,258	–
Residential land	8,561	–	14,535	205
Commercial construction	–	–	–	–
Residential construction	–	–	–	–
Commercial loans	20,222	131	17,946	28
Consumer loans	284	242	281	308
Total	$64,887	$373	$66,754	$541

Schedule of the carrying amount and the total unpaid principal balance of impaired loans

December 31	2012					2011
(in thousands)	Recorded investment	Unpaid principal balance	Related Allow- ance	Average recorded investment	Interest income recognized	Recorded investment	Unpaid principal balance	Related allow- ance		Average recorded investment	Interest income recognized
With no related allowance recorded
Real estate loans:
Residential 1-4 family	$14,633	$20,247	$   –	$16,688	$  294	$  19,217	$  26,614	$	–	$  21,385	$	282
Commercial real estate	2,929	2,929	–	7,771	237	13,397	13,397	–		13,404	747
Home equity line of credit	581	1,374	–	632	1	711	1,612	–		954	6
Residential land	7,691	10,624	–	21,589	1,185	30,781	39,136	–		33,398	1,779
Commercial construction	–	–	–	–	–	–	–	–		–	–
Residential construction	–	–	–	–	–	–	–	–		–	–
Commercial loans	4,265	6,994	–	24,605	986	41,680	43,516	–		40,952	2,912
Consumer loans	21	21	–	23	–	25	25	–		16	–
	30,120	42,189	–	71,308	2,703	105,811	124,300	–		110,109	5,726
With an allowance recorded
Real estate loans:
Residential 1-4 family	4,803	4,803	384	4,204	250	3,525	3,525	203		3,527	201
Commercial real estate	3,821	3,840	535	1,295	–	–	–	–		–	–
Home equity line of credit	–	–	–	26	–	–	–	–		–	–
Residential land	9,984	10,364	3,221	7,428	575	7,792	7,852	2,525		8,158	603
Commercial construction	–	–	–	–	–	–	–	–		–	–
Residential construction	–	–	–	–	–	–	–	–		–	–
Commercial loans	16,033	16,912	2,659	8,429	23	6,561	6,561	976		8,131	737
Consumer loans	–	–	–	–	–	–	–	–		–	–
	34,641	35,919	6,799	21,382	848	17,878	17,938	3,704		19,816	1,541
Total
Real estate loans:
Residential 1-4 family	19,436	25,050	384	20,892	544	22,742	30,139	203		24,912	483
Commercial real estate	6,750	6,769	535	9,066	237	13,397	13,397	–		13,404	747
Home equity line of credit	581	1,374	–	658	1	711	1,612	–		954	6
Residential land	17,675	20,988	3,221	29,017	1,760	38,573	46,988	2,525		41,556	2,382
Commercial construction	–	–	–	–	–	–	–	–		–	–
Residential construction	–	–	–	–	–	–	–	–		–	–
Commercial loans	20,298	23,906	2,659	33,034	1,009	48,241	50,077	976		49,083	3,649
Consumer loans	21	21	–	23	–	25	25	–		16	–
	$64,761	$78,108	$6,799	$92,690	$3,551	$123,689	$142,238	$	3,704	$129,925	$	7,267

Schedule of loan modifications

	2012			2011
	Number of	Outstanding recorded investment		Number of	Outstanding recorded investment
(dollars in thousands)	contracts	Pre-modification	Post-modification	contracts	Pre-modification	Post-modification
Troubled debt restructurings
Real estate loans:
Residential 1-4 family	35	$ 8,805	$ 8,232	42	$11,233	$  9,853
Commercial real estate	–	–	–	–	–	–
Home equity line of credit	–	–	–	1	93	93
Residential land	26	6,149	5,484	46	9,965	9,946
Commercial loans	19	2,583	2,583	56	35,349	35,349
Consumer loans	–	–	–	1	25	25
	80	$17,537	$16,299	146	$56,665	$55,266

Schedule of loans modified in TDRS that experienced a payment default of 90 days or more, and for which payment default occurred within one year of the modification

	2012			2011
(dollars in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Troubled debt restructurings that subsequently defaulted
Real estate loans:
Residential 1-4 family	–	$	–	–	$	–
Commercial real estate	–	–		–	–
Home equity line of credit	–	–		–	–
Residential land	–	–		1	528
Commercial loans	1	482		4	799
Consumer loans	–	–		–	–
	1	$	482	5	$	1,327

Schedule of deposit liabilities

December 31	2012			2011
	Weighted-average			Weighted-average
(dollars in thousands)	stated rate		Amount	stated rate		Amount
Savings	0.06	%	$1,758,547	0.07	%	$1,684,875
Other checking
Interest-bearing	0.02		641,970	0.02		610,542
Noninterest-bearing	–		621,806	–		538,214
Commercial checking	–		542,502	–		455,614
Money market	0.13		191,398	0.21		236,641
Term certificates	0.86		473,693	0.98		544,146
	0.13	%	$4,229,916	0.18	%	$4,070,032

Schedule of interest expense on deposit liabilities by type

(in thousands)	2012	2011	2010
Term certificates	$4,865	$6,393	$11,221
Savings	1,128	1,756	2,262
Money market	319	650	884
Interest-bearing checking	111	184	329
	$6,423	$8,983	$14,696

Schedule of securities sold under agreements to repurchase

December 31, 2012
Maturity	Repurchase liability	Weighted-average interest rate		Collateralized by mortgage-related securities and federal agency obligations– fair value plus accrued interest
(dollars in thousands)
Overnight	$95,642	0.15	%	$127,093
1 to 29 days	–	–		–
30 to 90 days	–	–		–
Over 90 days	50,284	4.75		62,748
	$145,926	1.74	%	$189,841

Schedule of securities sold under agreements to repurchase, which provided for repurchase of identical securities

(dollars in millions)	2012		2011		2010
Amount outstanding as of December 31	$146		$183		$172
Average amount outstanding during the year	$173		$183		$201
Maximum amount outstanding as of any month-end	$189		$186		$238
Weighted-average interest rate as of December 31	1.74	%	1.56	%	1.71	%
Weighted-average interest rate during the year	1.56	%	1.61	%	1.53	%
Weighted-average remaining days to maturity as of December 31	489		490		628

Schedule of advances from Federal Home Loan Bank

December 31, 2012	Weighted-average stated rate		Amount
(dollars in thousands)
Due in
2013	–	%	$       –
2014	–		–
2015	–		–
2016	–		–
2017	4.28		50,000
Thereafter	–		–
	4.28	%	$50,000