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Bank subsidiary (Tables)

12 Months Ended

Dec. 31, 2011

Bank subsidiary

Schedule of consolidated statements of income data

Consolidated Statements of Income Data

Years ended December 31		201	1	2010		2009
(in thousands)
Interest and dividend income
Interest and fees on loans		$184,485		$195,192		$217,838
Interest and dividends on investment and mortgage-related securities		14,568		14,946		26,977
Total interest and dividend income		199,053		210,138		244,815
Interest expense
Interest on deposit liabilities		8,983		14,696		34,046
Interest on other borrowings		5,486		5,653		9,497
Total interest expense		14,469		20,349		43,543
Net interest income		184,584		189,789		201,272
Provision for loan losses		15,009		20,894		32,000
Net interest income after provision for loan losses		169,575		168,895		169,272
Noninterest income
Fee income on deposit liabilities		18,026		26,369		30,713
Fees from other financial services		28,881		27,280		25,267
Fee income on other financial products		6,704		6,487		5,833
Net gains (losses) on sale of securities		371		–		(32,034	)
Net losses on available-for-sale securities (includes $32,167 of other-than-temporary impairment losses, net of $16,723 of non-credit losses recognized in other comprehensive income, for 2009)		–		–		(15,444	)
Other income		11,372		12,419		15,569
Total noninterest income		65,354		72,555		29,904
Noninterest expense
Compensation and employee benefits		71,137		71,476		73,990
Occupancy		17,154		16,548		22,057
Data processing		8,155		13,213		14,382
Services		7,396		6,594		11,189
Equipment		6,903		6,620		8,849
Office supplies, printing and postage		3,934		3,928		3,758
Marketing		3,001		2,418		2,134
Communication		1,764		2,221		2,446
Loss on early extinguishment of debt		–		–		760
Other expense		23,949		25,920		27,906
Total noninterest expense		143,393		148,938		167,471
Income before income taxes		91,536		92,512		31,705
Income taxes		31,693		34,056		9,938
Net income		$ 59,843		$ 58,456		$ 21,767

Schedule of consolidated balance sheets data

Consolidated Balance Sheet Data

December 31		2011		2010
(in thousands)
Assets
Cash and cash equivalents		$ 219,678		$ 204,397
Federal funds sold		–		1,721
Available-for-sale investment and mortgage-related securities		624,331		678,152
Investment in stock of Federal Home Loan Bank of Seattle		97,764		97,764
Loans receivable held for investment, net		3,642,818		3,489,880
Loans held for sale, at lower of cost or fair value		9,601		7,849
Other		233,592		234,806
Goodwill		82,190		82,190
Total assets		$4,909,974		$4,796,759
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing		$ 993,828		$ 865,642
Deposit liabilities–interest-bearing		3,076,204		3,109,730
Other borrowings		233,229		237,319
Other		118,078		90,683
Total liabilities		4,421,339		4,303,374
Commitments and contingencies (see below)
Common stock		331,880		330,562
Retained earnings		166,126		169,111
Accumulated other comprehensive loss, net of tax benefits		(9,371	)	(6,288	)
Total shareholder’s equity		488,635		493,385
Total liabilities and shareholder’s equity		$4,909,974		$4,796,759
Other assets
Bank-owned life insurance		$121,470		$117,565
Premises and equipment, net		52,940		56,495
Prepaid expenses		15,297		18,608
Accrued interest receivable		14,190		14,887
Mortgage-servicing rights		8,227		6,699
Real estate acquired in settlement of loans, net		7,260		4,292
Other		14,208		16,260
		$233,592		$234,806
Other liabilities
Accrued expenses		$ 21,216		$16,426
Federal and state income taxes payable		35,002		28,372
Cashier’s checks		22,802		22,396
Advance payments by borrowers		10,100		10,216
Other		28,958		13,273
		$118,078		$ 90,683

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

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)

$ –

$ –

December 31, 2010
				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		$317,945		$ 171		$(2,220)		$315,896		$205,316		$(2,220)		$ –		$ –
Mortgage-related securities- FNMA, FHLMC and GNMA		310,711		9,570		(311)		319,970		30,986		(311)		–		–
Municipal bonds		43,632		7		(1,353)		42,286		41,479		(1,353)		–		–
		$672,288		$9,748		$(3,884)		$678,152		$277,781		$(3,884)		$ –		$ –

Schedule of contractual maturities of available-for-sale securities

		Amortized		Fair
(in thousands)		Cost		value

Due in one year or less		$ –		$ –
Due after one year through five years		208,342		210,106
Due after five years through ten years		58,113		61,585
Due after ten years		7,280		7,775
		273,735		279,466
Mortgage-related securities-FNMA,FHLMC and GNMA		334,183		344,865
Total available-for-sale securities		$607,918		$624,331

Schedule of other than temporary impairments for expected losses that have been recognized in earnings

		Nine months ended
(in thousands)		December 31, 2009
Balance, April 1, 2009		$ 1,486
Additions:
Initial credit impairments		4,870
Subsequent credit impairments		10,574
Reductions:
For securities sold		(16,930	)
Balance, December 31, 2009		$ –

Schedule of loans receivable

December 31		2011			2010
(in thousands)
Real estate loans:
Residential 1-4 family		$1,926,774			$2,087,813
Commercial real estate		331,931			300,689
Home equity line of credit		535,481			416,453
Residential land		45,392			65,599
Commercial construction		41,950			38,079
Residential construction		3,327			5,602
Total real estate loans		2,884,855			2,914,235

Commercial loans		716,427			551,683
Consumer loans		93,253			80,138
Total loans		3,694,535			3,546,056
Deferred loan fees, net and unamortized discounts		(13,811	)		(15,530	)
Allowance for loan losses		(37,906	)		(40,646	)
Total loans, net		$3,642,818			$3,489,880

Schedule of allowance for loan losses

		Residential		Commercial real		Home equity line		Residential		Commercial		Residential		Commercial		Consumer
(in thousands)		1-4 family		estate		of credit		land		construction		construction		loans		loans		Unallocated		Total
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

December 31, 2010
Allowance for loan losses:
Beginning balance		$ 5,522		$ 861		$ 4,679		$ 4,252		$ 3,068		$ 19		$19,498		$ 2,590		$1,190		$ 41,679
Charge-offs		(6,142	)	–		(2,517)		(6,487	)	–		–		(6,261	)	(3,408	)	–		(24,815)
Recoveries		744		–		63		63		–		–		1,537		481		–		2,888
Provision		6,373		613		2,044		8,583		(1,354)		(12	)	1,241		3,662		(256	)	20,894
Ending balance		$ 6,497		$1,474		$ 4,269		$ 6,411		$ 1,714		$ 7		$16,015		$3,325		$ 934		$ 40,646
Ending balance: individually evaluated for impairment		$230		$ –		$ –		$1,642		$ –		$ –		$ 1,588		$ –		$ –		$ 3,460
Ending balance: collectively evaluated for impairment		$6,267		$1,474		$4,269		$4,769		$1,714		$ 7		$ 14,427		$3,325		$934		$37,186

Financing Receivables:
Ending balance		$2,087,813		$300,689		$416,453		$65,599		$38,079		$5,602		$551,683		$80,138		$ –		$3,546,056
Ending balance: individually evaluated for impairment		$34,615		$12,156		$827		$39,631		$ –		$ –		$28,886		$76		$ –		$116,191
Ending balance: collectively evaluated for impairment		$2,053,198		$288,533		$415,626		$25,968		$38,079		$5,602		$522,797		$80,062		$ –		$3,429,865

Schedule of changes in allowance for loan losses

(dollars in thousands)		2011		2010		2009
Allowance for loan losses, January 1		$40,646		$41,679		$35,798

Provision for loan losses		15,009		20,894		32,000

Charge-offs, net of recoveries
Real estate loans		10,733		14,276		9,526
Other loans		7,016		7,651		16,593
Net charge-offs		17,749		21,927		26,119
Allowance for loan losses, December 31		$37,906		$40,646		$41,679
Ratio of net charge-offs to average loans outstanding		0.49%		0.61%		0.66%

Schedule of credit risk profile by internally assigned grade for loans

December 31		2011						2010
(in thousands)		Commercial real estate		Commercial construction		Commercial		Commercial real estate		Commercial construction		Commercial
Grade:
Pass		$308,843		$41,950		$650,234		$285,624		$38,079		$462,078
Special mention		8,594		–		14,660		526		–		44,759
Substandard		11,058		–		47,607		14,539		–		44,259
Doubtful		3,436		–		3,926		–		–		556
Loss		–		–		–		–		–		31
Total		$331,931		$41,950		$716,427		$300,689		$38,079		$551,683

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, 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

December 31, 2010
Real estate loans:
Residential 1-4 family		$ 8,245		$3,719		$36,419		$48,383		$2,039,430		$2,087,813		$ –
Commercial real estate		–		4		–		4		300,685		300,689		–
Home equity line of credit		1,103		227		1,659		2,989		413,464		416,453		–
Residential land		1,543		1,218		16,060		18,821		46,778		65,599		581
Commercial construction		–		–		–		–		38,079		38,079		–
Residential construction		–		–		–		–		5,602		5,602		–
Commercial loans		892		1,317		3,191		5,400		546,283		551,683		64
Consumer loans		629		410		617		1,656		78,482		80,138		320
Total loans		$12,412		$6,895		$57,946		$77,253		$3,468,803		$3,546,056		$965

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

December 31		2011				2010
		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		$28,298		$ –		$36,420		$ –
Commercial real estate		3,436		–		–		–
Home equity line of credit		2,258		–		1,659		–
Residential land		14,535		205		15,479		581
Commercial construction		–		–		–		–
Residential construction		–		–		–		–
Commercial loans		17,946		28		4,956		64
Consumer loans		281		308		341		320
Total		$66,754		$541		$58,855		$965

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

December 31		2011											2010
(in thousands)		Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized			Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized

With no related allowance recorded
Real estate loans:
Residential 1-4 family		$ 19,217		$ 26,614		$ –		$ 21,385		$ 282			$ 18,205		$ 24,692		$ –		$14,609		$ 278
Commercial real estate		13,397		13,397		–		13,404		747			12,156		12,156		–		14,276		979
Home equity line of credit		711		1,612		–		954		6			–		–		–		–		–
Residential land		30,781		39,136		–		33,398		1,779			33,777		40,802		–		29,914		1,499
Commercial construction		–		–		–		–		–			–		–		–		–		–
Residential construction		–		–		–		–		–			–		–		–		–		–
Commercial loans		41,680		43,516		–		40,952		2,912			22,041		22,041		–		29,636		1,846
Consumer loans		25		25		–		16		–			–		–		–		–		–
		105,811		124,300		–		110,109		5,726			86,179		99,691		–		88,435		4,602
With an allowance recorded
Real estate loans:
Residential 1-4 family		3,525		3,525		203		3,527		201			3,917		3,917		230		2,807		175
Commercial real estate		–		–		–		–		–			–		–		–		–		–
Home equity line of credit		–		–		–		–		–			–		–		–		–		–
Residential land		7,792		7,852		2,525		8,158		603			5,041		5,090		1,642		3,753		327
Commercial construction		–		–		–		–		–			–		–		–		–		–
Residential construction		–		–		–		–		–			–		–		–		–		–
Commercial loans		6,561		6,561		976		8,131		737			6,845		6,845		1,588		2,796		182
Consumer loans		–		–		–		–		–			–		–		–		–		–
		17,878		17,938		3,704		19,816		1,541			15,803		15,852		3,460		9,356		684
Total
Real estate loans:
Residential 1-4 family		22,742		30,139		203		24,912		483			22,122		28,609		230		17,416		453
Commercial real estate		13,397		13,397		–		13,404		747			12,156		12,156		–		14,276		979
Home equity line of credit		711		1,612		–		954		6			–		–		–		–		–
Residential land		38,573		46,988		2,525		41,556		2,382			38,818		45,892		1,642		33,667		1,826
Commercial construction		–		–		–		–		–			–		–		–		–		–
Residential construction		–		–		–		–		–			–		–		–		–		–
Commercial loans		48,241		50,077		976		49,083		3,649			28,886		28,886		1,588		32,432		2,028
Consumer loans		25		25		–		16		–			–		–		–		–		–
		$123,689		$142,238		$3,704		$129,925		$7,267			$101,982		$115,543		$3,460		$97,791		$5,286

Schedule of loan modifications and loans modified in TDRS that experienced a payment default of 90 days or more

		2011
				Outstanding recorded investment
(dollars in thousands)		Number of contracts		Pre-modification		Post-modification

Troubled debt restructurings
Real estate loans:
Residential 1-4 family		42		$11,233		$ 9,853
Commercial real estate		–		–		–
Home equity line of credit		1		93		93
Residential land		46		9,965		9,946
Commercial loans		56		35,349		35,349
Consumer loans		1		25		25
		146		$56,665		$55,266

Loans modified in TDRs that experienced a payment default of 90 days or more in 2011, and for which the payment default occurred within one year of the modification, were as follows:

		2011
(dollars in thousands)		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		4		799
Consumer loans		–		–
		5		$1,327

Schedule of deposit liabilities

December 31		2011				2010
		Weighted-average				Weighted-average
(dollars in thousands)		stated rate		Amount		stated rate		Amount

Savings		0.07%		$1,684,875		0.12%		$1,623,211
Other checking
Interest-bearing		0.02		610,542		0.05		589,228
Noninterest-bearing		–		538,214		–		473,297
Commercial checking		–		455,614		–		392,345
Money market		0.21		236,641		0.28		230,990
Term certificates		0.98		544,146		1.25		666,301
		0.18%		$4,070,032		0.28%		$3,975,372

Schedule of interest expense on deposit liabilities by type

(in thousands)		2011		2010		2009
Term certificates		$6,393		$11,221		$27,369
Savings		1,756		2,262		4,952
Money market		650		884		886
Interest-bearing checking		184		329		839
		$8,983		$14,696		$34,046

Schedule of securities sold under agreements to repurchase

December 31, 2011
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		$132,932		0.35%		$156,478
1 to 29 days		–		–		–
30 to 90 days		–		–		–
Over 90 days		50,297		4.75		63,930
		$183,229		1.56%		$220,408

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

(dollars in millions)		2011		2010		2009
Amount outstanding as of December 31		$183		$172		$233
Average amount outstanding during the year		$183		$201		$230
Maximum amount outstanding as of any month-end		$186		$238		$241
Weighted-average interest rate as of December 31		1.56%		1.71%		1.38%
Weighted-average interest rate during the year		1.61%		1.53%		1.55%
Weighted-average remaining days to maturity as of December 31		490		628		544

Schedule of advances from Federal Home Loan Bank

December 31, 2011		Weighted-average stated rate		Amount
(dollars in thousands)
Due in
2012		–%		$ –
2013		–		–
2014		–		–
2015		–		–
2016		–		–
Thereafter		4.28		50,000
		4.28%		$50,000