INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2012

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3. INVESTMENT SECURITIES

     The following tables present the available for sale investment portfolio as of March 31, 2012, and December 31, 2011:

(Dollars in thousands)
March 31, 2012	Amortized		Unrealized		Unrealized
	Cost		Gross Gains		Gross Losses			Fair Value
U.S. Treasury securities	$	200	$	1	$	-		$	201
U.S. Government agency securities		191,172		3,309		(13	)		194,468
Corporate securities		14,303		-		(5,786	)		8,517
Mortgage-backed securities		384,206		10,038		(10	)		394,234
Obligations of state and political subdivisions		56,769		4,457		(40	)		61,186
Equity investments and other securities		11,292		659		(23	)		11,928
Total	$	657,942	$	18,464	$	(5,872	)	$	670,534
(Dollars in thousands)
December 31, 2011	Amortized		Unrealized		Unrealized
	Cost		Gross Gains		Gross Losses			Fair Value
U.S. Treasury securities	$	200	$	3	$	-		$	203
U.S. Government agency securities		216,211		3,453		(33	)		219,631
Corporate securities		14,351		-		(5,844	)		8,507
Mortgage-backed securities		419,510		9,351		(136	)		428,725
Obligations of state and political subdivisions		56,003		4,736		(7	)		60,732
Equity investments and other securities		11,318		749		(21	)		12,046
Total	$	717,593	$	18,292	$	(6,041	)	$	729,844

At March 31, 2012, the fair value of the securities in the investment portfolio was $670.5 million while the amortized cost was $657.9 million, reflecting a net unrealized gain in the portfolio of $12.6 million. At December 31, 2011, the fair value and amortized cost of securities in the investment portfolio were $729.8 million and $717.5 million, respectively, reflecting a net unrealized gain of $12.3 million.

At March 31, 2012, the corporate securities portfolio included four pooled trust preferred securities issued by banks and insurance companies with amortized cost of $13.8 million and an estimated fair market value of $8.0 million resulting in an estimated $5.8 million unrealized loss. This unrealized loss reflects a decline in market value since the purchase of these securities. Credit deterioration and wide credit and liquidity spreads contributed to the unrealized loss. These pooled trust preferred securities are rated C or better by the rating agencies that cover these securities and they have several features that reduce credit risk, including seniority over certain tranches in the same pool and the benefit of certain collateral coverage tests.

     The following tables provide the fair value and gross unrealized losses on securities available for sale, aggregated by category and length of time the individual securities have been in a continuous unrealized loss position:

(Dollars in thousands)	Less than 12 months					12 months or more					Total
			Unrealized					Unrealized					Unrealized
As of March 31, 2012	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency securities	$	12,673	$	(13	)	$	-	$	-			12,673		(13	)
Corporate securities		-		-			8,017		(5,786	)		8,017		(5,786	)
Mortgage-backed securities		12,269		(4	)		9,213		(6	)		21,482		(10	)
Obligations of state and political subdivisions		2,043		(40	)		-		-			2,043		(40	)
Equity and other securities		597		(4	)		1,181		(19	)		1,778		(23	)
Total	$	27,582	$	(61	)	$	18,411	$	(5,811	)	$	45,993	$	(5,872	)
(Dollars in thousands)	Less than 12 months						12 months or more				Total
			Unrealized					Unrealized					Unrealized
As of December 31, 2011	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency securities	$	14,627	$	(33	)	$	-	$	-		$	14,627	$	(33	)
Corporate securities		-		-			8,007		(5,844	)		8,007		(5,844	)
Mortgage-backed securities		26,416		(130	)		9,538		(6	)		35,954		(136	)
Obligations of state and political subdivisions		234		(7	)		-		-			234		(7	)
Equity and other securities		598		(2	)		1,182		(19	)		1,780		(21	)
Total	$	41,875	$	(172	)	$	18,727	$	(5,869	)	$	60,602	$	(6,041	)
(Dollars in thousands)	Less than 12 months					12 months or more					Total
			Unrealized					Unrealized					Unrealized
As of March 31, 2011	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency securities	$	81,204	$	(825	)	$	-	$	-		$	81,204	$	(825	)
Corporate securities		-		-			9,349		(4,664	)		9,349		(4,664	)
Mortgage-backed securities		166,586		(2,521	)		986		(84	)		167,572		(2,605	)
Obligations of state and political subdivisions		8,805		(159	)		-		-			8,805		(159	)
Equity and other securities		1,957		(42	)		1		(1	)		1,958		(43	)
Total	$	258,552	$	(3,547	)	$	10,336	$	(4,749	)	$	268,888	$	(8,296	)

At March 31, 2012, the Company had six investment securities with an amortized cost of $24.2 million and an unrealized loss of $5.8 million that have been in a continuous unrealized loss position for more than 12 months. Pooled trust preferred securities accounted for the majority of unrealized loss in these securities.

There were a total of eight securities in Bancorp’s investment portfolio that have been in a continuous unrealized loss position for less than 12 months with an amortized cost of $27.6 million and a total unrealized loss of $61,000 at March 31, 2012. The unrealized loss on these investment securities was predominantly caused by changes in market interest rates, average life, or credit spreads subsequent to purchase. The fair value of most of the Company’s securities fluctuates as market interest rates change.

     Management reviews and evaluates the Company’s debt securities on an ongoing basis for the presence of other-than-temporary impairment (“OTTI”). Our analysis takes into consideration current market conditions, length and severity of impairment, extent and nature of the change in fair value, issuer ratings, and whether or not the Company intends to, or may be required to, sell debt securities before recovering any unrealized losses.

The Company recorded a credit related OTTI charge of $.2 million pretax in the second quarter of 2011 related to a pooled trust preferred security in its investment portfolio, which also was placed on nonaccrual status at the same time. An additional credit related OTTI charge of $49,000, pretax, relating to this same security was deemed necessary in the first quarter of 2012. We do not intend to sell this security, and it is not likely that we will be required to sell this security, but we do not expect to recover the entire amortized cost basis of the security. The amount of OTTI related to credit losses recognized in earnings represents the portion of amortized cost of the security that we do not expect to recover and is based on the estimated cash flow expected from the security, discounted by the estimated future coupon rates of the security. We estimate cash flows based on the performance of the underlying collateral for the security and the overall structure of the security. Factors considered in the performance of underlying collateral include current default and deferral rates, estimated future default, deferral and recovery rates, and prepayment rates. Factors considered in the overall structure of the security include the impact of the underlying collateral cash flow on debt coverage tests and subordination levels. The remaining impairment on this security that is related to all other factors is recognized in other comprehensive income. Given regulatory guidelines on expectation of full payment of interest and principal as well as extended payments in kind, this pooled trust preferred security was placed on nonaccrual status. In October 2011 the Company placed another pooled trust preferred security, with payments in kind, on nonaccrual status. However, while this security had an impairment loss of $1.6 million at March 31, 2012, the security had no credit related OTTI as of March 31, 2012.

The following table presents a summary of the significant inputs utilized to measure the other-than-temporary impairment related to credit losses associated with the above pooled trust preferred security at March 31, 2012, and March 31, 2011:

(Dollars in thousands)
	March 31, 2012	March 31, 2011
Default Rate	0.75%	N/A
Recovery Rate	15.00%	N/A
Prepayments	1.00%	N/A

The following table presents information about the securities with OTTI losses for the three months ended March 31, 2012, and 2011:

(Dollars in thousands)
	Year to date March 31,
	2012			2011
Other-than-temporary impairment losses on securities	$	(1,726	)	$	-
Portion of other-than temporary, non-credit related losses
recognized in other comprehensive income		1,677			-
Net other-than-temporary impairment losses on securities	$	(49	)	$	-

The following table presents a tabular roll forward of the amount of credit related OTTI recognized in earnings for the periods ended March 31, 2012, and March 31, 2011:

(Dollars in thousands)
	Period ended
	March 31, 2012			March 31, 2011
Balance of net other-than-temporary impairment losses on securities, beginning of period	$	(179	)	$	-
Net other-than-temporary impairment losses on securities in the period		(49	)		-
Balance of net other-than-temporary impairment losses on securities, end of period	$	(228	)	$	-

At March 31, 2012, and December 31, 2011, the Company had $299.2 million and $291.0 million, respectively, in investment securities being provided as collateral to the Federal Home Loan Bank of Seattle (“FHLB”), the Federal Reserve Bank of San Francisco (“Reserve Bank”), the State of Oregon, the State of Washington, and others to support the Company’s borrowing capacities and certain public fund deposits. At March 31, 2012, and December 31, 2011, Bancorp had no reverse repurchase agreements.

     The following table presents the contractual maturities of the investment securities available for sale at March 31, 2012:

(Dollars in thousands)	Available for sale
March 31, 2012	Amortized cost		Fair value
U.S. Treasury securities
One year or less	$	200	$	201
After one year through five years		-		-
After five through ten years		-		-
Due after ten years		-		-
Total		200		201
U.S. Government agency securities:
One year or less		499		501
After one year through five years		190,673		193,967
After five through ten years		-		-
Due after ten years		-		-
Total		191,172		194,468
Corporate securities:
One year or less		-		-
After one year through five years		500		500
After five through ten years		-		-
Due after ten years		13,803		8,017
Total		14,303		8,517
Obligations of state and political subdivisions:
One year or less		1,515		1,566
After one year through five years		15,787		16,740
After five through ten years		29,109		31,729
Due after ten years		10,358		11,151
Total		56,769		61,186
Sub-total		262,444		264,372
Mortgage-backed securities		384,206		394,234
Equity investments and other securities		11,292		11,928
Total securities	$	657,942	$	670,534

     Certain investments have maturities that will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.