INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2012

Investments, Debt and Equity Securities [Abstract]

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

4. INVESTMENT SECURITIES

       The following tables present the available for sale investment portfolio as of September 30, 2012, and December 31, 2011:

(Dollars in thousands)
September 30, 2012	Amortized		Unrealized		Unrealized
	Cost		Gross Gains		Gross Losses			Fair Value
U.S. Treasury securities	$	200	$	-	$	-		$	200
U.S. Government agency securities		225,728		4,632		-			230,360
Corporate securities		14,303		-		(5,284	)		9,019
Mortgage-backed securities		447,437		13,820		(180	)		461,077
Obligations of state and political subdivisions		74,948		5,184		(16	)		80,116
Equity investments and other securities		11,240		657		(12	)		11,885
Total	$	773,856	$	24,293	$	(5,492	)	$	792,657
(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 September 30, 2012, the corporate securities portfolio included four pooled trust preferred securities issued by banks and/or insurance companies with amortized cost of $13.8 million and an estimated fair market value of $8.5 million resulting in an estimated $5.3 million unrealized loss. This unrealized loss reflects a decline in market value since the purchase of these securities. Credit deterioration and wider credit and liquidity spreads since purchase 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. Beginning on the 10th year anniversary of each pooled trust preferred security and quarterly thereafter, each security could, under certain circumstances, be redeemed at par. One of our trust preferred securities reached its 10 year anniversary on November 1. It is unlikely that the security will be redeemed at this point.

       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 September 30, 2012	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Treasury securities	$	200	$	-		$	-	$	-		$	200	$	-
Corporate securities		-		-			8,519		(5,284	)		8,519		(5,284	)
Mortgage-backed securities		24,307		(92	)		9,956		(88	)		34,263		(180	)
Obligations of state and political subdivisions		2,542		(16	)		-		-			2,542		(16	)
Equity and other securities		-		-			1,188		(12	)		1,188		(12	)
Total	$	27,049	$	(108	)	$	19,663	$	(5,384	)	$	46,712	$	(5,492	)
(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	)

       Management reviews and evaluates the Company’s debt securities on a quarterly basis for the presence of other-than-temporary impairment (“OTTI”). This 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. The Company does not intend to sell this security, and it is not likely that it will be required to sell this security, but it does 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 the Company does 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. The Company estimates 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. While this security had an impairment loss of $1.5 million at September 30, 2012, the security had no credit related OTTI as of September 30, 2012.

       The following table presents a summary of the significant inputs utilized to measure the OTTI related to credit losses associated with the above pooled trust preferred security at September 30, 2012, and September 30, 2011:

	September 30, 2012		September 30, 2011
Default Rate	0.75	%	0.75	%
Recovery Rate	15.00	%	15.00	%
Prepayments	1.00	%	1.00	%
Discount rate (coupon) range	3.0%-4.3	%	3.75%-5.04	%

       The following table presents information about the securities with OTTI losses for the periods shown:

(Dollars in thousands)
	Three months ended					Nine months ended
	September 30, 2012		September 30, 2011		September 30, 2012			September 30, 2011
Other-than-temporary impairment losses on securities	$	-	$	-	$	(1,726	)	$	(1,636	)
Portion of other-than temporary, non-credit related losses
recognized in other comprehensive income		-		-		1,677			1,457
Net other-than-temporary impairment losses on securities	$	-	$	-	$	(49	)	$	(179	)

       The following table presents a tabular roll forward of the amount of credit related OTTI recognized in earnings for the periods shown:

(Dollars in thousands)
	Three months ended						Nine months ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Balance of net OTTI losses on securities, beginning of period	$	(228	)	$	(179	)	$	(179	)	$	-
Net OTTI losses on securities in the period		-			-			(49	)		(179	)
Balance of net OTTI losses on securities, end of period	$	(228	)	$	(179	)	$	(228	)	$	(179	)

       At September 30, 2012, and December 31, 2011, the Company had $297.6 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.

       The following table presents the contractual maturities of the investment securities available for sale at September 30, 2012:

(Dollars in thousands)	Available for sale
September 30, 2012	Amortized cost		Fair value
U.S. Treasury securities
One year or less	$	-	$	-
After one year through five years		200		200
After five through ten years		-		-
Due after ten years		-		-
Total		200		200
U.S. Government agency securities:
One year or less		600		604
After one year through five years		160,010		163,732
After five through ten years		65,118		66,024
Due after ten years		-		-
Total		225,728		230,360
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		8,519
Total		14,303		9,019
Obligations of state and political subdivisions:
One year or less		1,817		1,839
After one year through five years		18,319		19,395
After five through ten years		35,643		38,687
Due after ten years		19,169		20,195
Total		74,948		80,116
Mortgage-backed securities		447,437		461,077
Equity investments and other securities		11,240		11,885
Total securities	$	773,856	$	792,657

       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.