Noninterest Income

Noninterest income in the fourth quarter of 2012 was $71.7 million, up $44.2 million, or 160%, from $27.5 million in the fourth quarter of 2011. Full year noninterest income was $237.5 million in 2012, up from $97.2 million in 2011, primarily driven by increased mortgage loan origination and sale revenue. The increase in net gain on mortgage loan origination and sale activities in 2012 from prior year periods reflects increased single family loan production volume and continued strength in secondary market profit margins. Partially offsetting this increase to noninterest income is a decrease in mortgage servicing income, reflecting a reduction in income recognized from MSR risk management activities.

Noninterest Expense

Noninterest expense in the fourth quarter of 2012 was $55.8 million, up $21.9 million, or 64.5%, from $33.9 million in the fourth quarter of 2011. Full year noninterest expense was $183.1 million in 2012, up 44.8% from $126.5 million in 2011. The increase in noninterest expense during 2012 was primarily due to an increase in incentive compensation, including commissions to lending personnel, driven by growth in closed mortgage loan volume.

Income Taxes

The Company's income tax expense was $7.1 million for the quarter. The Company's 2012 year-to-date income tax expense of $21.5 million is based on the Company's annual effective income tax rate plus discrete benefits recognized during the year. The Company's effective tax rate for the year of 21% differs from the Federal statutory tax rate of 35% primarily due to a $14.4 million tax benefit related to the reversal of the Company's beginning of year valuation allowance against deferred tax assets, tax exempt income and state income taxes in Oregon, Hawaii and Idaho.

Capital

Regulatory capital ratios for the Bank are as follows:
   

Dec. 31, 2012
   

Sept. 30, 2012
   

Dec. 31, 2011
   

Well- capitalized ratios
Tier 1 leverage capital (to average assets) 11.8 % 10.9 %     6.0 % 5.0 %
Tier 1 risk-based capital (to risk-weighted assets) 18.1 % 16.8 % 9.9 % 6.0 %
Total risk-based capital (to risk-weighted assets) 19.3 % 18.0 % 11.2 % 10.0 %
 

The Bank continues to meet the capital requirements of a “well-capitalized” institution.

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