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Loans Receivable
12 Months Ended
Dec. 31, 2022
Loans and Leases Receivable Disclosure [Abstract]  
Loan Receivable Loans ReceivableThe Bank originates loans in the ordinary course of business and has also acquired loans through mergers and acquisitions. Accrued interest receivable was excluded from disclosures presenting the Bank's amortized cost of loans receivable as it was deemed insignificant. In addition to originating loans, the Bank may also purchase loans through pool purchases, participation purchases and syndicated loan purchases.
(a) Loan Origination/Risk Management
The Bank categorizes the individual loans in the total loan portfolio into four segments: commercial business; residential real estate; real estate construction and land development; and consumer. Within these segments are classes of loans for which management monitors and assesses credit risk.
The Bank has certain lending policies and guidelines in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and guidelines on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and criticized loans. The Bank also conducts internal loan reviews and validates the credit risk assessment on a periodic basis and presents the results of these reviews to management. The loan review process complements and reinforces the risk identification and assessment decisions made by loan officers and credit personnel.
The amortized cost of loans receivable, net of ACL on loans consisted of the following portfolio segments and classes at the dates indicated:
December 31, 2022December 31, 2021
(In thousands)
Commercial business:
Commercial and industrial$692,100 $621,567 
SBA PPP1,468 145,840 
Owner-occupied CRE937,040 931,150 
Non-owner occupied CRE1,586,632 1,493,099 
Total commercial business3,217,240 3,191,656 
Residential real estate
343,631 164,582 
Real estate construction and land development:
Residential
80,074 85,547 
Commercial and multifamily
214,038 141,336 
Total real estate construction and land development294,112 226,883 
Consumer195,875 232,541 
Loans receivable4,050,858 3,815,662 
Allowance for credit losses on loans(42,986)(42,361)
 Loans receivable, net$4,007,872 $3,773,301 
Balances included in the amortized cost of loans receivable:
Unamortized net discount on acquired loans$(2,501)$(3,938)
Unamortized net deferred fee$(10,016)$(7,953)
A discussion of the risk characteristics of each loan portfolio segment is as follows:
Commercial Business:
There are four significant classes of loans in the commercial business portfolio segment discussed separately below:
Commercial and industrial. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may include a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Commercial and industrial loans carry more risk than other loans because the borrowers’ cash flow is less predictable and in the event of a default the amount of loss is potentially greater and more difficult to quantify because the value of the collateral securing these loans may fluctuate, may be uncollectible or may be obsolete or of limited use, among other things.
SBA PPP. The Bank began originating SBA PPP loans following the enactment of the CARES Act in April 2020. SBA PPP loans are fully guaranteed by the SBA, intended for businesses impacted by the COVID-19 Pandemic and designed to provide near term relief to help small businesses sustain operations. These loans have either a two-year or five-year maturity date and earn interest at 1%. The Bank also earned a fee based on the size of the loan, which is recognized over the life of the loan. The Bank no longer originates SBA PPP loans as the program expired on May 31, 2021.
Owner-occupied and non-owner occupied CRE. The Bank originates CRE loans primarily within its primary market areas. These loans are subject to underwriting standards and processes similar to commercial and industrial loans in that these
loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate properties. CRE lending typically involves higher loan principal amounts and payments on loans and repayment is dependent on successful operation and management of the properties. The value of the real estate securing these loans can be adversely affected by conditions in the real estate market or the economy. There is some common risk characteristics with owner-occupied CRE loans and non-owner occupied CRE loans. However, owner-occupied CRE loans are generally considered to have a slightly lower risk profile as we typically have the guarantee of the owner-occupant and can underwrite risk using the complete financial information on the entity that occupies the property.
Residential Real Estate:
The majority of the Bank’s residential real estate loans are secured by one-to-four family residences located in its primary market areas. The Company’s underwriting standards require that residential real estate loans maintained in the portfolio generally are owner-occupied and do not exceed 80% of the lower of appraised value at origination or cost of the underlying collateral. Terms of maturity typically range from 15 to 30 years. The Bank sells a portion of originated residential real estate loans in the secondary market. In addition to originating residential real estate loans, the Bank began purchasing pools of residential real estate loans during the year ended 2022. All purchased loans adhere to the Bank's underwriting standards.
Real Estate Construction and Land Development:
The Bank originates construction loans for residential and for commercial and multifamily properties. The residential construction loans generally include construction of custom single-family homes whereby the home owner is the borrower. The Bank also provides financing to builders for the construction of pre-sold residential homes and, in selected cases, to builders for the construction of speculative single-family residential property. Construction loans are typically short-term in nature and priced with variable rates of interest. Construction loans may also include construction to permanent financing where the loan term includes both the construction phase and term loan. Construction lending can involve a higher level of risk than other types of lending because funds are advanced partially based upon the value of the project, which is uncertain prior to the project’s completion. Because of the uncertainties inherent in estimating construction costs as well as the market value of a completed project and the effects of governmental regulation of real property, the Bank’s estimates with regard to the total funds required to complete a project and the related loan-to-value ratio may vary from actual results. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness. If the Bank’s estimate of the value of a project at completion proves to be overstated, it may have inadequate security for repayment of the loan and may incur a loss if the borrower does not repay the loan. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Bank until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being dependent upon successful completion of the construction project, market interest rate changes, government regulation of real property, general economic conditions and the availability of long-term financing.
Consumer:
The Bank originates consumer loans and lines of credit that are both secured and unsecured. The underwriting process for these loans ensures a qualifying primary and secondary source of repayment. Underwriting standards for home equity loans are significantly influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage of 80%, collection remedies, the number of such loans a borrower can have at one time and documentation requirements. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. The majority of consumer loans are for relatively small amounts disbursed among many individual borrowers which reduces the overall credit risk for this segment. To further reduce the risk, trend reports are reviewed by management on a regular basis.
The Bank also purchased indirect consumer loans. These indirect consumer loans were secured by new and used automobile and recreational vehicles and were originated indirectly by established and well-known dealers located in our market areas. In addition, the indirect loans purchased were made to only prime borrowers. The Bank ceased indirect auto loan originations in March 2020.
(b) Concentrations of Credit
Most of the Bank’s lending activity occurs within its primary market areas which are concentrated along the I-5 corridor from Whatcom County to Clark County in Washington State, and Multnomah, Washington and Lane County in Oregon, as well as other contiguous markets and represents a geographic concentration. Additionally, the Bank's loan portfolio is concentrated in commercial business loans, including commercial and industrial, owner and nonowner-occupied CRE and commercial and multifamily real estate construction and land development loans. Commercial business loans, excluding SBA PPP loans, are generally considered as having more inherent risk of default than residential real estate loans or other consumer loans. Also, the commercial loan balance per borrower is typically larger than that for residential real estate loans and consumer loans, implying higher potential losses on an individual loan basis.
(c) Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the Bank’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade of the loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) nonperforming loans, (v) past due status, and (vi) the general economic conditions of the United States of America, and specifically the states of Washington and Oregon. The Bank utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 10. A description of the general characteristics of the risk grades is as follows:
Grades 1 to 5: These grades are considered “Pass” and include loans with negligible to above average, but acceptable, risk. These borrowers generally have strong to acceptable capital levels and consistent earnings and debt service capacity. Loans with the higher grades within the “Pass” category may include borrowers who are experiencing unusual operating difficulties, but have acceptable payment performance to date. Increased monitoring of financial information and/or collateral may be appropriate. Loans with this grade show no immediate loss exposure.
Grade 6: This grade includes "Watch" loans. The grade is intended to be utilized on a temporary basis for pass grade borrowers where a potentially significant risk-modifying action is anticipated in the near term.
Grade 7: This grade includes "Special Mention" ("SM") loans and is intended to highlight loans deemed by management to have some elevated risks that deserve management's close attention. Loans with this grade show signs of deteriorating profits and capital and the borrower might not be strong enough to sustain a major setback. The borrower is typically higher than normally leveraged and outside support might be modest and likely illiquid. The loan is at risk of further credit decline unless active measures are taken to correct the situation.
Grade 8: This grade includes “Substandard” ("SS") loans in accordance with regulatory guidelines, which the Company has determined have a high credit risk. These loans also have well-defined weaknesses and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The borrower may have shown serious negative trends in financial ratios and performance. Such loans may be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business.
Grade 9: This grade includes “Doubtful” loans in accordance with regulatory guidelines and the Bank has determined these loans to have excessive credit risk. Such loans are placed on nonaccrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. Additionally, these loans generally have been partially charged off for the amount considered uncollectible.
Grade 10: This grade includes “Loss” loans in accordance with regulatory guidelines and the Bank has determined these loans have the highest risk of loss. Such loans are charged off or charged down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined.
Numerical loan grades for loans are established at the origination of the loan. Changes to loan grades are considered at the time new information about the performance of a loan becomes available, including the receipt of updated financial information from the borrower, results of annual term loan reviews and scheduled loan reviews. For consumer loans, the Bank follows the FDIC’s Uniform Retail Credit Classification and Account Management Policy for subsequent classification in the event of payment delinquencies or default. Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement. Credit deterioration is evidenced by delinquency, direct communications with the borrower or other borrower information that becomes known to management. Credit improvements are evidenced by known facts regarding the borrower or the collateral property.
Loan grades relate to the likelihood of losses in that the higher the grade, the greater the loss potential. Loans with a pass grade may have some estimated inherent losses, but to a lesser extent than the other loan grades. The SM loan grade is transitory in that the Bank is waiting on additional information to determine the likelihood and extent of any potential loss. The likelihood of loss for SM graded loans, however, is greater than Watch graded loans because there has been measurable credit deterioration. Loans with a SS grade have further credit deterioration and include both accrual loans and nonaccrual loans. For Doubtful and Loss graded loans, the Bank is almost certain of the losses and the outstanding principal balances are generally charged off to the realizable value.
Regulatory agencies provided guidance regarding credit risk ratings, delinquency reporting and nonaccrual status for loans adversely impacted by the COVID-19 Pandemic. The Bank exercised judgment in determining the risk rating for impacted borrowers and did not automatically adversely classify credits that were affected by the COVID-19 Pandemic. The Bank did not designate loans with payment deferrals granted due to the COVID-19 Pandemic as past due because of the deferral. Due to the short-term nature of the forbearance and other relief programs the Bank offered as a result of the COVID-19 Pandemic, borrowers granted relief under these programs were generally not reported as nonaccrual during the deferral period.
The following table presents the amortized cost of loans receivable by risk grade at the dates indicated:
December 31, 2022
Term Loans
Amortized Cost Basis by Origination Year
Revolving Loans
Revolving Loans Converted (1)
Loans Receivable
20222021202020192018Prior
(In thousands)
Commercial business:
Commercial and industrial
Pass$168,818 $93,302 $82,437 $61,160 $33,957 $74,181 $146,795 $172 $660,822 
SM212 109 443 4,637 362 4,447 5,433 — 15,643 
December 31, 2022
Term Loans
Amortized Cost Basis by Origination Year
Revolving Loans
Revolving Loans Converted (1)
Loans Receivable
20222021202020192018Prior
SS773 188 1,710 3,465 559 5,098 3,674 168 15,635 
Total169,803 93,599 84,590 69,262 34,878 83,726 155,902 340 692,100 
SBA PPP
Pass— 1,351 117 — — — — — 1,468 
Owner-occupied CRE
Pass134,432 167,927 93,834 157,096 62,876 282,212 — — 898,377 
SM— 1,744 — — 2,540 16,664 — 247 21,195 
SS— — 671 — 3,722 13,075 — — 17,468 
Total134,432 169,671 94,505 157,096 69,138 311,951 — 247 937,040 
Non-owner occupied CRE
Pass240,151 189,300 160,930 258,778 121,369 561,645 — — 1,532,173 
SM— 8,349 — 4,172 — 12,190 — — 24,711 
SS— — — — 3,627 26,121 — — 29,748 
Total240,151 197,649 160,930 262,950 124,996 599,956 — — 1,586,632 
Total commercial business
Pass543,401 451,880 337,318 477,034 218,202 918,038 146,795 172 3,092,840 
SM212 10,202 443 8,809 2,902 33,301 5,433 247 61,549 
SS773 188 2,381 3,465 7,908 44,294 3,674 168 62,851 
Total544,386 462,270 340,142 489,308 229,012 995,633 155,902 587 3,217,240 
Residential real estate
Pass132,510 149,934 24,668 16,803 4,207 15,337 — — 343,459 
SS— — — — — 172 — — 172 
Total132,510 149,934 24,668 16,803 4,207 15,509 — — 343,631 
Real estate construction and land development:
Residential
Pass45,521 26,675 2,891 3,061 871 1,055 — — 80,074 
Commercial and multifamily
Pass71,168 123,626 6,272 1,084 2,562 995 — — 205,707 
SM— — 2,213 5,687 — — — — 7,900 
SS— — — 37 — 394 — — 431 
Total71,168 123,626 8,485 6,808 2,562 1,389 — — 214,038 
Total real estate construction and land development
Pass116,689 150,301 9,163 4,145 3,433 2,050 — — 285,781 
SM— — 2,213 5,687 — — — — 7,900 
SS— — — 37 — 394 — — 431 
Total116,689 150,301 11,376 9,869 3,433 2,444 — — 294,112 
Consumer
Pass3,379 509 9,848 27,370 15,563 19,855 116,605 435 193,564 
SS— — 168 559 320 1,120 44 100 2,311 
Total3,379 509 10,016 27,929 15,883 20,975 116,649 535 195,875 
Loans receivable
Pass795,979 752,624 380,997 525,352 241,405 955,280 263,400 607 3,915,644 
SM212 10,202 2,656 14,496 2,902 33,301 5,433 247 69,449 
SS773 188 2,549 4,061 8,228 45,980 3,718 268 65,765 
Total$796,964 $763,014 $386,202 $543,909 $252,535 $1,034,561 $272,551 $1,122 $4,050,858 
(1) Represents the loans receivable balance at December 31, 2022 which was converted from a revolving loan to an amortizing loan during the year ended December 31, 2022.
December 31, 2021
Term Loans
Amortized Cost Basis by Origination Year
Revolving Loans
Revolving Loans Converted (1)
Loans Receivable
20212020201920182017Prior
(In thousands)
Commercial business:
Commercial and industrial
Pass$95,960 $100,193 $94,657 $54,707 $28,558 $77,294 $127,651 $1,035 $580,055 
SM326 884 5,998 1,425 2,223 2,401 2,048 353 15,658 
SS1,443 1,287 5,912 2,809 2,526 6,907 4,402 568 25,854 
Total97,729 102,364 106,567 58,941 33,307 86,602 134,101 1,956 621,567 
SBA PPP
Pass139,253 6,587 — — — — — — 145,840 
Total139,253 6,587 — — — — — — 145,840 
Owner-occupied CRE
Pass182,742 90,609 188,380 73,714 66,039 273,518 — 72 875,074 
SM264 — 3,079 7,521 3,937 16,724 — — 31,525 
SS— 1,332 — 3,787 3,014 16,418 — — 24,551 
Doubtful or Loss— — — — — — — — — 
Total183,006 91,941 191,459 85,022 72,990 306,660 — 72 931,150 
Non-owner-occupied CRE
Pass187,860 185,650 244,863 149,090 144,896 499,486 — — 1,411,845 
SM— — 5,674 — 15,482 2,400 — — 23,556 
SS— — — 3,379 — 54,319 — — 57,698 
Total187,860 185,650 250,537 152,469 160,378 556,205 — — 1,493,099 
Total commercial business
Pass605,815 383,039 527,900 277,511 239,493 850,298 127,651 1,107 3,012,814 
SM590 884 14,751 8,946 21,642 21,525 2,048 353 70,739 
SS1,443 2,619 5,912 9,975 5,540 77,644 4,402 568 108,103 
Total607,848 386,542 548,563 296,432 266,675 949,467 134,101 2,028 3,191,656 
Residential real estate
Pass85,089 27,090 23,295 5,672 6,141 16,891 — — 164,178 
SM— — — — — — — — — 
SS— — — — — 404 — — 404 
Total85,089 27,090 23,295 5,672 6,141 17,295 — — 164,582 
Real estate construction and land development:
Residential
Pass44,892 23,728 12,266 2,921 389 1,351 — — 85,547 
Total44,892 23,728 12,266 2,921 389 1,351 — — 85,547 
Commercial and multifamily
Pass56,448 41,616 34,117 5,794 710 1,379 — — 140,064 
SM— — 68 — — 213 — — 281 
SS— 571 — — — 420 — — 991 
Total56,448 42,187 34,185 5,794 710 2,012 — — 141,336 
Total real estate construction and land development
Pass101,340 65,344 46,383 8,715 1,099 2,730 — — 225,611 
SM— — 68 — — 213 — — 281 
SS— 571 — — — 420 — — 991 
Total101,340 65,915 46,451 8,715 1,099 3,363 — — 226,883 
December 31, 2021
Term Loans
Amortized Cost Basis by Origination Year
Revolving Loans
Revolving Loans Converted (1)
Loans Receivable
20212020201920182017Prior
Consumer
Pass1,286 15,737 46,041 29,819 15,068 13,026 108,492 120 229,589 
SM— — — — — — — — — 
SS— 181 657 476 542 1,043 36 17 2,952 
Total1,286 15,918 46,698 30,295 15,610 14,069 108,528 137 232,541 
Loans receivable
Pass793,530 491,210 643,619 321,717 261,801 882,945 236,143 1,227 3,632,192 
SM590 884 14,819 8,946 21,642 21,738 2,048 353 71,020 
SS1,443 3,371 6,569 10,451 6,082 79,511 4,438 585 112,450 
Total$795,563 $495,465 $665,007 $341,114 $289,525 $984,194 $242,629 $2,165 $3,815,662 
(1) Represents the loans receivable balance at December 31, 2021 which was converted from a revolving loan to an amortizing loan during the year ended December 31, 2021
(d) Nonaccrual Loans
The following tables present the amortized cost of nonaccrual loans for the dates indicated:
December 31, 2022
Nonaccrual without ACLNonaccrual with ACLTotal Nonaccrual
(In thousands)
Commercial business:
Commercial and industrial$4,503 $1,154 $5,657 
Owner-occupied CRE— 212 212 
Total commercial business4,503 1,366 5,869 
Real estate construction and land development:
Commercial and multifamily
— 37 37 
Total$4,503 $1,403 $5,906 
December 31, 2021
Nonaccrual without ACLNonaccrual with ACLTotal Nonaccrual
(In thousands)
Commercial business:
Commercial and industrial$6,454 $3,827 $10,281 
Owner-occupied CRE3,036 5,138 8,174 
Non-owner occupied CRE1,273 3,379 4,652 
Total commercial business10,763 12,344 23,107 
Residential real estate
— 47 47 
Real estate construction and land development:
Commercial and multifamily
— 571 571 
Consumer— 29 29 
Total$10,763 $12,991 $23,754 
The following table presents the reversal of interest income on loans due to the write-off of accrued interest receivable upon the initial classification of loans as nonaccrual loans and the interest income recognized due to payment in full or sale of previously classified nonaccrual loans during the following periods:
Year Ended December 31, 2022
Year Ended December 31, 2021
Interest Income ReversedInterest Income RecognizedInterest Income ReversedInterest Income Recognized
(In thousands)
Commercial business:
Commercial and industrial$(14)$263 $(10)$2,295 
Owner-occupied CRE— 53 — 117 
Non-owner occupied CRE— 774 — 601 
Total commercial business(14)1,090 (10)3,013 
Residential real estate
— 19 — — 
Real estate construction and land development:
Residential
— — — 71 
Commercial and multifamily
(14)65 — — 
Total real estate construction and land development(14)65 — 71 
Consumer— 68 (1)52 
Total$(28)$1,242 $(11)$3,136 
For the years ended December 31, 2022 and 2021, no interest income was recognized subsequent to a loan’s classification as nonaccrual, except as indicated in the tables above due to payment in full or sale.
(e) Past due loans
The Bank performs an aging analysis of past due loans using policies consistent with regulatory reporting requirements with categories of 30-89 days past due and 90 or more days past due. The amortized cost of past due loans as of December 31, 2022 and December 31, 2021 were as follows:
December 31, 2022
30-89 Days90 Days 
or Greater
Total Past 
Due
CurrentLoans Receivable
(In thousands)
Commercial business:
Commercial and industrial$586 $6,104 $6,690 $685,410 $692,100 
SBA PPP236 — 236 1,232 1,468 
Owner-occupied CRE— 189 189 936,851 937,040 
Non-owner occupied CRE— — — 1,586,632 1,586,632 
Total commercial business822 6,293 7,115 3,210,125 3,217,240 
Residential real estate
3,066 — 3,066 340,565 343,631 
Real estate construction and land development:
Residential
— — — 80,074 80,074 
Commercial and multifamily
— — — 214,038 214,038 
Total real estate construction and land development— — — 294,112 294,112 
Consumer1,561 — 1,561 194,314 195,875 
Total$5,449 $6,293 $11,742 $4,039,116 $4,050,858 
December 31, 2021
30-89 Days90 Days or
Greater
Total Past 
Due
CurrentLoans Receivable
(In thousands)
Commercial business:
Commercial and industrial$1,858 $6,821 $8,679 $612,888 $621,567 
SBA PPP223 293 516 145,324 145,840 
December 31, 2021
30-89 Days90 Days or
Greater
Total Past 
Due
CurrentLoans Receivable
(In thousands)
Owner-occupied CRE2,397 112 2,509 928,641 931,150 
Non-owner occupied CRE— — — 1,493,099 1,493,099 
Total commercial business4,478 7,226 11,704 3,179,952 3,191,656 
Residential real estate
420 10 430 164,152 164,582 
Real estate construction and land development:
Residential
792 — 792 84,755 85,547 
Commercial and multifamily
3,474 571 4,045 137,291 141,336 
Total real estate construction and land development4,266 571 4,837 222,046 226,883 
Consumer1,026 — 1,026 231,515 232,541 
Total$10,190 $7,807 $17,997 $3,797,665 $3,815,662 
Loans 90 days or more past due and still accruing interest were $1.6 million and $293,000 as of December 31, 2022 and December 31, 2021, respectively.
(f) Collateral-dependent Loans
The type of collateral securing loans individually evaluated for credit losses and for which the repayment was expected to be provided substantially through the operation or sale of the collateral as of December 31, 2022 and December 31, 2021 was as follows, with balances representing the amortized cost of the loan classified by the primary collateral category of each loan if multiple collateral sources secure the loan:
December 31, 2022
CREFarmlandResidential Real EstateTotal
(In thousands)
Commercial business:
Commercial and industrial$1,239 $1,977 $929 $4,145 
Owner-occupied CRE189 — — 189 
Total$1,428 $1,977 $929 $4,334 
December 31, 2021
CREFarmlandResidential Real EstateOtherTotal
(In thousands)
Commercial business:
Commercial and industrial$1,499 $4,362 $1,036 $245 $7,142 
Owner-occupied CRE3,035 — — — 3,035 
Non-owner occupied CRE1,273 — — — 1,273 
Total commercial business5,807 4,362 1,036 245 11,450 
Real estate construction and land development:
Commercial and multifamily
571 — — — 571 
Total$6,378 $4,362 $1,036 $245 $12,021 
There have been no significant changes to the collateral securing loans individually evaluated for credit losses and for which repayment was expected to be provided substantially through the operation or sale of the collateral during the year ended December 31, 2022, except changes due to additions or removals of loans in this classification.
(g) Troubled Debt Restructured Loans
Loans that were modified as TDR loans are set forth in the following tables for the periods indicated:
Year Ended December 31,
202220212020
Number of
Contracts
Amortized Cost (1) (2)
Number of
Contracts
Amortized Cost (1) (2)
Number of
Contracts
Amortized Cost (1) (2)
(Dollars in thousands)
Commercial business:
Commercial and industrial$2,556 31 $9,710 75 $36,118 
Owner-occupied CRE247 16,565 14 19,326 
Non-owner occupied CRE— — 17,640 25,728 
Total commercial business2,803 42 43,915 98 81,172 
Residential real estate
— — 178 22 
Real estate construction and land development:
Residential
— — — — 1,926 
Commercial and multifamily
5,687 450 450 
Total real estate construction and land development5,687 450 2,376 
Consumer320 22 511 48 1,198 
Total19 $8,810 66 $45,054 152 $84,768 
(1)Number of contracts and amortized cost represent loans which have balances as of period end, net of subsequent payments after modifications. Certain TDR loans may have been paid-down or charged-off during the years ended December 31, 2022, 2021 and 2020.
(2) As the Bank did not forgive any principal or interest balance as part of the loan modifications, the Bank’s amortized cost in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification).
The Bank had an ACL on loans of $12,000, $3.1 million, and $7.5 million at December 31, 2022, December 31, 2021, and December 31, 2020, respectively, related to these TDR loans which were restructured during the year ended December 31, 2022, 2021 and 2020, respectively.
The unfunded commitment to borrowers related to TDR loans was $5.8 million and $5.7 million at December 31, 2022 and December 31, 2021, respectively.
The following table presents loans that were modified in a TDR and subsequently defaulted within twelve months from the modification date during the periods indicated:
Year Ended December 31,
202220212020
Number of
Contracts (1)
Amortized Cost (1)
Number of
Contracts (1)
Amortized Cost (1)
Number of
Contracts (1)
Amortized Cost (1)
(Dollars in thousands)
Commercial business:
Commercial and industrial— $— $1,379 $2,136 
Owner-occupied CRE189 — — 1,369 
Non-owner occupied CRE— — — — 1,811 
Total commercial business189 1,379 5,316 
Total$189 $1,379 $5,316 
(1)Number of contracts and amortized cost represent TDR loans which have balances as of period end, net of subsequent payments after modifications. Certain TDR loans may have been paid-down or charged-off during the years ended December 31, 2022, 2021 and 2020.
During the years ended December 31, 2022, 2021, and 2020, one, six and eight TDR loans defaulted because each was past its modified maturity date and the borrower had not subsequently repaid the credits. The Bank chose not to further extend the maturity date on these TDR loans. The Bank had an ACL on loans for these TDR loans which defaulted during the related years of $7,000, $111,000, and $229,000 at December 31, 2022, 2021, and 2020.
(h) Related Party Loans
In the ordinary course of business, the Company has granted loans to certain directors, executive officers and their affiliates. Activity in related party loans during the periods indicated was as follows:
Year Ended December 31,
202220212020
(In thousands)
Balance outstanding at the beginning of year$7,122 $7,694 $8,144 
Principal additions— — 199 
Principal reductions(243)(572)(649)
Balance outstanding at the end of year$6,879 $7,122 $7,694 
The Company had $5,000 and $255,000 of unfunded commitments to related parties and all related party loans were performing in accordance with the underlying loan agreements as of December 31, 2022 and December 31, 2021.
(i) Residential Real Estate Loan Sales
The Bank originates residential real estate loans; a portion of which are sold on the secondary market. The Bank does not retain servicing on loans sold in the secondary market. There were no loans held for sale at December 31, 2022 and $1.5 million at December 31, 2021.
The following table presents information concerning the origination and sale of the Bank's residential real estate loans and the gains from their sale during the periods indicated:
 Year Ended December 31,
 202220212020
 (In thousands)
Originated (1)
$15,190 $190,734 $191,207 
Sold16,666 89,899 137,580 
Gain on sale of loans, net (2)
633 3,644 5,044 
(1) Includes loans originated for sale in the secondary market or for the Bank's loan portfolio.
(2) Excludes net gains on sales of SBA and other loans.
(j) Commercial Loan Sales, Servicing, and Commercial Servicing Asset
The following table presents the details of loans serviced for others for the periods indicated:
 December 31, 2022December 31, 2021
 (In thousands)
Loans serviced for others with participating interest, gross loan balance$17,375 $30,852 
Loans serviced for others with participating interest, participation balance owned by Bank (1)
3,791 7,088 
(1) Included in the balance of "Loans receivable" on the Consolidated Statements of Financial Condition.
The Company recognized $217,000, $320,000 and $423,000 of servicing income for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company's servicing asset at December 31, 2022 and December 31, 2021 was $192,000 and $343,000, respectively. There was no valuation allowance on the Company's servicing asset as of December 31, 2022 and December 31, 2021.
(k) Accrued interest receivable on loans receivable
Accrued interest receivable on loans receivable totaled $11.3 million and $10.1 million at December 31, 2022 and December 31, 2021, respectively. It is excluded from the calculation of the ACL on loans as interest accrued, but not received, is reversed timely.