LOANS AND CREDIT QUALITY:

For a detailed discussion of loans and credit quality, including accounting policies and the methodology used to estimate the allowance for credit losses, see Note 1, Summary of Significant Accounting Policies, and Note 5, Loans and Credit Quality, within our 2016 Annual Report on Form 10-K.

The Company's portfolio of loans held for investment is divided into two portfolio segments, consumer loans and commercial loans, which are the same segments used to determine the allowance for loan losses. Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes: single family and home equity and other loans within the consumer loan portfolio segment and commercial real estate, multifamily, construction/land development and commercial business loans within the commercial loan portfolio segment.

Loans held for investment consist of the following:



(in thousands)	At June 30, 2017			At December 31, 2016

Consumer loans
Single family⁽¹⁾	$	1,148,229		$	1,083,822
Home equity and other	414,506			359,874
	1,562,735			1,443,696
Commercial loans
Commercial real estate	942,122			871,563
Multifamily	780,602			674,219
Construction/land development	648,672			636,320
Commercial business	248,908			223,653
	2,620,304			2,405,755
	4,183,039			3,849,451
Net deferred loan fees and costs	9,521			3,577
	4,192,560			3,853,028
Allowance for loan losses	(36,136		)	(34,001		)
	$	4,156,424		$	3,819,027


(1)	Includes $5.1 million and $18.0 million at June 30, 2017 and December 31, 2016, respectively, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.

Loans in the amount of $1.75 billion and $1.59 billion at June 30, 2017 and December 31, 2016, respectively, were pledged to secure borrowings from the FHLB as part of our liquidity management strategy. Additionally, loans totaling $732.5 million and $554.7 million at June 30, 2017 and December 31, 2016, respectively, were pledged to secure borrowings from the Federal Reserve Bank. The FHLB and Federal Reserve Bank do not have the right to sell or re-pledge these loans.

Credit Risk Concentrations

Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions.

Loans held for investment are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At June 30, 2017, we had concentrations representing 10% or more of the total portfolio by state and property type for the loan classes of single family and commercial real estate within the state of Washington, which represented 13.7% and 13.1% of the total portfolio, respectively. At December 31, 2016 we had concentrations representing 10% or more of the total portfolio by state and property type for the loan classes of single family and commercial real estate within the state of Washington, which represented 13.8% and 14.4% of the total portfolio, respectively.

Credit Quality

Management considers the level of allowance for loan losses to be appropriate to cover credit losses inherent within the loans held for investment portfolio as of June 30, 2017. In addition to the allowance for loan losses, the Company maintains a separate allowance for losses related to unfunded loan commitments, and this amount is included in accounts payable and other liabilities on the consolidated statements of financial condition. Collectively, these allowances are referred to as the allowance for credit losses.

For further information on the policies that govern the determination of the allowance for loan losses levels, see Note 1, Summary of Significant Accounting Policies, within our 2016 Annual Report on Form 10-K.

Activity in the allowance for credit losses was as follows.



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016

Allowance for credit losses (roll-forward):
Beginning balance	$	36,042	$	32,423	$	35,264	$	30,659
Provision for credit losses	500		1,100		500		2,500
Recoveries, net of charge-offs	928		478		1,706		842
Ending balance	$	37,470	$	34,001	$	37,470	$	34,001
Components:
Allowance for loan losses	$	36,136	$	32,656	$	36,136	$	32,656
Allowance for unfunded commitments	1,334		1,345		1,334		1,345
Allowance for credit losses	$	37,470	$	34,001	$	37,470	$	34,001

Activity in the allowance for credit losses by loan portfolio and loan class was as follows.



	Three Months Ended June 30, 2017
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	7,954	$	(2	)	$	683	$	(347	)	$	8,288
Home equity and other	6,546		(186		)	67		429			6,856
	14,500		(188		)	750		82			15,144
Commercial loans
Commercial real estate	7,036		—			—		419			7,455
Multifamily	3,793		—			—		266			4,059
Construction/land development	8,069		—			214		(57		)	8,226
Commercial business	2,644		(16		)	168		(210		)	2,586
	21,542		(16		)	382		418			22,326
Total allowance for credit losses	$	36,042	$	(204	)	$	1,132	$	500		$	37,470



	Three Months Ended June 30, 2016
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	9,026	$	—		$	2	$	(734	)	$	8,294
Home equity and other	4,852		(204		)	87		665			5,400
	13,878		(204		)	89		(69		)	13,694
Commercial loans
Commercial real estate	5,175		—			—		870			6,045
Multifamily	1,832		—			—		216			2,048
Construction/land development	9,286		—			573		(490		)	9,369
Commercial business	2,252		—			20		573			2,845
	18,545		—			593		1,169			20,307
Total allowance for credit losses	$	32,423	$	(204	)	$	682	$	1,100		$	34,001



	Six Months Ended June 30, 2017
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	8,196	$	(2	)	$	1,016	$	(922	)	$	8,288
Home equity and other	6,153		(511		)	353		861			6,856
	14,349		(513		)	1,369		(61		)	15,144
Commercial loans
Commercial real estate	6,680		—			—		775			7,455
Multifamily	3,086		—			—		973			4,059
Construction/land development	8,553		—			434		(761		)	8,226
Commercial business	2,596		(16		)	432		(426		)	2,586
	20,915		(16		)	866		561			22,326
Total allowance for credit losses	$	35,264	$	(529	)	$	2,235	$	500		$	37,470



	Six Months Ended June 30, 2016
(in thousands)	Beginning balance		Charge-offs			Recoveries		(Reversal of) Provision			Ending balance

Consumer loans
Single family	$	8,942	$	(32	)	$	86	$	(702	)	$	8,294
Home equity and other	4,620		(298		)	338		740			5,400
	13,562		(330		)	424		38			13,694
Commercial loans
Commercial real estate	4,847		—			—		1,198			6,045
Multifamily	1,194		—			—		854			2,048
Construction/land development	9,271		(42		)	783		(643		)	9,369
Commercial business	1,785		(26		)	33		1,053			2,845
	17,097		(68		)	816		2,462			20,307
Total allowance for credit losses	$	30,659	$	(398	)	$	1,240	$	2,500		$	34,001

The following table disaggregates our allowance for credit losses and recorded investment in loans by impairment methodology.



	At June 30, 2017
(in thousands)	Allowance: collectively evaluated for impairment		Allowance: individually evaluated for impairment		Total		Loans: collectively evaluated for impairment		Loans: individually evaluated for impairment		Total

Consumer loans
Single family	$	7,964	$	324	$	8,288	$	1,059,203	$	83,968	$	1,143,171
Home equity and other	6,810		46		6,856		412,729		1,701		414,430
	14,774		370		15,144		1,471,932		85,669		1,557,601
Commercial loans
Commercial real estate	7,455		—		7,455		938,765		3,357		942,122
Multifamily	4,059		—		4,059		779,774		828		780,602
Construction/land development	8,226		—		8,226		647,649		1,023		648,672
Commercial business	2,414		172		2,586		247,083		1,825		248,908
	22,154		172		22,326		2,613,271		7,033		2,620,304
Total loans evaluated for impairment	36,928		542		37,470		4,085,203		92,702		4,177,905
Loans held for investment carried at fair value											5,134		⁽¹⁾
Total loans held for investment	$	36,928	$	542	$	37,470	$	4,085,203	$	92,702	$	4,183,039


(1)	Comprised of single family loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.



	At December 31, 2016
(in thousands)	Allowance: collectively evaluated for impairment		Allowance: individually evaluated for impairment		Total		Loans: collectively evaluated for impairment		Loans: individually evaluated for impairment		Total

Consumer loans
Single family	$	7,871	$	325	$	8,196	$	985,219	$	80,676	$	1,065,895
Home equity and other	6,104		49		6,153		358,350		1,463		359,813
	13,975		374		14,349		1,343,569		82,139		1,425,708
Commercial loans
Commercial real estate	6,680		—		6,680		869,225		2,338		871,563
Multifamily	3,086		—		3,086		673,374		845		674,219
Construction/land development	8,553		—		8,553		634,427		1,893		636,320
Commercial business	2,591		5		2,596		220,360		3,293		223,653
	20,910		5		20,915		2,397,386		8,369		2,405,755
Total loans evaluated for impairment	34,885		379		35,264		3,740,955		90,508		3,831,463
Loans held for investment carried at fair value											17,988		⁽¹⁾
Total loans held for investment	$	34,885	$	379	$	35,264	$	3,740,955	$	90,508	$	3,849,451


(1)	Comprised of single family loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.

Impaired Loans

The following tables present impaired loans by loan portfolio segment and loan class.



	At June 30, 2017
(in thousands)	Recorded investment⁽¹⁾		Unpaid principal balance ⁽²⁾		Related allowance

With no related allowance recorded:
Consumer loans
Single family	$	79,782	$	81,373	$	—
Home equity and other	1,185		1,211		—
	80,967		82,584		—
Commercial loans
Commercial real estate	3,357		3,874		—
Multifamily	828		845		—
Construction/land development	1,023		1,549		—
Commercial business	395		1,623		—
	5,603		7,891		—
	$	86,570	$	90,475	$	—
With an allowance recorded:
Consumer loans
Single family	$	4,186	$	4,277	$	324
Home equity and other	516		516		46
	4,702		4,793		370
Commercial loans
Commercial business	1,430		1,481		172
	$	6,132	$	6,274	$	542
Total:
Consumer loans
Single family⁽³⁾	$	83,968	$	85,650	$	324
Home equity and other	1,701		1,727		46
	85,669		87,377		370
Commercial loans
Commercial real estate	3,357		3,874		—
Multifamily	828		845		—
Construction/land development	1,023		1,549		—
Commercial business	1,825		3,104		172
	7,033		9,372		172
Total impaired loans	$	92,702	$	96,749	$	542


(1)	Includes partial charge-offs and nonaccrual interest paid and purchase discounts and premiums.


(2)	Unpaid principal balance does not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculated on net book balances not unpaid principal balances.


(3)	Includes $77.5 million in single family performing trouble debt restructurings "TDRs".



	At December 31, 2016
(in thousands)	Recorded investment ⁽¹⁾		Unpaid principal balance ⁽²⁾		Related allowance

With no related allowance recorded:
Consumer loans
Single family	$	77,756	$	80,573	$	—
Home equity and other	946		977		—
	78,702		81,550		—
Commercial loans
Commercial real estate	2,338		2,846		—
Multifamily	845		851		—
Construction/land development	1,893		2,819		—
Commercial business	2,945		4,365		—
	8,021		10,881		—
	$	86,723	$	92,431	$	—
With an allowance recorded:
Consumer loans
Single family	$	2,920	$	3,011	$	325
Home equity and other	517		517		49
	3,437		3,528		374
Commercial loans
Commercial business	348		347		5
	348		347		5
	$	3,785	$	3,875	$	379
Total:
Consumer loans
Single family⁽³⁾	$	80,676	$	83,584	$	325
Home equity and other	1,463		1,494		49
	82,139		85,078		374
Commercial loans
Commercial real estate	2,338		2,846		—
Multifamily	845		851		—
Construction/land development	1,893		2,819		—
Commercial business	3,293		4,712		5
	8,369		11,228		5
Total impaired loans	$	90,508	$	96,306	$	379


(1)	Includes partial charge-offs and nonaccrual interest paid.


(2)	Unpaid principal balance does not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculated on net book balances not unpaid principal balances.


(3)	Includes $73.1 million in single family performing TDRs.

The following tables provide the average recorded investment and interest income recognized on impaired loans by portfolio segment and class.



(in thousands)	Three Months Ended June 30, 2017				Three Months Ended June 30, 2016

Consumer loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Single family	$	83,653	$	790	$	81,754	$	740
Home equity and other	1,568		24		1,412		17
	85,221		814		83,166		757
Commercial loans
Commercial real estate	4,441		37		3,125		4
Multifamily	832		6		1,864		6
Construction/land development	1,105		21		2,458		23
Commercial business	2,380		36		2,802		23
	8,758		100		10,249		56
	$	93,979	$	914	$	93,415	$	813



(in thousands)	Six Months Ended June 30, 2017				Six Months Ended June 30, 2016

Consumer loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Single family	$	82,661	$	1,540	$	81,612	$	1,444
Home equity and other	1,533		43		1,504		33
	84,194		1,583		83,116		1,477
Commercial loans
Commercial real estate	3,740		96		3,124		8
Multifamily	836		12		1,878		35
Construction/land development	1,368		47		3,023		44
Commercial business	2,684		83		2,503		41
	8,628		238		10,528		128
	$	92,822	$	1,821	$	93,644	$	1,605

Credit Quality Indicators

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The Company differentiates its lending portfolios into homogeneous loans and non-homogeneous loans.

The 10 risk rating categories can be generally described by the following groupings for non-homogeneous loans:

Pass. We have five pass risk ratings which represent a level of credit quality that ranges from no well-defined deficiency or weakness to some noted weakness, however the risk of default on any loan classified as pass is expected to be remote. The five pass risk ratings are described below:

Minimal Risk. A minimal risk loan, risk rated 1-Exceptional, is to a borrower of the highest quality. The borrower has an unquestioned ability to produce consistent profits and service all obligations and can absorb severe market disturbances with little or no difficulty.

Low Risk. A low risk loan, risk rated 2-Superior, is similar in characteristics to a minimal risk loan. Balance sheet and operations are slightly more prone to fluctuations within the business cycle; however, debt capacity and debt service coverage remains strong. The borrower will have a strong demonstrated ability to produce profits and absorb market disturbances.

Modest Risk. A modest risk loan, risk rated 3-Excellent, is a desirable loan with excellent sources of repayment and no currently identifiable risk associated with collection. The borrower exhibits a very strong capacity to repay the loan in accordance with the repayment agreement. The borrower may be susceptible to economic cycles, but will have cash reserves to weather these cycles.

Average Risk. An average risk loan, risk rated 4-Good, is an attractive loan with sound sources of repayment and no material collection or repayment weakness evident. The borrower has an acceptable capacity to pay in accordance with the agreement. The borrower is susceptible to economic cycles and more efficient competition, but should have modest reserves sufficient to survive all but the most severe downturns or major setbacks.

Acceptable Risk. An acceptable risk loan, risk rated 5-Acceptable, is a loan with lower than average, but still acceptable credit risk. These borrowers may have higher leverage, less certain but viable repayment sources, have limited financial reserves and may possess weaknesses that can be adequately mitigated through collateral, structural or credit enhancement. The borrower is susceptible to economic cycles and is less resilient to negative market forces or financial events. Reserves may be insufficient to survive a modest downturn.

Watch. A watch loan, risk rated 6-Watch, is still pass-rated, but represents the lowest level of acceptable risk due to an emerging risk element or declining performance trend. Watch ratings are expected to be temporary, with issues resolved or manifested to the extent that a higher or lower rating would be appropriate. The borrower should have a plausible plan, with reasonable certainty of success, to correct the problems in a short period of time. Borrowers rated watch are characterized by elements of uncertainty, such as:


•	The borrower may be experiencing declining operating trends, strained cash flows or less-than anticipated performance. Cash flow should still be adequate to cover debt service, and the negative trends should be identified as being of a short-term or temporary nature.


•	The borrower may have experienced a minor, unexpected covenant violation.


•	Companies who may be experiencing tight working capital or have a cash cushion deficiency.


•	A loan may also be a watch if financial information is late, there is a documentation deficiency, the borrower has experienced unexpected management turnover, or if they face industry issues that, when combined with performance factors create uncertainty in their future ability to perform.


•	Delinquent payments, increasing and material overdraft activity, request for bulge and/or out- of-formula advances may be an indicator of inadequate working capital and may suggest a lower rating.


•	Failure of the intended repayment source to materialize as expected, or renewal of a loan (other than cash/marketable security secured or lines of credit) without reduction are possible indicators of a watch or worse risk rating.

Special Mention. A special mention loan, risk rated 7-Special Mention, has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or the institutions credit position at some future date. They contain unfavorable characteristics and are generally undesirable. Loans in this category are currently protected but are potentially weak and constitute an undue and unwarranted credit risk, but not to the point of a substandard classification. A special mention loan has potential weaknesses, which if not checked or corrected, weaken the loan or inadequately protect the Company’s position at some future date. Such weaknesses include:


•	Performance is poor or significantly less than expected. There may be a temporary debt-servicing deficiency or inadequate working capital as evidenced by a cash cushion deficiency, but not to the extent that repayment is compromised. Material violation of financial covenants is common.


•	Loans with unresolved material issues that significantly cloud the debt service outlook, even though a debt servicing deficiency does not currently exist.


•	Modest underperformance or deviation from plan for real estate loans where absorption of rental/sales units is necessary to properly service the debt as structured. Depth of support for interest carry provided by owner/guarantors may mitigate and provide for improved rating.


•	This rating may be assigned when a loan officer is unable to supervise the credit properly, an inadequate loan agreement, an inability to control collateral, failure to obtain proper documentation, or any other deviation from prudent lending practices.


•	Unlike a substandard credit, there should be a reasonable expectation that these temporary issues will be corrected within the normal course of business, rather than liquidation of assets, and in a reasonable period of time.

Substandard. A substandard loan, risk rated 8-Substandard, is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard. Loans are classified as substandard when they have unsatisfactory characteristics causing unacceptable levels of risk. A substandard loan normally has one or more well-defined weaknesses that could jeopardize repayment of the loan. The likely need to liquidate assets to correct the problem, rather than repayment from successful operations is the key distinction between special mention and substandard. The following are examples of well-defined weaknesses:


•	Cash flow deficiencies or trends are of a magnitude to jeopardize current and future payments with no immediate relief. A loss is not presently expected, however the outlook is sufficiently uncertain to preclude ruling out the possibility.


•	The borrower has been unable to adjust to prolonged and unfavorable industry or economic trends.


•	Material underperformance or deviation from plan for real estate loans where absorption of rental/sales units is necessary to properly service the debt and risk is not mitigated by willingness and capacity of owner/guarantor to support interest payments.


•	Management character or honesty has become suspect. This includes instances where the borrower has become uncooperative.

•

Due to unprofitable or unsuccessful business operations, some form of restructuring of the business, including liquidation of assets, has become the primary source of loan repayment. Cash flow has deteriorated, or been diverted, to the point that sale of collateral is now the Company’s primary source of repayment (unless this was the original source of repayment). If the collateral is under the Company’s control and is cash or other liquid, highly marketable securities and properly margined, then a more appropriate rating might be special mention or watch.


•	The borrower is involved in bankruptcy proceedings where collateral liquidation values are expected to fully protect the Company against loss.


•	There is material, uncorrectable faulty documentation or materially suspect financial information.

Doubtful. Loans classified as doubtful, risk rated 9-Doubtful, have all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work towards strengthening of the loan, classification as a loss (and immediate charge-off) is deferred until more exact status may be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, and perfection of liens on additional collateral and refinancing plans. In certain circumstances, a doubtful rating will be temporary, while the Company is awaiting an updated collateral valuation. In these cases, once the collateral is valued and appropriate margin applied, the remaining un-collateralized portion will be charged-off. The remaining balance, properly margined, may then be upgraded to substandard, however must remain on non-accrual.

Loss. Loans classified as loss, risk rated 10-Loss, are considered un-collectible and of such little value that the continuance as an active Company asset is not warranted. This rating does not mean that the loan has no recovery or salvage value, but rather that the loan should be charged-off now, even though partial or full recovery may be possible in the future.

Impaired. Loans are classified as impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due, in accordance with the terms of the original loan agreement, without unreasonable delay. This generally includes all loans classified as nonaccrual and troubled debt restructurings. Impaired loans are risk rated for internal and regulatory rating purposes, but presented separately for clarification.

Homogeneous loans maintain their original risk rating until they are greater than 30 days past due, and risk rating reclassification is based primarily on the past due status of the loan. The risk rating categories can be generally described by the following groupings for commercial and commercial real estate homogeneous loans:

Watch. A homogeneous watch loan, risk rated 6, is 30-59 days past due from the required payment date at month-end.

Special Mention. A homogeneous special mention loan, risk rated 7, is 60-89 days past due from the required payment date at month-end.

Substandard. A homogeneous substandard loan, risk rated 8, is 90-179 days past due from the required payment date at month-end.

Loss. A homogeneous loss loan, risk rated 10, is 180 days and more past due from the required payment date. These loans are generally charged-off in the month in which the 180 day time period elapses.

The risk rating categories can be generally described by the following groupings for residential and home equity and other homogeneous loans:

Watch. A homogeneous retail watch loan, risk rated 6, is 60-89 days past due from the required payment date at month-end.

Substandard. A homogeneous retail substandard loan, risk rated 8, is 90-179 days past due from the required payment date at month-end.

Loss. A homogeneous retail loss loan, risk rated 10, becomes past due 180 cumulative days from the contractual due date. These loans are generally charged-off in the month in which the 180 day period elapses.

Residential and home equity loans modified in a troubled debt restructure are not considered homogeneous. The risk rating classification for such loans are based on the non-homogeneous definitions noted above.

The following tables summarize designated loan grades by loan portfolio segment and loan class.



	At June 30, 2017
(in thousands)	Pass			Watch		Special mention		Substandard		Total

Consumer loans
Single family	$	1,117,636	⁽¹⁾	$	3,508	$	15,243	$	11,842	$	1,148,229
Home equity and other	412,039			205		659		1,603		414,506
	1,529,675			3,713		15,902		13,445		1,562,735
Commercial loans
Commercial real estate	886,638			42,739		8,713		4,032		942,122
Multifamily	765,652			12,737		1,893		320		780,602
Construction/land development	632,857			14,366		1,449		—		648,672
Commercial business	195,504			46,362		4,549		2,493		248,908
	2,480,651			116,204		16,604		6,845		2,620,304
	$	4,010,326		$	119,917	$	32,506	$	20,290	$	4,183,039


(1)	Includes $5.1 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.



	At December 31, 2016
(in thousands)	Pass			Watch		Special mention		Substandard		Total

Consumer loans
Single family	$	1,051,463	⁽¹⁾	$	4,348	$	15,172	$	12,839	$	1,083,822
Home equity and other	357,191			597		514		1,572		359,874
	1,408,654			4,945		15,686		14,411		1,443,696
Commercial loans
Commercial real estate	809,996			52,519		7,165		1,883		871,563
Multifamily	660,234			13,140		508		337		674,219
Construction/land development	615,675			16,074		3,083		1,488		636,320
Commercial business	171,883			42,767		3,385		5,618		223,653
	2,257,788			124,500		14,141		9,326		2,405,755
	$	3,666,442		$	129,445	$	29,827	$	23,737	$	3,849,451


(1)	Includes $18.0 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.

As of June 30, 2017 and December 31, 2016, none of the Company's loans were rated Doubtful or Loss. For a detailed discussion on credit quality, see Note 5, Loans and Credit Quality, within our 2016 Annual Report on Form 10-K.

Nonaccrual and Past Due Loans

Loans are placed on nonaccrual status when the full and timely collection of principal and interest is doubtful, generally when the loan becomes 90 days or more past due for principal or interest payment or if part of the principal balance has been charged off. Loans whose repayments are insured by the FHA or guaranteed by the VA are generally maintained on accrual status even if 90 days or more past due.

The following table presents an aging analysis of past due loans by loan portfolio segment and loan class.



	At June 30, 2017
(in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current			Total loans		90 days or more past due and accruing

Consumer loans
Single family	$	9,911	$	4,246	$	45,545	$	59,702	$	1,088,527	⁽¹⁾	$	1,148,229	$	33,824	⁽²⁾
Home equity and other	1,096		73		1,603		2,772		411,734			414,506		—
	11,007		4,319		47,148		62,474		1,500,261			1,562,735		33,824
Commercial loans
Commercial real estate	—		—		1,242		1,242		940,880			942,122		—
Multifamily	—		—		320		320		780,282			780,602		—
Construction/land development	147		—		—		147		648,525			648,672		—
Commercial business	424		—		590		1,014		247,894			248,908		—
	571		—		2,152		2,723		2,617,581			2,620,304		—
	$	11,578	$	4,319	$	49,300	$	65,197	$	4,117,842		$	4,183,039	$	33,824



	At December 31, 2016
(in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current			Total loans		90 days or more past due and accruing

Consumer loans
Single family	$	4,310	$	5,459	$	53,563	$	63,332	$	1,020,490	⁽¹⁾	$	1,083,822	$	40,846	⁽²⁾
Home equity and other	251		442		1,571		2,264		357,610			359,874		—
	4,561		5,901		55,134		65,596		1,378,100			1,443,696		40,846
Commercial loans
Commercial real estate	71		205		2,127		2,403		869,160			871,563		—
Multifamily	—		—		337		337		673,882			674,219		—
Construction/land development	—		—		1,376		1,376		634,944			636,320		—
Commercial business	202		—		2,414		2,616		221,037			223,653		—
	273		205		6,254		6,732		2,399,023			2,405,755		—
	$	4,834	$	6,106	$	61,388	$	72,328	$	3,777,123		$	3,849,451	$	40,846


(1)	Includes $5.1 million and $18.0 million of loans at June 30, 2017 and December 31, 2016, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.


(2)	FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss and are a subset of the 90 days or more past due balance.

The following tables present performing and nonperforming loan balances by loan portfolio segment and loan class.



	At June 30, 2017
(in thousands)	Accrual			Nonaccrual		Total

Consumer loans
Single family	$	1,136,508	⁽¹⁾	$	11,721	$	1,148,229
Home equity and other	412,903			1,603		414,506
	1,549,411			13,324		1,562,735
Commercial loans
Commercial real estate	940,880			1,242		942,122
Multifamily	780,282			320		780,602
Construction/land development	648,672			—		648,672
Commercial business	248,318			590		248,908
	2,618,152			2,152		2,620,304
	$	4,167,563		$	15,476	$	4,183,039



	At December 31, 2016
(in thousands)	Accrual			Nonaccrual		Total

Consumer loans
Single family	$	1,071,105	⁽¹⁾	$	12,717	$	1,083,822
Home equity and other	358,303			1,571		359,874
	1,429,408			14,288		1,443,696
Commercial loans
Commercial real estate	869,436			2,127		871,563
Multifamily	673,882			337		674,219
Construction/land development	634,944			1,376		636,320
Commercial business	221,239			2,414		223,653
	2,399,501			6,254		2,405,755
	$	3,828,909		$	20,542	$	3,849,451


(1)	Includes $5.1 million and $18.0 million of loans at June 30, 2017 and December 31, 2016, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations.

The following tables present information about TDR activity during the periods presented.



	Three Months Ended June 30, 2017
(dollars in thousands)	Concession type	Number of loan modifications	Recorded investment		Related charge- offs

Consumer loans
Single family
	Interest rate reduction	13	$	2,097	$	—
	Payment restructure	30	6,015		—
Home equity and other
	Payment restructure	1	277		—
Total consumer
	Interest rate reduction	13	2,097		—
	Payment restructure	31	6,292		—
		44	8,389		—

Commercial loans
Construction/land development
	Payment restructure	1	436		—
Total commercial
	Payment restructure	1	436		—
		1	436		—
Total loans
	Interest rate reduction	13	2,097		—
	Payment restructure	32	6,728		—
		45	$	8,825	$	—



	Three Months Ended June 30, 2016
(dollars in thousands)	Concession type	Number of loan modifications	Recorded investment		Related charge- offs

Consumer loans
Single family
	Interest rate reduction	13	$	2,369	$	—
	Payment restructure	19	3,747		—
Home equity and other
	Interest rate reduction	1	13		—
Total consumer
	Interest rate reduction	14	2,382		—
	Payment restructure	19	3,747		—
		33	6,129		—
Total loans
	Interest rate reduction	14	2,382		—
	Payment restructure	19	3,747		—
		33	$	6,129	$	—



	Six Months Ended June 30, 2017
(dollars in thousands)	Concession type	Number of loan modifications	Recorded investment		Related charge- offs

Consumer loans
Single family
	Interest rate reduction	39	$	6,920	$	—
	Payment restructure	42	8,892		—
Home equity and other
	Payment restructure	2	351		—
Total consumer
	Interest rate reduction	39	6,920		—
	Payment restructure	44	9,243		—
		83	16,163		—

Commercial loans
Construction/land development
	Payment restructure	1	436		—
Commercial business
	Payment restructure	1	18		—
Total commercial
	Payment restructure	2	454		—
		2	454		—
Total loans
	Interest rate reduction	39	6,920		—
	Payment restructure	46	9,697		—
		85	$	16,617	$	—



	Six Months Ended June 30, 2016
(dollars in thousands)	Concession type	Number of loan modifications	Recorded investment		Related charge- offs

Consumer loans
Single family
	Interest rate reduction	18	$	3,389	$	—
	Payment restructure	34	6,918		—
Home equity and other
	Interest rate reduction	1	13		—
Total consumer
	Interest rate reduction	19	3,402		—
	Payment restructure	34	6,918		—
		53	10,320		—
Total loans
	Interest rate reduction	19	3,402		—
	Payment restructure	34	6,918		—
		53	$	10,320	$	—

The following table presents loans that were modified as TDRs within the previous 12 months and subsequently re-defaulted during the three and six months ended June 30, 2017 and 2016, respectively. A TDR loan is considered re-defaulted when it becomes doubtful that the objectives of the modifications will be met, generally when a consumer loan TDR becomes 60 days or more past due on principal or interest payments or when a commercial loan TDR becomes 90 days or more past due on principal or interest payments.



	Three Months Ended June 30,
	2017			2016
(dollars in thousands)	Number of loan relationships that re-defaulted	Recorded investment		Number of loan relationships that re-defaulted	Recorded investment

Consumer loans
Single family	7	$	1,382	8	$	2,367
Home equity and other	—	—		1	93
	7	$	1,382	9	$	2,460



	Six Months Ended June 30,
	2017			2016
(dollars in thousands)	Number of loan relationships that re-defaulted	Recorded investment		Number of loan relationships that re-defaulted	Recorded investment

Consumer loans
Single family	8	$	1,652	9	$	2,638
Home equity and other	—	—		1	93
	8	$	1,652	10	$	2,731