| Loans Receivable | Loans Receivable The Company originates loans in the ordinary course of business and has also acquired loans through FDIC-assisted and open bank transactions. Disclosures related to the Company's recorded investment in loans receivable generally exclude accrued interest receivable and net deferred loan origination fees and costs because they are insignificant. Loans acquired in a business combination may be further classified as “purchased” loans. Loans purchased with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are accounted for under FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality . These loans are identified as “purchased credit impaired” ("PCI") loans. Loans purchased that are not accounted for under FASB ASC 310-30 are accounted for under FASB ASC 310-20, Receivables—Nonrefundable Fees and Other Costs and are referred to as "non-PCI" loans. (a) Loan Origination/Risk Management The Company categorizes loans in one of the four segments of the total loan portfolio: commercial business, one-to-four family residential, real estate construction and land development and consumer. Within these segments are classes of loans for which management monitors and assesses credit risk in the loan portfolios. The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures 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 potential problem loans. The Company 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, as well as the Company’s policies and procedures. A discussion of the risk characteristics of each loan portfolio segment is as follows: Commercial Business : There are three significant classes of loans in the commercial portfolio segment: commercial and industrial loans, owner-occupied commercial real estate and non-owner occupied commercial real estate. The owner and non-owner occupied commercial real estate are both considered commercial real estate loans. As the commercial and industrial loans carry different risk characteristics than the commercial real estate loans, they are 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 real estate. The Company originates commercial real estate loans within its primary market areas. These loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate involves more risk than other classes of loans in that the lending typically involves higher loan principal amounts, and payments on loans secured by real estate properties are dependent on successful operation and management of the properties. Repayment of these loans may be more adversely affected by conditions in the real estate market or the economy. Owner-occupied commercial real estate loans are generally of lower credit risk than non-owner occupied commercial real estate loans as the borrowers' businesses are likely dependent on the properties. One-to-Four Family Residential : The majority of the Company’s one-to-four family residential loans are secured by single-family residences located in its primary market areas. The Company’s underwriting standards require that single-family portfolio loans 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. Historically, the Company sold most single-family loans in the secondary market and retained a smaller portion in its loan portfolio. From the second quarter of 2013 until May 1, 2014, the Company only originated single-family loans for its loan portfolio. As a result of the Washington Banking Merger, since May 1, 2014 the Company is originating and selling a majority of its single-family mortgages. Real Estate Construction and Land Development : The Company originates construction loans for one-to-four family residential and for five or more family residential and commercial properties. The one-to-four family residential construction loans generally include construction of custom homes whereby the home buyer is the borrower. The Company also provides financing to builders for the construction of pre-sold homes and, in selected cases, to builders for the construction of speculative residential property. Substantially all construction loans are short-term in nature and priced with variable rates of interest. 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 Company’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 Company’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 Company 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, interest rate changes, government regulation of real property, general economic conditions and the availability of long-term financing. Consumer : The Company 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 credit risk for this type of loan. To further reduce the risk, trend reports are reviewed by management on a regular basis. As a result of the Washington Banking Merger, the Company is originating indirect consumer loans. These loans are for new and used automobile and recreational vehicles that are originated indirectly by selected dealers located in the Company's market areas. The Company has limited its purchase of indirect loans primarily to dealerships that are established and well known in their market areas and to applicants that are not classified as sub-prime. Loans receivable at March 31, 2016 and December 31, 2015 consisted of the following portfolio segments and classes: March 31, 2016 December 31, 2015 (In thousands) Commercial business: Commercial and industrial $ 592,308 $ 596,726 Owner-occupied commercial real estate 630,486 629,207 Non-owner occupied commercial real estate 730,489 697,388 Total commercial business 1,953,283 1,923,321 One-to-four family residential 72,806 72,548 Real estate construction and land development: One-to-four family residential 47,296 51,752 Five or more family residential and commercial properties 71,998 55,325 Total real estate construction and land development 119,294 107,077 Consumer 312,459 298,167 Gross loans receivable 2,457,842 2,401,113 Net deferred loan costs 1,306 929 Loans receivable, net 2,459,148 2,402,042 Allowance for loan losses (29,667 ) (29,746 ) Total loans receivable, net $ 2,429,481 $ 2,372,296 (b) Concentrations of Credit Most of the Company’s lending activity occurs within Washington State, and to a lesser extent Oregon. The Company’s primary market areas are concentrated along the I-5 corridor from Whatcom County to Clark County in Washington State and Multnomah County in Oregon, as well as other contiguous markets. The Washington Banking Merger expanded the Company's market area north of Seattle, Washington to the Canadian border. The majority of the Company’s loan portfolio consists of, in order of balances at March 31, 2016 , non-owner occupied commercial real estate, owner-occupied commercial real estate and commercial and industrial. As of March 31, 2016 and December 31, 2015 , there were no concentrations of loans related to any single industry in excess of 10% of the Company’s total loans. (c) Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Company’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, and (v) the general economic conditions of the United States of America, and specifically the states of Washington and Oregon. The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 0 to 10. A description of the general characteristics of the risk grades is as follows: • Grades 0 to 5: These grades are considered “pass grade” 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 financials and/or collateral may be appropriate. Loans with this grade show no immediate loss exposure. • Grade 6: This grade includes "Watch" loans and is considered a “pass grade”. 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 “Other Assets Especially Mentioned” (“OAEM”) loans in accordance with regulatory guidelines, and is intended to highlight loans with elevated risks. 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 decline unless active measures are taken to correct the situation. • Grade 8: This grade includes “Substandard” loans in accordance with regulatory guidelines, which the Company has determined have a high credit risk. These loans also have well-defined weaknesses which make payment default or principal exposure likely, but not yet certain. 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. Loans with this grade can be placed on accrual or nonaccrual status based on the Company’s accrual policy. • Grade 9: This grade includes “Doubtful” loans in accordance with regulatory guidelines, and the Company 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 a specific valuation allowance or have been partially charged-off for the amount considered uncollectible. • Grade 10: This grade includes “Loss” loans in accordance with regulatory guidelines, and the Company 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. “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt. Numerical loan grades for loans are established at the origination of the loan. Loan grades are reviewed on a quarterly basis, or more frequently if necessary, by the credit department. 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. The 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 OAEM loan grade is transitory in that the Company is waiting on additional information to determine the likelihood and extent of the potential loss. The likelihood of loss for OAEM graded loans, however, is greater than Watch graded loans because there has been measurable credit deterioration. Loans with a Substandard grade are generally loans for which the Company has individually analyzed for potential impairment. For Doubtful and Loss graded loans, the Company is almost certain of the losses, and the unpaid principal balances are generally charged-off to the realizable value. The following tables present the balance of the loans receivable by credit quality indicator as of March 31, 2016 and December 31, 2015 . March 31, 2016 Pass OAEM Substandard Doubtful Total (In thousands) Commercial business: Commercial and industrial $ 560,091 $ 10,031 $ 22,168 $ 18 $ 592,308 Owner-occupied commercial real estate 604,890 9,598 15,742 256 630,486 Non-owner occupied commercial real estate 683,831 16,945 29,713 — 730,489 Total commercial business 1,848,812 36,574 67,623 274 1,953,283 One-to-four family residential 71,724 — 1,082 — 72,806 Real estate construction and land development: One-to-four family residential 39,757 1,037 6,502 — 47,296 Five or more family residential and commercial properties 67,510 — 4,423 65 71,998 Total real estate construction and land development 107,267 1,037 10,925 65 119,294 Consumer 306,814 — 5,645 — 312,459 Gross loans receivable $ 2,334,617 $ 37,611 $ 85,275 $ 339 $ 2,457,842 December 31, 2015 Pass OAEM Substandard Doubtful Total (In thousands) Commercial business: Commercial and industrial $ 563,002 $ 8,093 $ 25,333 $ 298 $ 596,726 Owner-occupied commercial real estate 600,514 11,662 16,773 258 629,207 Non-owner occupied commercial real estate 643,674 23,447 30,267 — 697,388 Total commercial business 1,807,190 43,202 72,373 556 1,923,321 One-to-four family residential 71,457 — 1,091 — 72,548 Real estate construction and land development: One-to-four family residential 44,069 896 6,787 — 51,752 Five or more family residential and commercial properties 50,678 — 4,647 — 55,325 Total real estate construction and land development 94,747 896 11,434 — 107,077 Consumer 291,892 — 6,275 — 298,167 Gross loans receivable $ 2,265,286 $ 44,098 $ 91,173 $ 556 $ 2,401,113 Potential problem loans are loans classified as OAEM or worse that are currently accruing interest and are not considered impaired, but which management is monitoring because the financial information of the borrower causes concern as to their ability to meet their loan repayment terms. Potential problem loans may include PCI loans as these loans continue to accrete loan discounts established at acquisition based on the guidance of FASB ASC 310-30. Potential problem loans as of March 31, 2016 and December 31, 2015 were $94.8 million and $110.4 million , respectively. The balance of potential problem loans guaranteed by a governmental agency, which guarantee reduces the Company's credit exposure, was $809,000 and $1.2 million as of March 31, 2016 and December 31, 2015 , respectively. (d) Nonaccrual Loans Nonaccrual loans, segregated by segments and classes of loans, were as follows as of March 31, 2016 and December 31, 2015 : March 31, 2016 December 31, 2015 (In thousands) Commercial business: Commercial and industrial $ 4,882 $ 5,095 Owner-occupied commercial real estate 2,978 2,027 Non-owner occupied commercial real estate 1,350 — Total commercial business 9,210 7,122 One-to-four family residential 37 38 Real estate construction and land development: One-to-four family residential 2,207 2,414 Five or more family residential and commercial properties 65 — Total real estate construction and land development 2,272 2,414 Consumer 835 94 Nonaccrual loans $ 12,354 $ 9,668 The Company had $1.4 million and $1.1 million of nonaccrual loans guaranteed by governmental agencies at March 31, 2016 and December 31, 2015 , respectively. PCI loans are not included in the nonaccrual loan table above because these loans are accounted for under FASB ASC 310-30, which provides that accretable yield is calculated based on a loan's expected cash flow even if the loan is not performing under its contractual terms. (e) Past due loans The Company performs an aging analysis of past due loans using the categories of 30-89 days past due and 90 or more days past due. This policy is consistent with regulatory reporting requirements. The balances of past due loans, segregated by segments and classes of loans, as of March 31, 2016 and December 31, 2015 were as follows: March 31, 2016 30-89 Days 90 Days or Greater Total Past Due Current Total (In thousands) Commercial business: Commercial and industrial $ 1,182 $ 972 $ 2,154 $ 590,154 $ 592,308 Owner-occupied commercial real estate 933 2,393 3,326 627,160 630,486 Non-owner occupied commercial real estate 6,765 185 6,950 723,539 730,489 Total commercial business 8,880 3,550 12,430 1,940,853 1,953,283 One-to-four family residential 794 — 794 72,012 72,806 Real estate construction and land development: One-to-four family residential — 1,965 1,965 45,331 47,296 Five or more family residential and commercial properties 398 65 463 71,535 71,998 Total real estate construction and land development 398 2,030 2,428 116,866 119,294 Consumer 2,889 943 3,832 308,627 312,459 Gross loans receivable $ 12,961 $ 6,523 $ 19,484 $ 2,438,358 $ 2,457,842 December 31, 2015 30-89 Days 90 Days or Greater Total Past Due Current Total (In thousands) Commercial business: Commercial and industrial $ 2,900 $ 2,679 $ 5,579 $ 591,147 $ 596,726 Owner-occupied commercial real estate 2,753 2,609 5,362 623,845 629,207 Non-owner occupied commercial real estate 1,664 184 1,848 695,540 697,388 Total commercial business 7,317 5,472 12,789 1,910,532 1,923,321 One-to-four family residential 490 — 490 72,058 72,548 Real estate construction and land development: One-to-four family residential — 2,392 2,392 49,360 51,752 Five or more family residential and commercial properties 118 42 160 55,165 55,325 Total real estate construction and land development 118 2,434 2,552 104,525 107,077 Consumer 3,029 202 3,231 294,936 298,167 Gross loans receivable $ 10,954 $ 8,108 $ 19,062 $ 2,382,051 $ 2,401,113 There were no loans 90 days or more past due that were still accruing interest as of March 31, 2016 or December 31, 2015 , excluding PCI loans. (f) Impaired loans Impaired loans include nonaccrual loans and performing troubled debt restructured ("TDR") loans. The balances of impaired loans as of March 31, 2016 and December 31, 2015 are set forth in the following tables. March 31, 2016 Recorded Investment With No Specific Valuation Allowance Recorded Investment With Specific Valuation Allowance Total Recorded Investment Unpaid Contractual Principal Balance Related Specific Valuation Allowance (In thousands) Commercial business: Commercial and industrial $ 1,126 $ 8,872 $ 9,998 $ 12,845 $ 1,081 Owner-occupied commercial real estate 1,158 4,069 5,227 5,356 677 Non-owner occupied commercial real estate 5,016 6,813 11,829 11,871 922 Total commercial business 7,300 19,754 27,054 30,072 2,680 One-to-four family residential — 271 271 272 83 Real estate construction and land development: One-to-four family residential 2,367 1,038 3,405 4,158 31 Five or more family residential and commercial properties 65 1,935 2,000 2,054 213 Total real estate construction and land development 2,432 2,973 5,405 6,212 244 Consumer 791 161 952 995 29 Total $ 10,523 $ 23,159 $ 33,682 $ 37,551 $ 3,036 December 31, 2015 Recorded Investment With No Specific Valuation Allowance Recorded Investment With Specific Valuation Allowance Total Recorded Investment Unpaid Contractual Principal Balance Related Specific Valuation Allowance (In thousands) Commercial business: Commercial and industrial $ 872 $ 8,769 $ 9,641 $ 11,368 $ 1,173 Owner-occupied commercial real estate — 4,295 4,295 4,342 809 Non-owner occupied commercial real estate 3,696 6,834 10,530 10,539 943 Total commercial business 4,568 19,898 24,466 26,249 2,925 One-to-four family residential — 275 275 276 85 Real estate construction and land development: One-to-four family residential 1,403 2,065 3,468 4,089 66 Five or more family residential and commercial properties — 1,960 1,960 1,960 203 Total real estate construction and land development 1,403 4,025 5,428 6,049 269 Consumer 48 145 193 200 29 Total $ 6,019 $ 24,343 $ 30,362 $ 32,774 $ 3,308 The Company had governmental guarantees of $2.1 million and $1.5 million related to the impaired loan balances at March 31, 2016 and December 31, 2015 , respectively. The average recorded investment of impaired loans for the three months ended March 31, 2016 and 2015 are set forth in the following table. Three Months Ended March 31, 2016 2015 (In thousands) Commercial business: Commercial and industrial $ 9,706 $ 7,562 Owner-occupied commercial real estate 4,761 2,502 Non-owner occupied commercial real estate 11,179 7,127 Total commercial business 25,646 17,191 One-to-four family residential 273 244 Real estate construction and land development: One-to-four family residential 3,550 3,254 Five or more family residential and commercial properties 1,980 2,044 Total real estate construction and land development 5,530 5,298 Consumer 573 131 Total $ 32,022 $ 22,864 For the three months ended March 31, 2016 and 2015 , no interest income was recognized subsequent to a loan’s classification as nonaccrual. For the three months ended March 31, 2016 and 2015 , the Bank recorded $178,000 and $199,000 , respectively, of interest income related to performing TDR loans. (g) Troubled Debt Restructured Loans A TDR loan is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. TDRs are considered impaired and are separately measured for impairment under FASB ASC 310-10-35, whether on accrual ("performing") or nonaccrual ("nonperforming") status. The Company has more stringent definitions of concessions and impairment measures for PCI loans which are not in a pool as these loans have known credit deterioration and are generally accreting income at a lower discounted rate as compared to the contractual note rate based on the guidance of FASB ASC 310-30. The majority of the Bank’s TDR loans are a result of granting extensions of maturity on troubled credits which have already been adversely classified. The Bank grants such extensions to reassess the borrower’s financial status and to develop a plan for repayment. The second most prevalent concessions are certain modifications with extensions that also include interest rate reductions. Certain TDRs were additionally re-amortized over a longer period of time. The Bank additionally advanced funds to a troubled speculative home builder to complete established projects. These modifications would all be considered a concession for a borrower that could not obtain similar financing terms from another source other than from the Bank. The financial effects of each modification will vary based on the specific restructure. For the majority of the Bank’s TDRs, the loans were interest-only with a balloon payment at maturity. If the interest rate is not adjusted and the modified terms are consistent with other similar credits being offered, the Bank may not experience any loss associated with the restructure. If, however, the restructure involves forbearance agreements or interest rate modifications, the Bank may not collect all the principal and interest based on the original contractual terms. The Bank estimates the necessary allowance for loan losses on TDRs using the same guidance as used for other impaired loans. The recorded investment balance and related allowance for loan losses of performing and nonaccrual TDR loans as of March 31, 2016 and December 31, 2015 were as follows: March 31, 2016 December 31, 2015 Performing TDRs Nonaccrual TDRs Performing TDRs Nonaccrual (In thousands) TDR loans $ 21,328 $ 6,905 $ 20,695 $ 6,301 Allowance for loan losses on TDR loans 2,140 726 2,069 679 The unfunded commitment to borrowers related to TDRs was $210,000 and $551,000 at March 31, 2016 and December 31, 2015 , respectively. Loans that were modified as TDRs during the three months ended March 31, 2016 and 2015 are set forth in the following tables: Three Months Ended March 31, 2016 2015 Number of Contracts (1) Outstanding Number of Contracts (1) Outstanding Principal Balance (1)(2) (Dollars in thousands) Commercial business: Commercial and industrial 9 $ 1,918 7 $ 1,006 Owner-occupied commercial real estate — — 1 308 Non-owner occupied commercial real estate 1 1,118 — — Total commercial business 10 3,036 8 1,314 Real estate construction and land development: One-to-four family residential 5 2,390 3 2,399 Total real estate construction and land development 5 2,390 3 2,399 Consumer 3 41 1 39 Total TDR loans 18 $ 5,467 12 $ 3,752 (1) Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the three months ended March 31, 2016 and 2015 . (2) Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. There were no advances on these types of loans during the three months ended March 31, 2016 and 2015 . Of the 18 loans modified during the three months ended March 31, 2016 , eight loans with a total outstanding principal balance of $1.5 million had no prior modifications. Of the 12 loans modified during the three months ended March 31, 2015 , four loans with a total outstanding principal balance of $695,000 had no prior modifications. The remaining loans included in the tables above for the three months ended March 31, 2016 and 2015 were previously reported as TDRs. The Bank typically grants shorter extension periods to continually monitor the troubled credits despite the fact that the extended date might not be the date the Bank expects the cash flow. The Company does not consider these modifications a subsequent default of a TDR as new loan terms, specifically new maturity dates, were granted. The potential losses related to these loans would have been considered in the period the loan was first reported as a TDR and adjusted, as necessary, in the current periods based on more recent information. The related specific valuation allowance at March 31, 2016 for loans that were modified as TDRs during the three months ended March 31, 2016 was $376,000 . There were no loans which were modified during the previous twelve months ended March 31, 2016 that subsequently defaulted during the three months ended March 31, 2016. There was one commercial and industrial loan totaling $2.2 million at March 31, 2015 that was modified during the previous twelve months and subsequently defaulted during the three months ended March 31, 2015 because the borrower did not make specific curtailment, or additional, payments on the loan in prior periods. There were no other loans which were modified during the previous twelve months ended March 31, 2015 that subsequently defaulted during the three months ended March 31, 2015. (h) Purchased Credit Impaired Loans The Company acquired loans and designated them as PCI loans, which are accounted for under FASB ASC 310-30, in the Washington Banking Merger on May 1, 2014 and in previously completed acquisitions including the FDIC-assisted acquisitions of Cowlitz Bank ("Cowlitz") and Pierce Commercial Bank ("Pierce") on July 30, 2010 and November 8, 2010, respectively, and the acquisitions of Northwest Commercial Bank ("NCB") on January 9, 2013 and Valley Community Bancshares, Inc. ("Valley") on July 15, 2013. The following table reflects the outstanding principal balance and recorded investment at March 31, 2016 and December 31, 2015 of the PCI loans: March 31, 2016 December 31, 2015 Outstanding Principal Recorded Investment Outstanding Principal Recorded Investment (In thousands) Commercial business: Commercial and industrial $ 16,508 $ 12,794 $ 20,110 $ 16,986 Owner-occupied commercial real estate 21,890 19,587 25,237 22,826 Non-owner occupied commercial real estate 28,936 26,654 30,178 27,261 Total commercial business 67,334 59,035 75,525 67,073 One-to-four family residential 5,259 4,983 5,707 5,392 Real estate construction and land development: One-to-four family residential 5,764 3,082 6,904 4,121 Five or more family residential and commercial properties 2,996 3,126 3,071 3,207 Total real estate construction and land development 8,760 6,208 9,975 7,328 Consumer 6,138 7,235 6,720 7,126 Gross PCI loans $ 87,491 $ 77,461 $ 97,927 $ 86,919 On the acquisition dates, the amount by which the undiscounted expected cash flows of the PCI loans exceeded the estimated fair value of the loan is the “accretable yield”. The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loans. The follo |
