| Loans Receivable | Loans Receivable The Company originates loans in the ordinary course of business and has also acquired loans through mergers and acquisitions. Disclosures related to the Company's recorded investment in loans receivable generally exclude accrued interest receivable and net deferred fees or costs because they are insignificant. Loans acquired in a business combination are 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 ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality . These loans are identified as "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 criticized 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 business portfolio segment: commercial and industrial, owner-occupied commercial real estate and non-owner occupied commercial real estate. The owner and non-owner occupied commercial real estate classes 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 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. Commercial real estate. The Company originates commercial real estate 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. Commercial real estate 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 little difference in risk between owner-occupied commercial real estate loans and non-owner occupied commercial real estate loans. 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. The Company sells most of its single-family loans in the secondary market and retains a smaller portion in its loan portfolio. 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. The Company also originates 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 September 30, 2018 and December 31, 2017 consisted of the following portfolio segments and classes: September 30, 2018 December 31, 2017 (In thousands) Commercial business: Commercial and industrial $ 861,530 $ 645,396 Owner-occupied commercial real estate 785,416 622,150 Non-owner occupied commercial real estate 1,283,160 986,594 Total commercial business 2,930,106 2,254,140 One-to-four family residential 96,333 86,997 Real estate construction and land development: One-to-four family residential 107,148 51,985 Five or more family residential and commercial properties 120,787 97,499 Total real estate construction and land development 227,935 149,484 Consumer 391,283 355,091 Gross loans receivable 3,645,657 2,845,712 Net deferred loan costs 3,397 3,359 Loans receivable, net 3,649,054 2,849,071 Allowance for loan losses (34,475 ) (32,086 ) Total loans receivable, net $ 3,614,579 $ 2,816,985 (b) Concentrations of Credit Most of the Company’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 County in Oregon, as well as other contiguous markets. The majority of the Company’s loan portfolio consists of (in order of balances at September 30, 2018 ) non-owner occupied commercial real estate, commercial and industrial and owner-occupied commercial real estate. As of September 30, 2018 and December 31, 2017 , 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 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 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 financial information 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 outstanding 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 September 30, 2018 and December 31, 2017 . September 30, 2018 Pass OAEM Substandard Doubtful/Loss Total (In thousands) Commercial business: Commercial and industrial $ 797,284 $ 15,793 $ 48,453 $ — $ 861,530 Owner-occupied commercial real estate 745,548 21,260 18,608 — 785,416 Non-owner occupied commercial real estate 1,256,115 12,889 14,156 — 1,283,160 Total commercial business 2,798,947 49,942 81,217 — 2,930,106 One-to-four family residential 95,023 — 1,310 — 96,333 Real estate construction and land development: One-to-four family residential 105,703 261 1,184 — 107,148 Five or more family residential and commercial properties 120,733 54 — — 120,787 Total real estate construction and land development 226,436 315 1,184 — 227,935 Consumer 386,566 — 4,193 524 391,283 Gross loans receivable $ 3,506,972 $ 50,257 $ 87,904 $ 524 $ 3,645,657 December 31, 2017 Pass OAEM Substandard Doubtful/Loss Total (In thousands) Commercial business: Commercial and industrial $ 597,697 $ 19,536 $ 28,163 $ — $ 645,396 Owner-occupied commercial real estate 595,455 12,668 14,027 — 622,150 Non-owner occupied commercial real estate 955,450 10,494 20,650 — 986,594 Total commercial business 2,148,602 42,698 62,840 — 2,254,140 One-to-four family residential 85,762 — 1,235 — 86,997 Real estate construction and land development: One-to-four family residential 49,925 537 1,523 — 51,985 Five or more family residential and commercial properties 96,404 707 388 — 97,499 Total real estate construction and land development 146,329 1,244 1,911 — 149,484 Consumer 349,590 — 4,976 525 355,091 Gross loans receivable $ 2,730,283 $ 43,942 $ 70,962 $ 525 $ 2,845,712 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 September 30, 2018 and December 31, 2017 were $105.7 million and $83.5 million , respectively. (d) Nonaccrual Loans Nonaccrual loans, segregated by segments and classes of loans, were as follows as of September 30, 2018 and December 31, 2017 : September 30, 2018 December 31, 2017 (In thousands) Commercial business: Commercial and industrial $ 5,918 $ 3,110 Owner-occupied commercial real estate 5,565 4,090 Non-owner occupied commercial real estate 2,004 1,898 Total commercial business 13,487 9,098 One-to-four family residential 74 81 Real estate construction and land development: One-to-four family residential 1,076 1,247 Consumer 143 277 Nonaccrual loans $ 14,780 $ 10,703 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 September 30, 2018 and December 31, 2017 were as follows: September 30, 2018 30-89 Days 90 Days or Greater Total Past Due Current Total (In thousands) Commercial business: Commercial and industrial $ 685 $ 1,946 $ 2,631 $ 858,899 $ 861,530 Owner-occupied commercial real estate 1,666 1,385 3,051 782,365 785,416 Non-owner occupied commercial real estate 1,985 1,103 3,088 1,280,072 1,283,160 Total commercial business 4,336 4,434 8,770 2,921,336 2,930,106 One-to-four family residential — — — 96,333 96,333 Real estate construction and land development: One-to-four family residential — 309 309 106,839 107,148 Five or more family residential and commercial properties — — — 120,787 120,787 Total real estate construction and land development — 309 309 227,626 227,935 Consumer 1,445 — 1,445 389,838 391,283 Gross loans receivable $ 5,781 $ 4,743 $ 10,524 $ 3,635,133 $ 3,645,657 December 31, 2017 30-89 Days 90 Days or Greater Total Past Due Current Total (In thousands) Commercial business: Commercial and industrial $ 2,993 $ 1,172 $ 4,165 $ 641,231 $ 645,396 Owner-occupied commercial real estate 1,277 1,225 2,502 619,648 622,150 Non-owner occupied commercial real estate 870 3,314 4,184 982,410 986,594 Total commercial business 5,140 5,711 10,851 2,243,289 2,254,140 One-to-four family residential 513 — 513 86,484 86,997 Real estate construction and land development: One-to-four family residential 84 1,331 1,415 50,570 51,985 Five or more family residential and commercial properties 40 — 40 97,459 97,499 Total real estate construction and land development 124 1,331 1,455 148,029 149,484 Consumer 1,939 687 2,626 352,465 355,091 Gross loans receivable $ 7,716 $ 7,729 $ 15,445 $ 2,830,267 $ 2,845,712 There were no loans 90 days or more past due that were still accruing interest as of September 30, 2018 or December 31, 2017 , 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 September 30, 2018 and December 31, 2017 are set forth in the following tables. September 30, 2018 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 $ 2,409 $ 11,821 $ 14,230 $ 14,738 $ 1,711 Owner-occupied commercial real estate 1,566 11,315 12,881 12,907 1,825 Non-owner occupied commercial real estate 4,484 5,863 10,347 10,483 739 Total commercial business 8,459 28,999 37,458 38,128 4,275 One-to-four family residential — 285 285 297 80 Real estate construction and land development: One-to-four family residential 767 309 1,076 1,838 6 Total real estate construction and land development 767 309 1,076 1,838 6 Consumer — 410 410 398 113 Total $ 9,226 $ 30,003 $ 39,229 $ 40,661 $ 4,474 December 31, 2017 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 $ 2,127 $ 9,872 $ 11,999 $ 12,489 $ 1,326 Owner-occupied commercial real estate 2,452 4,356 6,808 7,054 621 Non-owner occupied commercial real estate 4,722 11,297 16,019 16,172 1,222 Total commercial business 9,301 25,525 34,826 35,715 3,169 One-to-four family residential — 299 299 308 93 Real estate construction and land development: One-to-four family residential 938 309 1,247 2,200 2 Five or more family residential and commercial properties — 645 645 645 37 Total real estate construction and land development 938 954 1,892 2,845 39 Consumer 160 282 442 466 54 Total $ 10,399 $ 27,060 $ 37,459 $ 39,334 $ 3,355 The average recorded investment of impaired loans for the three and nine months ended September 30, 2018 and 2017 are set forth in the following table. Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (In thousands) Commercial business: Commercial and industrial $ 16,252 $ 11,171 $ 15,258 $ 11,190 Owner-occupied commercial real estate 12,533 5,289 12,687 5,049 Non-owner occupied commercial real estate 10,265 11,037 10,311 11,198 Total commercial business 39,050 27,497 38,256 27,437 One-to-four family residential 288 307 292 312 Real estate construction and land development: One-to-four family residential 1,080 2,157 1,139 2,530 Five or more family residential and commercial properties — 860 161 967 Total real estate construction and land development 1,080 3,017 1,300 3,497 Consumer 396 346 403 328 Total $ 40,814 $ 31,167 $ 40,251 $ 31,574 For the three and nine months ended September 30, 2018 and 2017 , no interest income was recognized subsequent to a loan’s classification as nonaccrual. For the three and nine months ended September 30, 2018 , the Bank recorded $361,000 and $1.0 million , respectively, of interest income related to performing TDR loans. For the three and nine months ended September 30, 2017 , the Bank recorded $366,000 and $1.0 million , 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. TDR loans 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 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 TDR loans were additionally re-amortized over a longer period of time. 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 TDR loans, 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 TDR loans 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 September 30, 2018 and December 31, 2017 were as follows: September 30, 2018 December 31, 2017 Performing TDRs Nonaccrual TDRs Performing TDRs Nonaccrual (In thousands) TDR loans $ 24,449 $ 6,461 $ 26,757 $ 5,193 Allowance for loan losses on TDR loans 2,237 713 2,635 379 The unfunded commitment to borrowers related to TDR loans was $1.3 million and $1.2 million at September 30, 2018 and December 31, 2017 , respectively. Loans that were modified as TDR loans during the three and nine months ended September 30, 2018 and 2017 are set forth in the following table: Three Months Ended September 30, 2018 2017 Number of Contracts (1) Outstanding Number of Contracts (1) Outstanding Principal Balance (1)(2) (Dollars in thousands) Commercial business: Commercial and industrial 11 $ 2,352 4 $ 1,353 Owner-occupied commercial real estate 2 1,081 2 1,299 Non-owner occupied commercial real estate 2 2,776 1 655 Total commercial business 15 6,209 7 3,307 Consumer 1 25 4 52 Total loans modified as TDR loans 16 $ 6,234 11 $ 3,359 Nine Months Ended September 30, 2018 2017 Number of Contracts (1) Outstanding Number of Contracts (1) Outstanding Principal Balance (1)(2) (Dollars in thousands) Commercial business: Commercial and industrial 22 $ 4,445 13 $ 5,564 Owner-occupied commercial real estate 3 1,639 3 1,351 Non-owner occupied commercial real estate 3 2,976 2 1,596 Total commercial business 28 9,060 18 8,511 Real estate construction and land development: One-to-four family residential 2 767 2 1,038 Total real estate construction and land development 2 767 2 1,038 Consumer 8 133 5 60 Total TDR loans 38 $ 9,960 25 $ 9,609 (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 and nine months ended September 30, 2018 and 2017 . (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 and nine months ended September 30, 2018 and 2017 . The related specific valuation allowance at September 30, 2018 for loans that were modified as TDR loans during the nine months ended September 30, 2018 was $1.0 million . Certain loans included in the tables above may have been previously reported as TDR loans. The Bank typically grants shorter extension periods to continually monitor these TDR loans despite the fact that the extended date might not be the date the Bank expects sufficient cash flow from these borrowers. The Bank 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 loan and are adjusted, as necessary, in the current period based on more recent information. Loans that were modified during the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2018 and 2017 are set forth in the following table: Three Months Ended September 30, 2018 2017 Number of Contracts Outstanding Principal Balance Number of Outstanding (Dollars in thousands) Commercial business: Commercial and industrial 2 $ 1,742 1 $ 234 Total commercial business 2 1,742 1 234 Total 2 $ 1,742 1 $ 234 Nine Months Ended September 30, 2018 2017 Number of Contracts Outstanding Principal Balance Number of Outstanding (Dollars in thousands) Commercial business: Commercial and industrial 7 $ 2,020 1 $ 234 Owner-occupied commercial real estate 1 69 — — Non-owner occupied commercial real estate — — — — Total commercial business 8 2,089 1 234 Real estate construction and land development: One-to-four family residential 2 767 — — Total real estate construction and land development 2 767 — — Total 10 $ 2,856 1 $ 234 During the nine months ended September 30, 2018 , one owner-occupied commercial real estate TDR loan and two commercial and industrial TDR loans with a total outstanding balance of $69,000 and $1.7 million , respectively, defaulted because each was past its modified maturity date, and the borrower has not subsequently repaid the credits. The Bank has chosen not to further extend the maturity date on these loans. In addition, during the nine months ended September 30, 2018 , one commercial and industrial TDR loan and two construction TDR loans with total outstanding balances of $279,000 and $767,000 , respectively, defaulted because the borrowers were more than 90 days delinquent on their scheduled loan payments. Also, four commercial and industrial TDR loans defaulted and subsequently repaid their credits during nine months ended September 30, 2018. The Bank had a $320,000 specific valuation allowance at September 30, 2018 related to these TDR loans which defaulted during the nine months ended September 30, 2018 . During both the three and nine months ended September 30, 2017 , the one commercial and industrial TDR loan defaulted because the borrower was more than 90 days delinquent on his scheduled loan payment. (h) Purchased Credit Impaired Loans The Company acquired certain loans and designated them, as appropriate, as PCI loans, which are accounted for under FASB ASC 310-30. No loans acquired in the Premier and Puget Mergers were considered PCI. The following table reflects the outstanding principal balance and recorded investment of the PCI loans at September 30, 2018 and December 31, 2017 : September 30, 2018 December 31, 2017 Outstanding Principal Recorded Investment Outstanding Principal Recorded Investment (In thousands) Commercial business: Commercial and industrial $ 7,182 $ 3,758 $ 8,818 $ 2,912 Owner-occupied commercial real estate 9,277 8,258 12,230 11,515 Non-owner occupied commercial real estate 9,051 8,020 14,295 13,342 Total commercial business 25,510 20,036 35,343 27,769 One-to-four family residential 3,279 3,416 4,120 5,255 Real estate construction and land development: One-to-four family re |
