| Loan Receivable | Loans Receivable The Bank originates loans in the ordinary course of business and has also acquired loans through mergers and acquisitions. Accrued interest receivable was excluded from disclosures presenting the Bank's amortized cost of loans receivable as it was deemed insignificant. (a) Loan Origination/Risk Management The Bank categorizes the individual loans in the total loan portfolio into four segments: commercial business; residential real estate; real estate construction and land development; and consumer. Within these segments are classes of loans for which management monitors and assesses credit risk. The Bank has certain lending policies and 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 Bank also conducts internal loan reviews and validates the credit risk assessment on a periodic basis and presents the results of these reviews to management. The loan review process complements and reinforces the risk identification and assessment decisions made by loan officers and credit personnel. The amortized cost of loans receivable, net of ACL on loans at December 31, 2021 and December 31, 2020 consisted of the following portfolio segments and classes: December 31, 2021 December 31, 2020 (In thousands) Commercial business: Commercial and industrial $ 621,567 $ 733,098 SBA PPP 145,840 715,121 Owner-occupied CRE 931,150 856,684 Non-owner occupied CRE 1,493,099 1,410,303 Total commercial business 3,191,656 3,715,206 Residential real estate 164,582 122,756 Real estate construction and land development: Residential 85,547 78,259 Commercial and multifamily 141,336 227,454 Total real estate construction and land development 226,883 305,713 Consumer 232,541 324,972 Loans receivable 3,815,662 4,468,647 December 31, 2021 December 31, 2020 (In thousands) Allowance for credit losses on loans (42,361) (70,185) Loans receivable, net $ 3,773,301 $ 4,398,462 Balances included in the amortized cost of loans receivable: Unamortized net discount on acquired loans $ (3,938) $ (6,575) Unamortized net deferred fee $ (7,952) $ (15,458) A discussion of the risk characteristics of each loan portfolio segment is as follows: Commercial Business : There are four significant classes of loans in the commercial business portfolio segment discussed separately below: Commercial and industrial. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may include a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Commercial and industrial loans carry more risk than other loans because the borrowers’ cash flow is less predictable and in the event of a default the amount of loss is potentially greater and more difficult to quantify because the value of the collateral securing these loans may fluctuate, may be uncollectible or may be obsolete or of limited use, among other things. SBA PPP. The Bank began originating SBA PPP loans following the enactment of the CARES Act in April 2020. SBA PPP loans are fully guaranteed by the SBA, intended for businesses impacted by the COVID-19 Pandemic and designed to provide near term relief to help small businesses sustain operations. These loans have either a two-year or five-year maturity date and earn interest at 1%. The Bank also earns a fee based on the size of the loan, which is recognized over the life of the loan. Owner-occupied and non-owner occupied CRE. The Bank originates CRE loans primarily within its primary market areas. These loans are subject to underwriting standards and processes similar to commercial and industrial loans in that these loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate properties. CRE lending typically involves higher loan principal amounts and payments on loans and repayment is dependent on successful operation and management of the properties. The value of the real estate securing these loans can be adversely affected by conditions in the real estate market or the economy. There is some common risk characteristics with owner-occupied CRE loans and non-owner occupied CRE loans. However, owner-occupied CRE loans are generally considered to have a slightly lower risk profile as we typically have the guarantee of the owner-occupant and can underwrite risk using the complete financial information on the entity that occupies the property. Residential Real Estate : The majority of the Bank’s residential real estate loans are secured by one-to-four family residences located in its primary market areas. The Company’s underwriting standards require that residential real estate loans maintained in the portfolio generally are owner-occupied and do not exceed 80% of the lower of appraised value at origination or cost of the underlying collateral. Terms of maturity typically range from 15 to 30 years. The Bank sells a portion of originated residential real estate loans in the secondary market. Real Estate Construction and Land Development : The Bank originates construction loans for residential and for commercial and multifamily properties. The residential construction loans generally include construction of custom single-family homes whereby the home owner is the borrower. The Bank also provides financing to builders for the construction of pre-sold residential homes and, in selected cases, to builders for the construction of speculative single-family residential property. 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 Bank’s estimates with regard to the total funds required to complete a project and the related loan-to-value ratio may vary from actual results. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness. If the Bank’s estimate of the value of a project at completion proves to be overstated, it may have inadequate security for repayment of the loan and may incur a loss if the borrower does not repay the loan. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Bank until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being dependent upon successful completion of the construction project, market interest rate changes, government regulation of real property, general economic conditions and the availability of long-term financing. Consumer : The Bank originates consumer loans and lines of credit that are both secured and unsecured. The underwriting process for these loans ensures a qualifying primary and secondary source of repayment. Underwriting standards for home equity loans are significantly influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage of 80%, collection remedies, the number of such loans a borrower can have at one time and documentation requirements. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. The majority of consumer loans are for relatively small amounts disbursed among many individual borrowers which reduces the overall credit risk for this segment. To further reduce the risk, trend reports are reviewed by management on a regular basis. The Bank also purchased indirect consumer loans. These indirect consumer loans were secured by new and used automobile and recreational vehicles and were originated indirectly by established and well-known dealers located in our market areas. In addition, the indirect loans purchased were made to only prime borrowers. The Bank ceased indirect auto loan originations in March 2020. (b) Concentrations of Credit Most of the Bank’s lending activity occurs within its primary market areas which are concentrated along the I-5 corridor from Whatcom County to Clark County in Washington State and Multnomah County and Washington County in Oregon, as well as other contiguous markets and represents a geographic concentration. Additionally, our loan portfolio is concentrated in commercial loans, including commercial business loans and commercial and multifamily real estate construction and land development loans. Commercial loans are generally viewed as having more inherent risk of default than residential real estate loans or other consumer loans. Also, the commercial loan balance per borrower is typically larger than that for residential real estate loans and consumer loans, implying higher potential losses on an individual loan basis. (c) Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Bank’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade of the loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) nonperforming loans, (v) past due status and (vi) the general economic conditions of the United States of America, and specifically the states of Washington and Oregon. The Bank utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 10. A description of the general characteristics of the risk grades is as follows: • Grades 1 to 5: These grades are considered “Pass” and include loans with negligible to above average, but acceptable, risk. These borrowers generally have strong to acceptable capital levels and consistent earnings and debt service capacity. Loans with the higher grades within the “Pass” category may include borrowers who are experiencing unusual operating difficulties, but have acceptable payment performance to date. Increased monitoring of financial information and/or collateral may be appropriate. Loans with this grade show no immediate loss exposure. • Grade 6: This grade includes "Watch" loans. The grade is intended to be utilized on a temporary basis for pass grade borrowers where a potentially significant risk-modifying action is anticipated in the near term. • Grade 7: This grade includes "Special Mention" ("SM") loans and is intended to highlight loans deemed by management to have some elevated risks that deserve management's close attention. Loans with this grade show signs of deteriorating profits and capital and the borrower might not be strong enough to sustain a major setback. The borrower is typically higher than normally leveraged and outside support might be modest and likely illiquid. The loan is at risk of further credit decline unless active measures are taken to correct the situation. • Grade 8: This grade includes “Substandard” ("SS") loans in accordance with regulatory guidelines, which the Company has determined have a high credit risk. These loans also have well-defined weaknesses and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The borrower may have shown serious negative trends in financial ratios and performance. Such loans may be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. • Grade 9: This grade includes “Doubtful” loans in accordance with regulatory guidelines and the Bank has determined these loans to have excessive credit risk. Such loans are placed on nonaccrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. Additionally, these loans generally have been partially charged off for the amount considered uncollectible. • Grade 10: This grade includes “Loss” loans in accordance with regulatory guidelines and the Bank has determined these loans have the highest risk of loss. Such loans are charged off or charged down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. Numerical loan grades for loans are established at the origination of the loan. Changes to loan grades are considered at the time new information about the performance of a loan becomes available, including the receipt of updated financial information from the borrower, results of annual term loan reviews and scheduled loan reviews. For consumer loans, the Bank follows the FDIC’s Uniform Retail Credit Classification and Account Management Policy for subsequent classification in the event of payment delinquencies or default. Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement. Credit deterioration is evidenced by delinquency, direct communications with the borrower or other borrower information that becomes known to management. Credit improvements are evidenced by known facts regarding the borrower or the collateral property. Loan grades relate to the likelihood of losses in that the higher the grade, the greater the loss potential. Loans with a pass grade may have some estimated inherent losses, but to a lesser extent than the other loan grades. The SM loan grade is transitory in that the Bank is waiting on additional information to determine the likelihood and extent of the potential loss. The likelihood of loss for SM graded loans, however, is greater than Watch graded loans because there has been measurable credit deterioration. Loans with a SS grade are generally accrual loans at risk of being classified as nonaccrual loans and includes all of our loans classified as nonaccrual. For Doubtful and Loss graded loans, the Bank is almost certain of the losses and the outstanding principal balances are generally charged off to the realizable value. Regulatory agencies provided guidance regarding credit risk ratings, delinquency reporting and nonaccrual status for loans adversely impacted by the COVID-19 Pandemic. The Bank has and will continue to exercise judgment in determining the risk rating for impacted borrowers and will not automatically adversely classify credits that have been affected by the COVID-19 Pandemic. The Bank did not designate loans with payment deferrals granted due to the COVID-19 Pandemic as past due because of the deferral. Due to the short-term nature of the forbearance and other relief programs the Bank was offering as a result of the COVID-19 Pandemic, borrowers granted relief under these programs were generally not reported as nonaccrual during the deferral period. The following table presents the amortized cost of loans receivable by risk grade as of December 31, 2021 and December 31, 2020: December 31, 2021 Revolving Loans Revolving Loans Converted to Term Loans (1) Loans Receivable Term Loans 2021 2020 2019 2018 2017 Prior (In thousands) Commercial business: Commercial and industrial Pass $ 95,960 $ 100,193 $ 94,657 $ 54,707 $ 28,558 $ 77,294 $ 127,651 $ 1,035 $ 580,055 SM 326 884 5,998 1,425 2,223 2,401 2,048 353 15,658 SS 1,443 1,287 5,912 2,809 2,526 6,907 4,402 568 25,854 Total 97,729 102,364 106,567 58,941 33,307 86,602 134,101 1,956 621,567 SBA PPP Pass 139,253 6,587 — — — — — — 145,840 Owner-occupied CRE Pass 182,742 90,609 188,380 73,714 66,039 273,518 — 72 875,074 SM 264 — 3,079 7,521 3,937 16,724 — — 31,525 SS — 1,332 — 3,787 3,014 16,418 — — 24,551 Total 183,006 91,941 191,459 85,022 72,990 306,660 — 72 931,150 Non-owner occupied CRE Pass 187,860 185,650 244,863 149,090 144,896 499,486 — — 1,411,845 SM — — 5,674 — 15,482 2,400 — — 23,556 SS — — — 3,379 — 54,319 — — 57,698 Total 187,860 185,650 250,537 152,469 160,378 556,205 — — 1,493,099 Total commercial business Pass 605,815 383,039 527,900 277,511 239,493 850,298 127,651 1,107 3,012,814 SM 590 884 14,751 8,946 21,642 21,525 2,048 353 70,739 SS 1,443 2,619 5,912 9,975 5,540 77,644 4,402 568 108,103 Total 607,848 386,542 548,563 296,432 266,675 949,467 134,101 2,028 3,191,656 Residential real estate Pass 85,089 27,090 23,295 5,672 6,141 16,891 — — 164,178 SS — — — — — 404 — — 404 Total 85,089 27,090 23,295 5,672 6,141 17,295 — — 164,582 Real estate construction and land development: Residential Pass 44,892 23,728 12,266 2,921 389 1,351 — — 85,547 December 31, 2021 Revolving Loans Revolving Loans Converted to Term Loans (1) Loans Receivable Term Loans 2021 2020 2019 2018 2017 Prior Commercial and multifamily Pass 56,448 41,616 34,117 5,794 710 1,379 — — 140,064 SM — — 68 — — 213 — — 281 SS — 571 — — — 420 — — 991 Total 56,448 42,187 34,185 5,794 710 2,012 — — 141,336 Total real estate construction and land development Pass 101,340 65,344 46,383 8,715 1,099 2,730 — — 225,611 SM — — 68 — — 213 — — 281 SS — 571 — — — 420 — — 991 Total 101,340 65,915 46,451 8,715 1,099 3,363 — — 226,883 Consumer Pass 1,286 15,737 46,041 29,819 15,068 13,026 108,492 120 229,589 SS — 181 657 476 542 1,043 36 17 2,952 Total 1,286 15,918 46,698 30,295 15,610 14,069 108,528 137 232,541 Loans receivable Pass 793,530 491,210 643,619 321,717 261,801 882,945 236,143 1,227 3,632,192 SM 590 884 14,819 8,946 21,642 21,738 2,048 353 71,020 SS 1,443 3,371 6,569 10,451 6,082 79,511 4,438 585 112,450 Total $ 795,563 $ 495,465 $ 665,007 $ 341,114 $ 289,525 $ 984,194 $ 242,629 $ 2,165 $ 3,815,662 (1) Represents the loans receivable balance at December 31, 2021 which was converted from a revolving loan to an amortizing loan during the year ended December 31, 2021. December 31, 2020 Revolving Loans Revolving Loans Converted to Term Loans (1) Loans Receivable Term Loans 2020 2019 2018 2017 2016 Prior (In thousands) Commercial business: Commercial and industrial Pass $ 118,971 $ 127,919 $ 70,766 $ 44,231 $ 37,658 $ 95,958 $ 121,440 $ 819 $ 617,762 SM 14,430 9,162 10,878 4,171 5,700 3,579 11,790 814 60,524 SS 2,199 11,835 3,416 9,348 1,052 7,651 15,484 3,827 54,812 Total 135,600 148,916 85,060 57,750 44,410 107,188 148,714 5,460 733,098 SBA PPP Pass 715,121 — — — — — — — 715,121 Owner-occupied CRE Pass 89,224 167,095 94,830 80,138 74,902 254,864 — — 761,053 SM 6,146 4,540 16,386 11,231 5,464 12,105 — — 55,872 SS — — 114 7,320 3,313 29,012 — — 39,759 Total 95,370 171,635 111,330 98,689 83,679 295,981 — — 856,684 Non-owner-occupied CRE Pass 197,548 173,153 148,830 172,438 240,614 406,817 — — 1,339,400 SM — 1,979 357 2,448 6,210 3,539 — — 14,533 SS — — 3,623 — 35,455 17,292 — — 56,370 Total 197,548 175,132 152,810 174,886 282,279 427,648 — — 1,410,303 Total commercial business Pass 1,120,864 468,167 314,426 296,807 353,174 757,639 121,440 819 3,433,336 SM 20,576 15,681 27,621 17,850 17,374 19,223 11,790 814 130,929 SS 2,199 11,835 7,153 16,668 39,820 53,955 15,484 3,827 150,941 Total 1,143,639 495,683 349,200 331,325 410,368 830,817 148,714 5,460 3,715,206 Residential real estate Pass 30,141 41,829 15,730 10,362 7,322 16,825 — — 122,209 SS — — — 59 — 488 — — 547 Total 30,141 41,829 15,730 10,421 7,322 17,313 — — 122,756 Real estate construction and land development: Residential Pass 33,801 36,697 2,725 1,097 971 1,042 — — 76,333 SS — — — 1,926 — — — — 1,926 Total 33,801 36,697 2,725 3,023 971 1,042 — — 78,259 Commercial and multifamily Pass 27,423 151,020 38,682 5,660 689 1,407 — — 224,881 SM 67 1,011 — — — 29 — — 1,107 SS 572 450 — — — 444 — — 1,466 Total 28,062 152,481 38,682 5,660 689 1,880 — — 227,454 Total real estate construction and land development Pass 61,224 187,717 41,407 6,757 1,660 2,449 — — 301,214 SM 67 1,011 — — — 29 — — 1,107 SS 572 450 — 1,926 — 444 — — 3,392 Total 61,863 189,178 41,407 8,683 1,660 2,922 — — 305,713 Consumer Pass 43,742 77,083 53,195 30,559 13,443 15,453 87,547 315 321,337 SS 34 404 684 648 420 1,319 78 48 3,635 Total 43,776 77,487 53,879 31,207 13,863 16,772 87,625 363 324,972 Loans receivable Pass 1,255,971 774,796 424,758 344,485 375,599 792,366 208,987 1,134 4,178,096 SM 20,643 16,692 27,621 17,850 17,374 19,252 11,790 814 132,036 SS 2,805 12,689 7,837 19,301 40,240 56,206 15,562 3,875 158,515 Total $ 1,279,419 $ 804,177 $ 460,216 $ 381,636 $ 433,213 $ 867,824 $ 236,339 $ 5,823 $ 4,468,647 (1) Represents the loans receivable balance at December 31, 2020 which was converted from a revolving loan to an amortizing loan during the year ended December 31, 2020. (d) Nonaccrual Loans The following table presents the amortized cost of nonaccrual loans for the dates indicated: December 31, 2021 Nonaccrual without ACL Nonaccrual with ACL Total Nonaccrual (In thousands) Commercial business: Commercial and industrial $ 6,454 $ 3,827 $ 10,281 Owner-occupied CRE 3,036 5,138 8,174 Non-owner occupied CRE 1,273 3,379 4,652 Total commercial business 10,763 12,344 23,107 Residential real estate — 47 47 Real estate construction and land development: Commercial and multifamily — 571 571 Consumer — 29 29 Total $ 10,763 $ 12,991 $ 23,754 December 31, 2020 Nonaccrual without ACL Nonaccrual with ACL Total Nonaccrual (In thousands) Commercial business: Commercial and industrial $ 22,039 $ 9,208 $ 31,247 Owner-occupied CRE 4,693 13,700 18,393 Non-owner occupied CRE 3,424 3,722 7,146 Total commercial business 30,156 26,630 56,786 Residential real estate 67 117 184 Real estate construction and land development: Commercial and multifamily 572 450 1,022 Consumer 31 69 100 Total $ 30,826 $ 27,266 $ 58,092 The following table presents the reversal of interest income on loans due to the write-off of accrued interest receivable upon the initial classification of loans as nonaccrual loans and the interest income recognized due to payment in full of previously classified nonaccrual loans during the following periods: December 31, 2021 December 31, 2020 Interest Income Reversed Interest Income Recognized Interest Income Reversed Interest Income Recognized (In thousands) Commercial business: Commercial and industrial $ (10) $ 2,295 $ (95) $ 434 Owner-occupied CRE — 117 (238) 89 Non-owner occupied CRE — 601 (208) 67 Total commercial business (10) 3,013 (541) 590 Residential real estate — — (2) 2 Real estate construction and land development: Residential — 71 — — Commercial and multifamily — — (11) — Total real estate construction and land development — 71 (11) — Consumer (1) 52 (1) 47 Total $ (11) $ 3,136 $ (555) $ 639 For the years ended December 31, 2021 and 2020, no interest income was recognized subsequent to a loan’s classification as nonaccrual, except as indicated in the tables above due to payment in full. (e) Past due loans The Bank performs an aging analysis of past due loans using policies consistent with regulatory reporting requirements with categories of 30-89 days past due and 90 or more days past due. The amortized cost of past due loans as of December 31, 2021 and December 31, 2020 were as follows: December 31, 2021 30-89 Days 90 Days Total Past Current Loans Receivable (In thousands) Commercial business: Commercial and industrial $ 1,858 $ 6,821 $ 8,679 $ 612,888 $ 621,567 SBA PPP 223 293 516 145,324 145,840 Owner-occupied CRE 2,397 112 2,509 928,641 931,150 Non-owner occupied CRE — — — 1,493,099 1,493,099 Total commercial business 4,478 7,226 11,704 3,179,952 3,191,656 December 31, 2021 30-89 Days 90 Days Total Past Current Loans Receivable (In thousands) Residential real estate 420 10 430 164,152 164,582 Real estate construction and land development: Residential 792 — 792 84,755 85,547 Commercial and multifamily 3,474 571 4,045 137,291 141,336 Total real estate construction and land development 4,266 571 4,837 222,046 226,883 Consumer 1,026 — 1,026 231,515 232,541 Total $ 10,190 $ 7,807 $ 17,997 $ 3,797,665 $ 3,815,662 December 31, 2020 30-89 Days 90 Days or Total Past Current Loans Receivable (In thousands) Commercial business: Commercial and industrial $ 4,621 $ 8,082 $ 12,703 $ 720,395 $ 733,098 SBA PPP — — — 715,121 715,121 Owner-occupied CRE 991 403 1,394 855,290 856,684 Non-owner occupied CRE 412 1,970 2,382 1,407,921 1,410,303 Total commercial business 6,024 10,455 16,479 3,698,727 3,715,206 Residential real estate 765 16 781 121,975 122,756 Real estate construction and land development: Residential — — — 78,259 78,259 Commercial and multifamily 2,225 — 2,225 225,229 227,454 Total real estate construction and land development 2,225 — 2,225 303,488 305,713 Consumer 1,407 30 1,437 323,535 324,972 Total $ 10,421 $ 10,501 $ 20,922 $ 4,447,725 $ 4,468,647 There was one SBA PPP loan 90 days or more past due that was still accruing interest as of December 31, 2021 with an amortized cost of $293,000. There were no loans 90 days or more past due that were still accruing interest as of December 31, 2020 . (f) Collateral-dependent Loans The type of collateral securing loans individually evaluated for credit losses and for which the repayment was expected to be provided substantially through the operation or sale of the collateral as of December 31, 2021 and December 31, 2020 were as follows, with b alances representing the amortized cost of the loan classified by the primary collateral category of each loan if multiple collateral sources secure the loan : December 31, 2021 CRE Farmland Residential Real Estate Other Total (In thousands) Commercial business: Commercial and industrial $ 1,499 $ 4,362 $ 1,036 $ 245 $ 7,142 Owner-occupied CRE 3,035 — — — 3,035 Non-owner occupied CRE 1,273 — — — 1,273 Total commercial business 5,807 4,362 1,036 245 11,450 Real estate construction and land development: Commercial and multifamily 571 — — — 571 Total $ 6,378 $ 4,362 $ 1,036 $ 245 $ 12,021 December 31, 2020 CRE Farmland Residential Real Estate Other Total (In thousands) Commercial business: Commercial and industrial $ 1,893 $ 18,738 $ 584 $ 1,405 $ 22,620 Owner-occupied CRE 4,693 — — — 4,693 Non-owner occupied CRE 3,424 — — — 3,424 Total commercial business 10,010 18,738 584 1,405 30,737 Residential real estate — — 67 — 67 Real estate construction and land development: Commercial and multifamily 572 — — — 572 Consumer — — 30 — 30 Total $ 10,582 $ 18,738 $ 681 $ 1,405 $ 31,406 There have been no significant changes to the collateral securing loans individually evaluated for credit losses and for which repayment was expected to be provided substantially through the operation or sale of the collateral during the year ended December 31, 2021, except changes due to additions or removals of loans in this classification. (g) Troubled Debt Restructured Loans Loans that were modified as TDR loans are set forth in the following tables for the periods indicated: Year Ended December 31, 2021 2020 2019 Number of Amortized Cost (1) (2) Number of Amortized Cost (1) (2) Number of Amortized Cost (1) (2) (Dollars in thousands) Commercial business: Commercial and industrial 31 $ 9,710 75 $ 36,118 44 $ 31,122 Owner-occupied CRE 7 16,565 14 19,326 4 1,695 Non-owner occupied CRE 4 17,640 9 25,728 4 2,208 Total commercial business 42 43,915 98 81,172 52 35,025 Residential real estate 1 178 1 22 — — Real estate construction and land development: Residential — — 4 1,926 1 237 Commercial and multifamily 1 450 1 450 — — Total real estate construction and land development 1 450 5 2,376 1 237 Consumer 22 511 48 1,198 12 157 Total 66 $ 45,054 152 $ 84,768 65 $ 35,419 (1) Number of contracts and amortized cost represent loans which have balances as of period end, net of subsequent payments after modifications. Certain TDR loans may have been paid-down or charged-off during the years ended December 31, 2021, 2020 and 2019. (2) As the Bank did not forgive any principal or interest balance as part of the loan modifications, the Bank’s amortized cost in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification). The Bank had an ACL on loa ns of $3.1 million, $7.5 million and $1.0 million at December 31, 2021, December 31, 2020, and December 31, 2019, respectively, related to these TDR loans which were restructured during the year ended December 31, 2021, 2020 and 2019, respectively. The unfunded commitment to borrowers related to TDR loans was $5.7 million and $2.6 million at December 31, 2021 and December 31, 2020, respectively. The following tables present loans that were modified in a TDR and subsequently defaulted within twelve months from the modification date during the periods indicated: Year Ended December 31, 2021 2020 2019 Number of Contracts (1) Amortized Cost (1) Number of Contracts (1) Amortized Cost (1) Number of Contracts (1) Amortized Cost (1) (Dollars in thousands) Commercial business: Commercial and industrial 6 $ 1,379 4 $ 2,136 13 $ 12,854 Owner-occupied CRE — — 2 1,369 3 1,142 Non-owner occupied CRE — — 2 1,811 1 52 Total 6 $ 1,379 8 $ 5,316 17 $ 14,048 (1) Number of contracts and amortized cost represent TDR loans which have balances as of period end, net of subsequent payments after modifications. Certain TDR loans may have been paid-down or charged-off during the years ended December 31, 2021, 2020 and 2019. During the years ended December 31, 2021, 2020, and 2019, six, eight and 11 TDR loans defaulted because each was past its modified maturity date and the borrower had not subsequently repaid the credits. The Bank chose not to further extend the maturity date on these TDR loans. The remaining six TDR loans for the year ended December 31, 2019 defaulted because the borrower was more than 90 days delinquent on their scheduled loan payments. The Bank had an ACL on loans for these TDR loans which defaulted during the related years of $111,000, $229,000, and $88,000 at December 31, 2021, 2020, and 2019. (h) Related Party Loans In the ordinary course of business, the Company has granted loans to certain directors, executive officers and their affiliates. Activity in related party loans during the periods indicated was as follows: Year Ended December 31, 2021 2020 2019 (In thousands) Balance outstanding at the beginning of year $ 7,694 $ 8,144 $ 8,367 Principal additions — 199 — Principal reductions (572) (649) (223) Balance outstanding at the end of year $ 7,122 $ 7,694 $ 8,144 The Company had $255,000 and $545,000 of unfunded commitments to related parties and all related party loans were performing in accordance with the underlying loan agreements as of December 31, 2021 and December 31, 2020. (i) Residential Real Estate Loan Sales The Bank originates residential real estate loans; a portion of which are sold on the secondary market. The Bank does not retain servicing on loans sold in the secondary market. At December 31, 2021 and December 31, 2020, the balance of loans held for sale was $1.5 million and $4.9 million, respectively. The following table presents information concerning the origination and sale of the Bank's residential real estate loans and the gains from their sale during the periods indicated: Year Ended December 31, 2021 2020 2019 (In thousands) Originated (1) $ 190,734 $ 191,207 $ 150,030 Sold 89,899 137,580 68,238 Gain on sale of loans, net (2) 3,644 5,044 2,159 (1) Includes loans originated for sale in the secondary market or for the Bank's loan portfolio. (2) Excludes net gains on sales of SBA and other loans. (j) Commercial Loan Sales, Servicing, and Commercial Servicing Asset Details of loans serviced for others are as follows: December 31, 2021 December 31, 2020 (In thousands) Loans serviced for others with participating interest, gross loan balance $ 30,852 $ 32,131 Loans serviced for others with partic |
