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Loans Receivable
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loans Receivable Loans Receivable
The Company 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 Company's amortized cost of loans receivable as it was deemed insignificant. In addition to originating loans, the Company may also purchase loans through pool purchases, participation purchases and syndicated loan purchases.
(a) Loan Origination/Risk Management
The Company 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 in the loan portfolios.
The Company has certain lending policies and guidelines in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and guidelines on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and criticized loans. The 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.
The amortized cost of loans receivable, net of ACL on loans consisted of the following portfolio segments and classes at the dates indicated:
December 31, 2023December 31, 2022
(Dollars in thousands)
Commercial business:
Commercial and industrial$718,291 $693,568 
Owner-occupied CRE958,620 937,040 
Non-owner occupied CRE1,697,574 1,586,632 
Total commercial business3,374,485 3,217,240 
Residential real estate
375,342 343,631 
Real estate construction and land development:
Residential
78,610 80,074 
Commercial and multifamily
335,819 214,038 
Total real estate construction and land development414,429 294,112 
Consumer171,371 195,875 
Loans receivable4,335,627 4,050,858 
ACL on loans(47,999)(42,986)
 Loans receivable, net$4,287,628 $4,007,872 
Balances included in the amortized cost of loans receivable:
Unamortized net discount on acquired loans$(1,923)$(2,501)
Unamortized net deferred fee$(11,063)$(10,016)
A discussion of the risk characteristics of each loan portfolio segment is as follows:
Commercial Business:
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.
Owner-occupied and non-owner occupied CRE. The Company 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 Company’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 Company sells a portion of originated residential real estate loans in the secondary market. In addition to originating residential real estate loans, the Company began purchasing pools of residential real estate loans during the year ended 2022. All purchased loans adhere to the Company's underwriting standards.
Real Estate Construction and Land Development:
The Company 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 homeowner is the borrower. The Company also provides financing to builders for the construction of pre-sold residential homes and, in selected cases, to builders for the construction of speculative single-family residential property. Construction loans are typically short-term in nature and priced with variable rates of interest. Construction loans may also be originated as a construction-to-permanent financing loan whereby upon completion of the construction phase, the loan is automatically converted to a permanent term loan. Construction lending can involve a higher level of risk than other types of lending because funds are advanced partially based upon the value of the project, which is uncertain prior to the project’s completion. Because of the uncertainties inherent in estimating construction costs as well as the market value of a completed project and the effects of governmental regulation of real property, the 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, market 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 overall credit risk for this segment. To further reduce the risk, trend reports are reviewed by management on a regular basis.
The Company also purchased indirect consumer loans. These indirect consumer loans were made by well-known dealers located in our market areas to prime borrowers and secured by new and used automobile and recreational vehicles. The Company ceased indirect consumer loan originations in March 2020.
(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, Washington to Lane County, Oregon, as well as Yakima County in Washington and Ada County in Idaho. Additionally, the Company's loan portfolio is concentrated in commercial business loans, which include commercial and industrial, owner-occupied and nonowner-occupied CRE, and real estate construction and land development loans which include commercial and multifamily real estate construction and land development loans. Commercial business loans and commercial and multifamily real estate construction and land development loans are generally considered as having a more inherent risk of default than residential real estate loans or other consumer loans. Also, the 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 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, (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 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” 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 and are considered Pass grade for reporting purposes.
•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 Company 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 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 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.
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 Company 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 Company is waiting on additional information to determine the likelihood and extent of any potential loss. The likelihood of loss for SM graded loans, however, is greater than Watch graded loans because there has been measurable credit deterioration. Loans with a SS grade have further credit deterioration and include both accrual loans and nonaccrual loans. For Doubtful and Loss graded loans, the Company is almost certain of the losses and the outstanding principal balances are generally charged off to the realizable value. There were no loans graded Doubtful or Loss as of December 31, 2023 and 2022.
The following tables present the amortized cost of loans receivable by risk grade and origination year, and the gross charge-offs by loan class and origination year, at the dates indicated. The Company adopted the vintage disclosure requirements of ASU 2022-02 prospectively as described in Note 1 beginning January 1, 2023.
December 31, 2023Revolving Loans
Revolving Loans Converted(1)
Loans Receivable
Term Loans
Amortized Cost Basis by Origination Year
20232022202120202019Prior
(Dollars in thousands)
Commercial business:
Commercial and industrial
Pass$120,973 $150,854 $74,231 $66,364 $40,307 $76,924 $141,740 $188 $671,581 
SM— 2,495 104 292 4,556 1,458 9,124 — 18,029 
SS— 1,215 2,734 3,548 1,076 7,875 12,168 65 28,681 
Total120,973 154,564 77,069 70,204 45,939 86,257 163,032 253 718,291 
Owner-occupied CRE
Pass90,775 138,505 159,490 82,296 146,869 299,609 — — 917,544 
SM— — 2,219 2,775 705 16,266 — — 21,965 
SS— — 4,908 654 — 13,549 — — 19,111 
Total90,775 138,505 166,617 85,725 147,574 329,424 — — 958,620 
Non-owner occupied CRE
Pass153,239 260,431 216,811 157,424 239,928 628,489 — — 1,656,322 
SM— — 8,172 — 570 19,300 — — 28,042 
SS— 598 — — — 12,612 — — 13,210 
Total153,239 261,029 224,983 157,424 240,498 660,401 — — 1,697,574 
Total commercial business
Pass364,987 549,790 450,532 306,084 427,104 1,005,022 141,740 188 3,245,447 
SM— 2,495 10,495 3,067 5,831 37,024 9,124 — 68,036 
SS— 1,813 7,642 4,202 1,076 34,036 12,168 65 61,002 
Total364,987 554,098 468,669 313,353 434,011 1,076,082 163,032 253 3,374,485 
Commercial business gross charge-offs
Current period— — 254 323 27 115 — — 719 
Residential real estate
Pass36,321 141,201 141,430 24,108 15,022 16,297 — — 374,379 
SS— — 801 — — 162 — — 963 
Total36,321 141,201 142,231 24,108 15,022 16,459 — — 375,342 
Real estate construction and land development:
Residential
Pass41,663 24,760 1,050 1,289 804 719 1 — 70,286 
SM— — 2,139 — — — — — 2,139 
SS1,000 319 4,866 — — — — — 6,185 
Total42,663 25,079 8,055 1,289 804 719 1 — 78,610 
Commercial and multifamily
Pass42,499 187,827 91,460 337 749 3,145 — — 326,017 
SM— — — 3,777 5,660 365 — — 9,802 
Total42,499 187,827 91,460 4,114 6,409 3,510 — — 335,819 
Total real estate construction and land development
Pass84,162 212,587 92,510 1,626 1,553 3,864 1 — 396,303 
SM— — 2,139 3,777 5,660 365 — — 11,941 
SS1,000 319 4,866 — — — — — 6,185 
Total85,162 212,906 99,515 5,403 7,213 4,229 1 — 414,429 
December 31, 2023Revolving Loans
Revolving Loans Converted(1)
Loans Receivable
Term Loans
Amortized Cost Basis by Origination Year
20232022202120202019Prior
Consumer
Pass1,897 1,980 293 6,221 15,841 20,402 122,007 1,123 169,764 
SS— — — 134 207 893 333 40 1,607 
Total1,897 1,980 293 6,355 16,048 21,295 122,340 1,163 171,371 
Consumer gross charge-offs:
Current period7 10 30 29 106 152 252 — 586 
Loans receivable
Pass487,367 905,558 684,765 338,039 459,520 1,045,585 263,748 1,311 4,185,893 
SM— 2,495 12,634 6,844 11,491 37,389 9,124 — 79,977 
SS1,000 2,132 13,309 4,336 1,283 35,091 12,501 105 69,757 
Total$488,367 $910,185 $710,708 $349,219 $472,294 $1,118,065 $285,373 $1,416 $4,335,627 
Gross charge-offs:
Total
$7 $10 $284 $352 $133 $267 $252 $— $1,305 
(1) Represents the loans receivable balance at December 31, 2023 which was converted from a revolving loan to a non-revolving amortizing loan during the year ended December 31, 2023.

December 31, 2022Revolving Loans
Revolving Loans Converted(1)
Loans Receivable
Term Loans
Amortized Cost Basis by Origination Year
20222021202020192018Prior
(Dollars in thousands)
Commercial business:
Commercial and industrial
Pass$168,818 $94,653 $82,554 $61,160 $33,957 $74,181 $146,795 $172 $662,290 
SM212 109 443 4,637 362 4,447 5,433 — 15,643 
SS773 188 1,710 3,465 559 5,098 3,674 168 15,635 
Total169,803 94,950 84,707 69,262 34,878 83,726 155,902 340 693,568 
Owner-occupied CRE
Pass134,432 167,927 93,834 157,096 62,876 282,212 — — 898,377 
SM— 1,744 — — 2,540 16,664 — 247 21,195 
SS— — 671 — 3,722 13,075 — — 17,468 
Total134,432 169,671 94,505 157,096 69,138 311,951 — 247 937,040 
Non-owner-occupied CRE
Pass240,151 189,300 160,930 258,778 121,369 561,645 — — 1,532,173 
SM— 8,349 — 4,172 — 12,190 — — 24,711 
SS— — — — 3,627 26,121 — — 29,748 
Total240,151 197,649 160,930 262,950 124,996 599,956 — — 1,586,632 
Total commercial business
Pass543,401 451,880 337,318 477,034 218,202 918,038 146,795 172 3,092,840 
SM212 10,202 443 8,809 2,902 33,301 5,433 247 61,549 
SS773 188 2,381 3,465 7,908 44,294 3,674 168 62,851 
Total544,386 462,270 340,142 489,308 229,012 995,633 155,902 587 3,217,240 
December 31, 2022Revolving Loans
Revolving Loans Converted(1)
Loans Receivable
Term Loans
Amortized Cost Basis by Origination Year
20222021202020192018Prior
Residential real estate
Pass132,510 149,934 24,668 16,803 4,207 15,337 — — 343,459 
SS— — — — — 172 — — 172 
Total132,510 149,934 24,668 16,803 4,207 15,509 — — 343,631 
Real estate construction and land development:
Residential
Pass45,521 26,675 2,891 3,061 871 1,055 — — 80,074 
Commercial and multifamily
Pass71,168 123,626 6,272 1,084 2,562 995 — — 205,707 
SM— — 2,213 5,687 — — — — 7,900 
SS— — — 37 — 394 — — 431 
Total71,168 123,626 8,485 6,808 2,562 1,389 — — 214,038 
Total real estate construction and land development
Pass116,689 150,301 9,163 4,145 3,433 2,050 — — 285,781 
SM— — 2,213 5,687 — — — — 7,900 
SS— — — 37 — 394 — — 431 
Total116,689 150,301 11,376 9,869 3,433 2,444 — — 294,112 
Consumer
Pass3,379 509 9,848 27,370 15,563 19,855 116,605 435 193,564 
SS— — 168 559 320 1,120 44 100 2,311 
Total3,379 509 10,016 27,929 15,883 20,975 116,649 535 195,875 
Loans receivable
Pass795,979 752,624 380,997 525,352 241,405 955,280 263,400 607 3,915,644 
SM212 10,202 2,656 14,496 2,902 33,301 5,433 247 69,449 
SS773 188 2,549 4,061 8,228 45,980 3,718 268 65,765 
Total$796,964 $763,014 $386,202 $543,909 $252,535 $1,034,561 $272,551 $1,122 $4,050,858 
(1) Represents the loans receivable balance at December 31, 2022 which was converted from a revolving loan to a non-revolving amortizing loan during the year ended December 31, 2022
(d) Nonaccrual Loans
The following tables present the amortized cost of nonaccrual loans at the dates indicated:
December 31, 2023
Nonaccrual without ACLNonaccrual with ACLTotal Nonaccrual
(Dollars in thousands)
Commercial business:
Commercial and industrial$1,706 $2,557 $4,263 
Owner-occupied CRE— 205 205 
Total commercial business1,706 2,762 4,468 
Total$1,706 $2,762 $4,468 
December 31, 2022
Nonaccrual without ACLNonaccrual with ACLTotal Nonaccrual
(Dollars in thousands)
Commercial business:
Commercial and industrial$4,503 $1,154 $5,657 
December 31, 2022
Nonaccrual without ACLNonaccrual with ACLTotal Nonaccrual
(Dollars in thousands)
Owner-occupied CRE— 212 212 
Total commercial business4,503 1,366 5,869 
Real estate construction and land development:
Commercial and multifamily
— 37 37 
Total$4,503 $1,403 $5,906 
The following table presents the reversal of interest income on loans due to the write-off of accrued interest receivable upon the initial classification of loans as nonaccrual loans and the interest income recognized due to payment in full or sale of previously classified nonaccrual loans during the following periods:
Year Ended December 31, 2023Year Ended December 31, 2022
Interest Income ReversedInterest Income RecognizedInterest Income ReversedInterest Income Recognized
(Dollars in thousands)
Commercial business:
Commercial and industrial$(61)$347 $(14)$263 
Owner-occupied CRE— — — 53 
Non-owner occupied CRE— — — 774 
Total commercial business(61)347 (14)1,090 
Residential real estate
— — — 19 
Real estate construction and land development:
Commercial and multifamily
— — (14)65 
Consumer— — — 68 
Total$(61)$347 $(28)$1,242 
For the year ended December 31, 2023 and 2022, no interest income was recognized subsequent to a loan’s classification as nonaccrual, except as indicated in the tables above due to payment in full or sale.
(e) Past due loans
The Company 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 following tables present the amortized cost of past due loans at the dates indicated:
December 31, 2023
30-89 Days90 Days 
or Greater		Total Past 
Due		CurrentLoans Receivable
(Dollars in thousands)
Commercial business:
Commercial and industrial$2,289 $3,857 $6,146 $712,145 $718,291 
Owner-occupied CRE— 189 189 958,431 958,620 
Non-owner occupied CRE1,489 — 1,489 1,696,085 1,697,574 
Total commercial business3,778 4,046 7,824 3,366,661 3,374,485 
Residential real estate
162 — 162 375,180 375,342 
Real estate construction and land development:
Residential
— 319 319 78,291 78,610 
Commercial and multifamily
— — — 335,819 335,819 
Total real estate construction and land development— 319 319 414,110 414,429 
Consumer615 87 702 170,669 171,371 
Total$4,555 $4,452 $9,007 $4,326,620 $4,335,627 
December 31, 2022
30-89 Days90 Days or
Greater		Total Past 
Due		CurrentLoans Receivable
(Dollars in thousands)
Commercial business:
Commercial and industrial$822 $6,104 $6,926 $686,642 $693,568 
Owner-occupied CRE— 189 189 936,851 937,040 
Non-owner occupied CRE— — — 1,586,632 1,586,632 
Total commercial business822 6,293 7,115 3,210,125 3,217,240 
Residential real estate
3,066 — 3,066 340,565 343,631 
Real estate construction and land development:
Residential
— — — 80,074 80,074 
Commercial and multifamily
— — — 214,038 214,038 
Total real estate construction and land development— — — 294,112 294,112 
Consumer1,561 — 1,561 194,314 195,875 
Total$5,449 $6,293 $11,742 $4,039,116 $4,050,858 
Loans 90 days or more past due and still accruing interest were $1.3 million and $1.6 million as of December 31, 2023 and December 31, 2022, respectively.
(f) Collateral-dependent Loans
The following tables present 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 at the dates indicated, with balances representing the amortized cost of the loan classified by the primary collateral category of each loan if multiple collateral sources secure the loan:
December 31, 2023
CREFarmlandResidential Real EstateEquipmentTotal
(Dollars in thousands)
Commercial business:
Commercial and industrial$260 $389 $621 $304 $1,574 
Owner-occupied CRE189 — — — 189 
Total commercial business449 389 621 304 1,763 
Total$449 $389 $621 $304 $1,763 
December 31, 2022
CREFarmlandResidential Real EstateTotal
(Dollars in thousands)
Commercial business:
Commercial and industrial$1,239 $1,977 $929 $4,145 
Owner-occupied CRE189 — — 189 
Total commercial business1,428 1,977 929 4,334 
Total$1,428 $1,977 $929 $4,334 
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, 2023, except changes due to additions or removals of loans in this classification.
(g) Modification of Loans
In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis.
Modifications of loans to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
The following table presents loan modifications by type of modification at amortized cost that were modified as a result of experiencing both financial difficulty and modified during the period indicated:
Year Ended December 31, 2023
Term ExtensionTerm Extension & Int. Rate ReductionTotal Modified Loans% of Modified Loans to Loans Receivable, net
(Dollars in thousands)
Commercial business:
Commercial and industrial$16,822 $— $16,822 2.34 %
Owner-occupied CRE209 — $209 0.02 
Non-owner occupied CRE2,701 237 2,938 0.17 
Total commercial business19,732 237 19,969 0.59 
Real estate construction and land development:
Residential
5,866 — 5,866 7.46 
Commercial and multifamily
3,777 — 3,777 1.12 
Total real estate construction and land development9,643 — 9,643 2.33 
Consumer26 15 41 0.02 
Total$29,401 $252 $29,653 0.68 %
The following tables present the financial effect of the loan modifications presented in the preceding table during the periods indicated:
Year Ended December 31, 2023
Weighted Average % of Interest Rate ReductionsWeighted Average Years of Term Extensions
Commercial business:
Commercial and industrial— %0.48
Owner-occupied CRE— %0.75
Non-owner occupied CRE3.00 1.09
Total commercial business3.00 0.57
Real estate construction and land development:
Commercial and multifamily
— 0.83
Consumer1.00 2.64
Total3.00 %0.61
There were no modified loans included in the tables above that were past due or on nonaccrual as of December 31, 2023.
There were no loans to borrowers experiencing financial difficulty that had a payment default within the year ended December 31, 2023 that were modified in the twelve months prior to that default.
There were $6.6 million in commitments to lend additional funds to borrowers experiencing financial difficulty whose terms have been modified during the year ended December 31, 2023 through either principal forgiveness, interest rate reduction, term extension, or other than insignificant payment delay.
(h) Related Party Loans
In the ordinary course of business, the Company has granted loans to certain directors, executive officers and their affiliates. The following table presents the activity in related party loans during the periods indicated:
Year Ended December 31,
202320222021
(Dollars in thousands)
Balance outstanding at the beginning of year$6,879 $7,122 $7,694 
Principal additions122 — — 
Principal reductions(252)(243)(572)
Balance outstanding at the end of year$6,749 $6,879 $7,122 
All related party loans were performing in accordance with the underlying loan agreements as of December 31, 2023 and December 31, 2022. The Company had $113,000 and $5,000 of unfunded commitments to related parties as of December 31, 2023 and December 31, 2022.
(i) Commercial Loan Sales, Servicing, and Commercial Servicing Asset
The following table presents the details of loans serviced for others at the dates indicated:
 December 31, 2023December 31, 2022
 (Dollars in thousands)
Loans serviced for others with participating interest, gross loan balance$11,715 $17,375 
Loans serviced for others with participating interest, participation balance owned by Company (1)
2,466 3,791 
(1) Included in the balance of "Loans receivable" on the Consolidated Statements of Financial Condition.
The Company recognized $135,000, $217,000 and $320,000 of servicing income for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company's servicing asset at December 31, 2023 and December 31, 2022 was $128,000 and $192,000, respectively. There was no valuation allowance on the Company's servicing asset as of December 31, 2023 and December 31, 2022.
(j) Accrued interest receivable on loans receivable
Accrued interest receivable on loans receivable totaled $13.3 million and $11.3 million at December 31, 2023 and December 31, 2022, respectively and is excluded from the calculation of the ACL on loans as interest accrued, but not received, is reversed timely.