
	December 31,
	2022		2021
	(In thousands)
One-to-four family residential:
Permanent owner occupied	$	233,785	$	185,320
Permanent non-owner occupied	242,051		199,796
	475,836		385,116

Multifamily	126,895		130,146

Commercial real estate	407,882		419,417

Construction/land: (1)
One-to-four family residential	52,836		34,677
Multifamily	15,501		37,194
Commercial	—		6,189
Land	9,783		15,395
	78,120		93,455

Business	31,371		46,590
Consumer	62,055		44,812
Total loans	1,182,159		1,119,536
Less:
Deferred loan (costs) fees, net (2)	(151)		418
ALLL	15,227		15,657
Loans receivable, net	$	1,167,083	$	1,103,461

(1)Included in the construction/land category are “rollover” loans, which are loans that will convert upon completion of the construction period to permanent loans and be reclassified according to the underlying collateral. In addition, raw land or buildable lots, where the Company does not intend to finance the construction are included in the construction/land category. At December 31, 2022, the Company had $15.5 million of multifamily loans and $9.8 million of commercial land loans included in the construction/land loan portfolio that will be converted to permanent loans upon completion of the construction period. At December 31, 2021, total loans included in the construction/land loan portfolio to be converted to permanent loans included $37.2 million of multifamily loans, $12.9 million of commercial land loans, and $6.2 million of commercial real estate loans.

Concentrations of credit. Most of the Company’s lending activity occurs within the state of Washington. The primary market areas include King, and to a lesser extent, Pierce, Snohomish and Kitsap counties. At December 31, 2022, the Company’s loan portfolio was comprised of one-to-four family residential loans representing 40.3% of the total loan portfolio, commercial real estate and multifamily loans representing 34.4% and 10.7%, respectively, and construction/land loans representing 6.6% of the total loan portfolio. Consumer and business loans accounted for the remaining 8.0% of the total loan portfolio. During the years ended December 31, 2021 and 2020, the Company participated in the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), a guaranteed unsecured loan program enacted under the CARES Act to provide near-term relief to help small businesses impacted by COVID-19 sustain operations. Forgiveness

payments received from the SBA reduced the balance of PPP loans included in commercial business loans to $785,000 at December 31, 2022, all of which is fully guaranteed by the SBA. The Company’s five largest borrowing relationships had an aggregate total of $109.6 million at December 31, 2022, representing 9.3% of total loans receivable.


December 31, 2022
Fixed Rate			Adjustable Rate
Term to Maturity	Principal Balance		Term to Rate Adjustment	Principal Balance
(In thousands)
Due within one year	$	4,673	Due within one year (1)	$	329,764
After one year through three years	56,461		After one year through three years	72,362
After three years through five years	68,783		After three years through five years	224,852
After five years through ten years	104,646		After five years through ten years	108,557
Thereafter	212,061		Thereafter	—
	$	446,624		$	735,535


December 31, 2021
Fixed Rate			Adjustable Rate
Term to Maturity	Principal Balance		Term to Rate Adjustment	Principal Balance
(In thousands)
Due within one year	$	39,712	Due within one year (1)	$	284,631
After one year through three years	50,504		After one year through three years	74,706
After three years through five years	92,824		After three years through five years	177,607
After five years through ten years	118,310		After five years through ten years	103,909
Thereafter	177,333		Thereafter	—
	$	478,683		$	640,853

Our adjustable-rate loans are tied to various indexes, including LIBOR, the prime rate as published in The Wall Street Journal, and the FHLB. Certain adjustable‑rate loans have interest rate adjustment limitations and are generally indexed to the FHLB Long-Term Bullet advance rates published by the FHLB. Future market factors may affect the correlation of the interest rate adjustment with the rates paid on short‑term deposits that have been primarily utilized to fund these loans.

Credit Quality Indicators. The Company assigns a risk rating to all credit exposures based on the risk rating system designed to define the basic characteristics and identified risk elements of each credit extension. The Company utilizes a nine‑point risk rating system. A description of the general characteristics of the risk grades is as follows:

•Grades 1 through 5: These grades are considered to be “pass” credits. These include assets where there is virtually no credit risk, such as cash secured loans with funds on deposit with the Company. Pass credits also include credits that are on the Company’s watch list (grade 5), where the borrower exhibits potential weaknesses, which may, if not checked or corrected, negatively affect the borrower’s financial capacity and threaten their ability to fulfill debt obligations in the future.

•Grade 6: These credits, classified as ”special mention”, possess weaknesses that deserve management’s close attention. Special mention assets do not expose the Company to sufficient risk to warrant adverse classification in the substandard, doubtful or loss categories. If left uncorrected, these potential weaknesses may result in deterioration in the Company’s credit position at a future date.

•Grade 7: These credits, classified as “substandard”, present a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These credits have well defined weaknesses which jeopardize the orderly liquidation of the debt and are inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged.

•Grade 8: These credits are classified as “doubtful” have well defined weaknesses which make the full collection or liquidation of the loan highly questionable and improbable. This classification is used where significant risk exposures are perceived but the exact amount of the loss cannot yet be determined due to pending events.

•Grade 9: Assets classified as “loss” are considered uncollectible and cannot be justified as a viable asset for the Company. There is little or no prospect of near term recovery and no realistic strengthening action of significance is pending.


	December 31, 2022
	One-to-Four Family Residential		Multifamily		Commercial Real Estate		Construction/ Land		Business		Consumer		Total
	(In thousands)
Risk Rating:
Pass, grade 1-4	$	473,700	$	122,972	$	342,827	$	78,120	$	31,371	$	61,632	$	1,110,622
Pass, grade 5 (watch)	1,113		2,291		14,845		—		—		27		18,276
Special mention	1,023		—		4,668		—		—		203		5,894
Substandard	—		1,632		45,542		—		—		193		47,367
Total	$	475,836	$	126,895	$	407,882	$	78,120	$	31,371	$	62,055	$	1,182,159


	December 31, 2021
	One-to-Four Family Residential		Multifamily		Commercial Real Estate		Construction / Land		Business		Consumer		Total
	(In thousands)
Risk Rating:
Pass, grade 1-4	$	383,276	$	126,149	$	351,241	$	91,202	$	46,590	$	44,379	$	1,042,837
Pass, grade 5 (watch)	911		3,997		23,019		2,253		—		33		30,213
Special mention	929		—		11,127		—		—		221		12,277
Substandard	—		—		34,030		—		—		179		34,209
Total	$	385,116	$	130,146	$	419,417	$	93,455	$	46,590	$	44,812	$	1,119,536

ALLL. When the Company classifies problem assets as either substandard or doubtful, pursuant to Federal regulations, or identifies a loan where it is uncertain if the Company will be able to collect all amounts due according to the contractual terms of the loan, it may establish a specific reserve in an amount deemed prudent to address the risk specifically. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending

activities, but which, unlike specific allowances, have not been specifically allocated to the particular problem assets. When an insured institution classifies problem assets as a loss, pursuant to Federal regulations, it is required to charge-off such assets in the period in which they are deemed uncollectible. The determination as to the classification of the Company’s assets and the amount of valuation allowances is subject to review by bank regulators, who can require the establishment of additional loss allowances.

Loan grades are used by the Company to identify and track potential problem loans which do not rise to the levels described for substandard, doubtful, or loss. The grades for watch and special mention are assigned to loans which have been criticized based upon known characteristics such as periodic payment delinquency or stale financial information from the borrower and/or guarantors. Loans identified as criticized (watch and special mention) or classified (substandard, doubtful or loss) are subject to problem loan reporting every three months.

The following tables summarize changes in the ALLL and loan portfolio by type of loan and reserve method for the periods indicated. The analysis of pooled loans excluded PPP loans as these loans are fully guaranteed by the SBA.


	At or For the Year Ended December 31, 2022
	One-to-Four Family Residential		Multifamily		Commercial Real Estate		Construction/ Land		Business		Consumer		Total
ALLL:	(In thousands)
Beginning balance	$	3,214	$	1,279	$	6,615	$	2,064	$	1,112	$	1,373	$	15,657
Charge-offs	—		—		—		—		—		(37)		(37)
Recoveries	7		—		—		—		—		—		7
Provision (recapture of provision)	822		(69)		(1,218)		(347)		(164)		576		(400)
Ending balance	$	4,043	$	1,210	$	5,397	$	1,717	$	948	$	1,912	$	15,227

General reserve	$	4,030	$	1,210	$	5,397	$	1,717	$	948	$	1,912	$	15,214
Specific reserve	13		—		—		—		—		—		13

Loans:
Total Loans	$	475,836	$	126,895	$	407,882	$	78,120	$	31,371	$	62,055	$	1,182,159
Loans collectively evaluated for impairment (1) (3)	474,476		125,263		362,340		78,120		31,371		62,055		1,133,625
Loans individually evaluated for impairment (2)	1,360		1,632		45,542		—		—		—		48,534


	At or For the Year Ended December 31, 2021
	One-to-Four Family Residential		Multifamily		Commercial Real Estate		Construction/ Land		Business		Consumer		Total
ALLL:	(In thousands)
Beginning balance	$	3,181	$	1,366	$	6,127	$	2,189	$	1,242	$	1,069	$	15,174
Charge-offs	—		—		—		—		—		—		—
Recoveries	183		—		—		—		—		—		183
(Recapture) provision	(150)		(87)		488		(125)		(130)		304		300
Ending balance	$	3,214	$	1,279	$	6,615	$	2,064	$	1,112	$	1,373	$	15,657

General reserve	$	3,194	$	1,279	$	6,615	$	2,064	$	1,112	$	1,373	$	15,637
Specific reserve	20		—		—		—		—		—		20

Loans:
Total Loans	$	385,116	$	130,146	$	419,417	$	93,455	$	46,590	$	44,812	$	1,119,536
Loans collectively evaluated for impairment (1) (3)	383,009		130,146		385,387		93,455		46,590		44,812		1,083,399
Loans individually evaluated for impairment (2)	2,107		—		34,030		—		—		—		36,137


	Loans Past Due as of December 31, 2022
	30-59 Days		60-89 Days		90 Days and Greater		Total		Current		Total Loans (1)
	(In thousands)
Real estate:
One-to-four family residential:
Owner occupied	$	—	$	—	$	—	$	—	$	233,785	$	233,785
Non-owner occupied	27		—		—		27		242,024		242,051
Multifamily	—		—		—		—		126,895		126,895
Commercial real estate	—		—		—		—		407,882		407,882
Construction/land	—		—		—		—		78,120		78,120
Total real estate	27		—		—		27		1,088,706		1,088,733
Business	—		—		—		—		31,371		31,371
Consumer	—		—		193		193		61,862		62,055
Total	$	27	$	—	$	193	$	220	$	1,181,939	$	1,182,159


	Loans Past Due as of December 31, 2021
	30-59 Days		60-89 Days		90 Days and Greater		Total		Current		Total Loans (1)
	(In thousands)
Real estate:
One-to-four family residential:
Owner occupied	$	—	$	—	$	—	$	—	$	185,320	$	185,320
Non-owner occupied	—		—		—		—		199,796		199,796
Multifamily	—		—		—		—		130,146		130,146
Commercial real estate	—		—		—		—		419,417		419,417
Construction/land	—		—		—		—		93,455		93,455
Total real estate	—		—		—		—		1,028,134		1,028,134
Business	76		—		—		76		46,514		46,590
Consumer	179		—		—		179		44,633		44,812
Total	$	255	$	—	$	—	$	255	$	1,119,281	$	1,119,536


	December 31, 2022
	One-to-Four Family Residential		Multifamily		Commercial Real Estate		Construction / Land		Business		Consumer		Total
	(In thousands)
Performing (1)	$	475,836	$	126,895	$	407,882	$	78,120	$	31,371	$	61,862	$	1,181,966
Nonperforming	—		—		—		—		—		193		193
Total	$	475,836	$	126,895	$	407,882	$	78,120	$	31,371	$	62,055	$	1,182,159


	December 31, 2021
	One-to-Four Family Residential		Multifamily		Commercial Real Estate		Construction/ Land		Business		Consumer		Total
	(In thousands)
Performing (1)	$	385,116	$	130,146	$	419,417	$	93,455	$	46,590	$	44,812	$	1,119,536
Nonperforming (2)	—		—		—		—		—		—		—
Total	$	385,116	$	130,146	$	419,417	$	93,455	$	46,590	$	44,812	$	1,119,536

Impaired loans. The loan portfolio is constantly being monitored by management for delinquent loans and changes in the financial condition of each borrower. When an issue is identified with a borrower and it is determined that the loan needs to be classified as nonperforming and/or impaired, an evaluation of the collateral is performed prior to the end of the financial reporting period and, if necessary, an appraisal is ordered in accordance with the Company’s appraisal policy guidelines. Based on this evaluation, any additional provision for loan loss or charge-offs that may be needed is recorded prior to the end of the financial reporting period.


	At December 31, 2022
	Recorded Investment (1)		Unpaid Principal Balance (2)		Related Allowance
	(In thousands)
Loans with no related allowance:
One-to-four family residential:
Owner occupied	$	174	$	175	$	—
Non-owner occupied	188		188		—
Multifamily	1,632		1,632		—
Commercial real estate	45,542		45,542		—


Total	47,536		47,537		—
Loans with an allowance:
One-to-four family residential:
Owner occupied	486		533		12
Non-owner occupied	512		512		1




Total	998		1,045		13
Total impaired loans:
One-to-four family residential:
Owner occupied	660		708		12
Non-owner occupied	700		700		1
Multifamily	1,632		1,632		—
Commercial real estate	45,542		45,542		—


Total	$	48,534	$	48,582	$	13


	At December 31, 2021
	Recorded Investment (1)		Unpaid Principal Balance (2)		Related Allowance
	(In thousands)
Loans with no related allowance:
One-to-four family residential:
Owner occupied	$	178	$	185	$	—
Non-owner occupied	915		915		—

Commercial real estate	34,030		34,030		—


Total	35,123		35,130		—
Loans with an allowance:
One-to-four family residential:
Owner occupied	494		541		19
Non-owner occupied	520		520		1




Total	1,014		1,061		20
Total impaired loans:
One-to-four family residential:
Owner occupied	672		726		19
Non-owner occupied	1,435		1,435		1

Commercial real estate	34,030		34,030		—


Total	$	36,137	$	36,191	$	20


	Year Ended December 31,
	2022				2021
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Loans with no related allowance:
One-to-four family residential:
Owner occupied	$	184	$	11	$	217	$	12
Non-owner occupied	712		23		947		62
Multifamily	1,317		69		828		—
Commercial real estate	41,102		2,054		23,994		1,329


Total	43,315		2,157		25,986		1,403

Loans with an allowance:
One-to-four family residential:
Owner occupied	490		28		498		31
Non-owner occupied	516		36		756		37




Total	1,006		64		1,254		68

Total impaired loans:
One-to-four family residential:
Owner occupied	674		39		715		43
Non-owner occupied	1,228		59		1,703		99
Multifamily	1,317		69		828		—
Commercial real estate	41,102		2,054		23,994		1,329


Total	$	44,321	$	2,221	$	27,240	$	1,471

The accrual status of a loan may change after it has been classified as a TDR. Management considers the following in determining the accrual status of restructured loans: (1) if the loan was on accrual status prior to the restructuring, the borrower has demonstrated performance under the previous terms, and a credit evaluation shows the borrower’s capacity to continue to perform under the restructured terms (both principal and interest payments), the loan will remain on accrual at the time of the restructuring; (2) if the loan was on nonaccrual status before the restructuring, and the Company’s credit evaluation shows the borrower’s capacity to meet the restructured terms, the loan would remain as nonaccrual for a minimum of six months until the borrower has demonstrated a reasonable period of sustained repayment performance (thereby providing reasonable assurance as to the ultimate collection of principal and interest in full under the modified terms).

There were no TDR modifications during the year ended December 31, 2022. The following table presents TDR modifications during the year ended December 31, 2021, and the recorded investment prior to the modification and after the modification:


	Year Ended December 31, 2021
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

TDRs that occurred during the period:
One-to-four family residential:


Advancement of maturity date	3	$	1,353	$	1,353
Commercial real estate:


Advancement of maturity date	1	1,241		1,241


Total	4	$	2,594	$	2,594

The CARES Act, signed into law on March 27, 2020, provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. generally up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. To qualify as an eligible loan under the CARES Act, as amended by the CAA, 2021, a loan modification must be (1) related to the COVID-19 pandemic; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and January 1, 2022. At December 31, 2022, the Company had no loans that were on active short-term deferrals under the CARES Act and related regulatory guidance. Loan modifications made in accordance with the CARES Act are still subject to an impairment evaluation.

At December 31, 2022 and 2021, the Company had no commitments to extend additional credit to borrowers whose loan terms have been modified in a TDR. All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the ALLL.

There were no charge-offs to the ALLL for the years ended December 31, 2022 and 2021, related to TDRs. For the years ended December 31, 2022 and 2021, there were no payment defaults on loans modified as TDRs within the previous 12 months.