Loans and Leases

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Loans and Leases

LOANS AND LEASES

Our loans are carried at the principal amount outstanding, net of deferred fees and costs, and in the case of acquired and purchased loans, net of purchase discounts and premiums. Deferred fees and costs and purchase discounts and premiums on acquired non-impaired loans are recognized as an adjustment to interest income over the contractual life of the loans primarily using the effective interest method or taken into income when the related loans are paid off or included in the carrying amount of loans that are sold.

Loans and Leases Held for Investment

The following table summarizes the composition of our loans and leases held for investment as of the dates indicated:

	September 30,			December 31,
	2019			2018
	(In thousands)
Real estate mortgage	$	7,908,097		$	7,933,859
Real estate construction and land	2,581,317			2,262,710
Commercial	7,898,042			7,428,500
Consumer	408,555			401,296
Total gross loans and leases held for investment	18,796,011			18,026,365
Deferred fees, net	(60,468		)	(68,652		)
Total loans and leases held for investment, net of deferred fees	18,735,543			17,957,713
Allowance for loan and lease losses	(138,552		)	(132,472		)
Total loans and leases held for investment, net	$	18,596,991		$	17,825,241

The following tables present an aging analysis of our loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated:

	September 30, 2019
	30 - 89		90 or More
	Days		Days		Total
	Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Real estate mortgage:
Commercial	$	2,867	$	7,137	$	10,004	$	4,290,562	$	4,300,566
Income producing and other residential	4,551		469		5,020		3,591,338		3,596,358
Total real estate mortgage	7,418		7,606		15,024		7,881,900		7,896,924
Real estate construction and land:
Commercial	—		—		—		1,009,362		1,009,362
Residential	2,622		—		2,622		1,539,490		1,542,112
Total real estate construction and land	2,622		—		2,622		2,548,852		2,551,474
Commercial:
Asset-based	48		662		710		3,810,031		3,810,741
Venture capital	—		—		—		2,209,649		2,209,649
Other commercial	6,742		2,241		8,983		1,849,184		1,858,167
Total commercial	6,790		2,903		9,693		7,868,864		7,878,557
Consumer	795		408		1,203		407,385		408,588
Total	$	17,625	$	10,917	$	28,542	$	18,707,001	$	18,735,543

	December 31, 2018
	30 - 89		90 or More
	Days		Days		Total
	Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Real estate mortgage:
Commercial	$	3,487	$	7,541	$	11,028	$	4,813,270	$	4,824,298
Income producing and other residential	1,557		476		2,033		3,091,810		3,093,843
Total real estate mortgage	5,044		8,017		13,061		7,905,080		7,918,141
Real estate construction and land:
Commercial	—		442		442		912,141		912,583
Residential	1,527		—		1,527		1,319,546		1,321,073
Total real estate construction and land	1,527		442		1,969		2,231,687		2,233,656
Commercial:
Asset-based	47		646		693		3,304,728		3,305,421
Venture capital	4,705		—		4,705		2,034,043		2,038,748
Other commercial	5,181		1,285		6,466		2,053,960		2,060,426
Total commercial	9,933		1,931		11,864		7,392,731		7,404,595
Consumer	581		333		914		400,407		401,321
Total	$	17,085	$	10,723	$	27,808	$	17,929,905	$	17,957,713

It is our policy to discontinue accruing interest when principal or interest payments are past due 90 days or more (unless the loan is both well secured and in the process of collection) or when, in the opinion of management, there is a reasonable doubt as to the collectability of a loan or lease in the normal course of business. Interest income on nonaccrual loans is recognized only to the extent cash is received and the principal balance of the loan is deemed collectable.

The following table presents our nonaccrual and performing loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated:  

	September 30, 2019						December 31, 2018
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
	(In thousands)
Real estate mortgage:
Commercial	$	19,515	$	4,281,051	$	4,300,566	$	15,321	$	4,808,977	$	4,824,298
Income producing and other residential	2,868		3,593,490		3,596,358		2,524		3,091,319		3,093,843
Total real estate mortgage	22,383		7,874,541		7,896,924		17,845		7,900,296		7,918,141
Real estate construction and land:
Commercial	377		1,008,985		1,009,362		442		912,141		912,583
Residential	—		1,542,112		1,542,112		—		1,321,073		1,321,073
Total real estate construction and land	377		2,551,097		2,551,474		442		2,233,214		2,233,656
Commercial:
Asset-based	33,015		3,777,726		3,810,741		32,324		3,273,097		3,305,421
Venture capital	20,131		2,189,518		2,209,649		20,299		2,018,449		2,038,748
Other commercial	22,554		1,835,613		1,858,167		7,380		2,053,046		2,060,426
Total commercial	75,700		7,802,857		7,878,557		60,003		7,344,592		7,404,595
Consumer	653		407,935		408,588		1,043		400,278		401,321
Total	$	99,113	$	18,636,430	$	18,735,543	$	79,333	$	17,878,380	$	17,957,713

At September 30, 2019, nonaccrual loans and leases totaled $99.1 million and included $10.9 million of loans and leases 90 or more days past due, $6.3 million of loans and leases 30 to 89 days past due, and $81.9 million of loans and leases current with respect to contractual payments that were placed on nonaccrual status based on management’s judgment regarding their collectability. Nonaccrual loans and leases totaled $79.3 million at December 31, 2018, including $10.7 million of loans and leases 90 or more days past due, $6.6 million of loans and leases 30 to 89 days past due, and $62.0 million of current loans and leases that were placed on nonaccrual status based on management’s judgment regarding their collectability.

As of September 30, 2019, our three largest loan relationships on nonaccrual status had an aggregate carrying value of $53.4 million and represented 54% of total nonaccrual loans and leases.

The following tables present the credit risk rating categories for loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated. Classified loans and leases are those with a credit risk rating of either substandard or doubtful.

	September 30, 2019
	Classified		Special Mention		Pass		Total
	(In thousands)
Real estate mortgage:
Commercial	$	34,952	$	39,309	$	4,226,305	$	4,300,566
Income producing and other residential	8,670		1,005		3,586,683		3,596,358
Total real estate mortgage	43,622		40,314		7,812,988		7,896,924
Real estate construction and land:
Commercial	377		—		1,008,985		1,009,362
Residential	—		837		1,541,275		1,542,112
Total real estate construction and land	377		837		2,550,260		2,551,474
Commercial:
Asset-based	50,634		41,974		3,718,133		3,810,741
Venture capital	34,489		66,255		2,108,905		2,209,649
Other commercial	58,707		117,931		1,681,529		1,858,167
Total commercial	143,830		226,160		7,508,567		7,878,557
Consumer	778		614		407,196		408,588
Total	$	188,607	$	267,925	$	18,279,011	$	18,735,543

	December 31, 2018
	Classified		Special Mention		Pass		Total
	(In thousands)
Real estate mortgage:
Commercial	$	57,734	$	74,785	$	4,691,779	$	4,824,298
Income producing and other residential	10,521		968		3,082,354		3,093,843
Total real estate mortgage	68,255		75,753		7,774,133		7,918,141
Real estate construction and land:
Commercial	442		7,041		905,100		912,583
Residential	—		1,527		1,319,546		1,321,073
Total real estate construction and land	442		8,568		2,224,646		2,233,656
Commercial:
Asset-based	45,957		48,338		3,211,126		3,305,421
Venture capital	28,731		77,588		1,932,429		2,038,748
Other commercial	92,526		50,136		1,917,764		2,060,426
Total commercial	167,214		176,062		7,061,319		7,404,595
Consumer	1,199		1,015		399,107		401,321
Total	$	237,110	$	261,398	$	17,459,205	$	17,957,713

Nonaccrual loans and leases and performing TDRs are considered impaired for reporting purposes. TDRs are a result of rate reductions, term extensions, fee concessions, and debt forgiveness, or a combination thereof.

The following table presents the composition of our impaired loans and leases held for investment, net of deferred fees, by loan portfolio segment as of the dates indicated:

	September 30, 2019						December 31, 2018
					Total						Total
	Nonaccrual				Impaired		Nonaccrual				Impaired
	Loans				Loans		Loans				Loans
	and		Performing		and		and		Performing		and
	Leases		TDRs		Leases		Leases		TDRs		Leases
	(In thousands)
Real estate mortgage	$	22,383	$	10,292	$	32,675	$	17,845	$	11,484	$	29,329
Real estate construction and land	377		4,980		5,357		442		5,420		5,862
Commercial	75,700		980		76,680		60,003		692		60,695
Consumer	653		77		730		1,043		105		1,148
Total	$	99,113	$	16,329	$	115,442	$	79,333	$	17,701	$	97,034

The following tables present information regarding our impaired loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of and for the dates indicated:

	September 30, 2019						December 31, 2018
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
Impaired Loans and Leases	Investment		Balance		Allowance		Investment		Balance		Allowance
	(In thousands)
With An Allowance Recorded:
Real estate mortgage:
Commercial	$	485	$	485	$	71	$	1,736	$	1,648	$	170
Income producing and other residential	2,032		2,030		177		2,569		2,563		247
Commercial:
Asset based	500		500		500		—		—		—
Venture capital	12,379		13,570		6,177		11,621		13,255		3,141
Other commercial	16,969		18,044		2,405		473		482		473
With No Related Allowance Recorded:
Real estate mortgage:
Commercial	$	22,503	$	37,568			$	17,783	$	32,035
Income producing and other residential	7,655		10,058				7,241		9,425
Real estate construction and land:
Commercial	5,357		5,402				5,862		5,870
Commercial:
Asset-based	32,515		50,633				32,324		38,100
Venture capital	7,752		39,440				8,678		41,335
Other commercial	6,565		24,868				7,599		25,740
Consumer	730		896				1,148		1,470
Total Loans and Leases With and
Without an Allowance Recorded:
Real estate mortgage	$	32,675	$	50,141	$	248	$	29,329	$	45,671	$	417
Real estate construction and land	5,357		5,402		—		5,862		5,870		—
Commercial	76,680		147,055		9,082		60,695		118,912		3,614
Consumer	730		896		—		1,148		1,470		—
Total	$	115,442	$	203,494	$	9,330	$	97,034	$	171,923	$	4,031

	Three Months Ended September 30,
	2019				2018
	Weighted		Interest		Weighted		Interest
	Average		Income		Average		Income
Impaired Loans and Leases	Balance(1)		Recognized		Balance(1)		Recognized
	(In thousands)
With An Allowance Recorded:
Real estate mortgage:
Commercial	$	485	$	8	$	1,781	$	18
Income producing and other residential	2,031		15		2,494		21
Commercial:
Asset-based	163		—		—		—
Venture capital	12,343		—		28,322		—
Other commercial	2,181		9		1,360		—
With No Related Allowance Recorded:
Real estate mortgage:
Commercial	$	19,745	$	56	$	34,155	$	129
Income producing and other residential	7,615		56		7,906		45
Real estate construction and land:
Commercial	5,357		98		5,533		95
Residential	—		—		—		—
Commercial:
Asset-based	30,880		—		34,618		—
Venture capital	7,752		—		1,421		—
Other commercial	6,096		6		8,108		25
Consumer	568		1		383		2
Total Loans and Leases With and
Without an Allowance Recorded:
Real estate mortgage	$	29,876	$	135	$	46,336	$	213
Real estate construction and land	5,357		98		5,533		95
Commercial	59,415		15		73,829		25
Consumer	568		1		383		2
Total	$	95,216	$	249	$	126,081	$	335

_________________________

(1) For loans and leases reported as impaired at September 30, 2019 and 2018, amounts were calculated based on the period of time such loans and leases were impaired during the reported period.

	Nine Months Ended September 30,
	2019				2018
	Weighted		Interest		Weighted		Interest
	Average		Income		Average		Income
Impaired Loans and Leases	Balance(1)		Recognized		Balance(1)		Recognized
	(In thousands)
With An Allowance Recorded:
Real estate mortgage:
Commercial	$	485	$	24	$	1,781	$	55
Income producing and other residential	2,031		44		2,494		62
Commercial:
Asset-based	55		—		—		—
Venture capital	9,201		—		17,459		—
Other commercial	1,125		26		688		—
With No Related Allowance Recorded:
Real estate mortgage:
Commercial	$	16,729	$	162	$	32,098	$	376
Income producing and other residential	7,488		163		7,845		132
Real estate construction and land:
Commercial	5,357		290		5,533		283
Commercial:
Asset-based	29,989		—		34,618		—
Venture capital	6,173		—		1,330		—
Other commercial	5,606		22		7,417		70
Consumer	493		4		373		6
Total Loans and Leases With and
Without an Allowance Recorded:
Real estate mortgage	$	26,733	$	393	$	44,218	$	625
Real estate construction and land	5,357		290		5,533		283
Commercial	52,149		48		61,512		70
Consumer	493		4		373		6
Total	$	84,732	$	735	$	111,636	$	984

_________________________

(1) For loans and leases reported as impaired at September 30, 2019 and 2018, amounts were calculated based on the period of time such loans and leases were impaired during the reported period.

The following table presents our troubled debt restructurings of loans held for investment by loan portfolio segment and class for the periods indicated:

	Three Months Ended September 30,
	2019					2018
		Pre-		Post-			Pre-		Post-
		Modification		Modification			Modification		Modification
	Number	Outstanding		Outstanding		Number	Outstanding		Outstanding
	of	Recorded		Recorded		of	Recorded		Recorded
Troubled Debt Restructurings	Loans	Investment		Investment		Loans	Investment		Investment
	(Dollars in thousands)
Real estate mortgage:
Commercial	—	$	—	$	—	4	$	2,889	$	712
Income producing and other residential	2	495		495		5	912		912
Commercial:
Asset-based	—	—		—		4	28,947		33,947
Venture capital	1	—		—		5	23,501		23,501
Other commercial	3	99		99		5	1,487		1,115
Total	6	$	594	$	594	23	$	57,736	$	60,187

	Nine Months Ended September 30,
	2019					2018
		Pre-		Post-			Pre-		Post-
		Modification		Modification			Modification		Modification
	Number	Outstanding		Outstanding		Number	Outstanding		Outstanding
	of	Recorded		Recorded		of	Recorded		Recorded
Troubled Debt Restructurings	Loans	Investment		Investment		Loans	Investment		Investment
	(Dollars in thousands)
Real estate mortgage:
Commercial	1	$	37	$	—	4	$	2,889	$	712
Income producing and other residential	7	1,280		1,280		8	2,616		1,557
Commercial:
Asset-based	1	620		620		4	28,947		33,947
Venture capital	11	16,076		16,214		9	28,737		28,737
Other commercial	14	792		792		9	13,301		12,929
Consumer	—	—		—		1	27		27
Total	34	$	18,805	$	18,906	35	$	76,517	$	77,909

During the three months ended September 30, 2019, there were three other commercial loans totaling $133,000 and one income producing and other residential loan for $254,000 restructured in the preceding 12-month period that subsequently defaulted. During the nine months ended September 30, 2019, there were two venture capital loans totaling $441,000, three other commercial loans totaling $133,000, and one income producing and other residential loan for $254,000 restructured in the preceding 12-month period that subsequently defaulted.

During the three months ended September 30, 2018, there were no loans restructured in the preceding 12-month period that subsequently defaulted. During the nine months ended September 30, 2018, there were no loans restructured in the preceding 12-month period that subsequently defaulted.

Leases Receivable

We provide equipment financing to our customers primarily with operating and direct financing leases. For direct financing leases, lease receivables are recorded on the balance sheet but the leased equipment is not, although we generally retain legal title to the leased equipment until the end of each lease. Direct financing leases are stated at the net amount of minimum lease payments receivable, plus any unguaranteed residual value, less the amount of unearned income and net acquisition discount at the reporting date. Direct lease origination costs are amortized using the effective interest method over the life of the leases. Direct financing leases are subject to our accounting for allowance for loan and lease losses. See Note 8. Leases for information regarding operating leases where we are the lessor.

The following table provides the components of leases receivable income for the period indicated:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
	(In thousands)
Component of leases receivable income:
Interest income on net investments in leases	$	2,648	$	8,674

The following table presents the components of leases receivable as of the date indicated:

	September 30, 2019
	(In thousands)
Net investment in direct financing leases:
Lease payments receivable	$	166,692
Unguaranteed residual assets	21,315
Deferred fees and other	747
Aggregate net investment in leases	$	188,754

The following table presents maturities of leases receivable as of the date indicated:

	September 30, 2019
	(In thousands)
Period Ending December 31,
2019	$	17,353
2020	72,465
2021	51,242
2022	19,819
2023	11,735
Thereafter	9,105
Total undiscounted cash flows	181,719
Less: Unearned income	(15,027		)
Present value of lease payments	$	166,692

Allowance for Loan and Lease Losses

The following tables present a summary of the activity in the allowance for loan and lease losses on loans and leases held for investment by loan portfolio segment for the periods indicated:

	Three Months Ended September 30, 2019
				Real Estate
	Real Estate			Construction
	Mortgage			and Land		Commercial			Consumer			Total
	(In thousands)
Allowance for Loan and Lease Losses:
Balance, beginning of period	$	46,826		$	26,378	$	59,401		$	2,432		$	135,037
Charge-offs	(120		)	—		(6,021		)	(360		)	(6,501		)
Recoveries	95			—		1,898			23			2,016
Net charge-offs	(25		)	—		(4,123		)	(337		)	(4,485		)
(Negative provision) provision	(1,655		)	683		8,907			65			8,000
Balance, end of period	$	45,146		$	27,061	$	64,185		$	2,160		$	138,552

	Nine Months Ended September 30, 2019
				Real Estate
	Real Estate			Construction
	Mortgage			and Land			Commercial			Consumer			Total
	(In thousands)
Allowance for Loan and Lease Losses:
Balance, beginning of period	$	46,021		$	28,209		$	56,360		$	1,882		$	132,472
Charge-offs	(850		)	—			(25,951		)	(802		)	(27,603		)
Recoveries	478			—			11,084			121			11,683
Net charge-offs	(372		)	—			(14,867		)	(681		)	(15,920		)
(Negative provision) provision	(503		)	(1,148		)	22,692			959			22,000
Balance, end of period	$	45,146		$	27,061		$	64,185		$	2,160		$	138,552
Ending Allowance by
Impairment Methodology:
Individually evaluated for impairment	$	248		$	—		$	9,082		$	—		$	9,330
Collectively evaluated for impairment	$	44,898		$	27,061		$	55,103		$	2,160		$	129,222
Ending Loans and Leases by
Impairment Methodology:
Individually evaluated for impairment	$	29,808		$	5,357		$	75,455		$	—		$	110,620
Collectively evaluated for impairment	7,867,116			2,546,117			7,803,102			408,588			18,624,923
Ending balance	$	7,896,924		$	2,551,474		$	7,878,557		$	408,588		$	18,735,543

	Three Months Ended September 30, 2018
				Real Estate
	Real Estate			Construction
	Mortgage			and Land			Commercial			Consumer			Total
	(In thousands)
Allowance for Loan and Lease Losses:
Balance, beginning of period	$	45,467		$	26,210		$	58,806		$	1,656		$	132,139
Charge-offs	(726		)	—			(2,372		)	(210		)	(3,308		)
Recoveries	222			23			1,303			41			1,589
Net (charge-offs) recoveries	(504		)	23			(1,069		)	(169		)	(1,719		)
Provision (negative provision)	1,394			(47		)	9,907			246			11,500
Balance, end of period	$	46,357		$	26,186		$	67,644		$	1,733		$	141,920

	Nine Months Ended September 30, 2018
				Real Estate
	Real Estate			Construction
	Mortgage			and Land		Commercial			Consumer			Total
	(In thousands)
Allowance for Loan and Lease Losses:
Balance, beginning of period (1)	$	40,051		$	13,055	$	84,022		$	2,328		$	139,456
Charge-offs	(8,071		)	—		(25,321		)	(304		)	(33,696		)
Recoveries	1,999			49		7,702			136			9,886
Net (charge-offs) recoveries	(6,072		)	49		(17,619		)	(168		)	(23,810		)
Provision (negative provision)	12,378			13,082		1,241			(427		)	26,274
Balance, end of period	$	46,357		$	26,186	$	67,644		$	1,733		$	141,920
Ending Allowance by
Impairment Methodology:
Individually evaluated for impairment	$	496		$	—	$	20,363		$	—		$	20,859
Collectively evaluated for impairment	$	45,861		$	26,186	$	47,281		$	1,733		$	121,061
Ending Loans and Leases by
Impairment Methodology:
Individually evaluated for impairment	$	44,985		$	5,533	$	79,493		$	—		$	130,011
Collectively evaluated for impairment	7,633,675			1,995,424		7,072,565			398,471			17,100,135
Ending balance	$	7,678,660		$	2,000,957	$	7,152,058		$	398,471		$	17,230,146

_______________________________________ 

(1) The allowance for loan losses related to PCI loans of $6.4 million as of December 31, 2017 is reflected in the beginning balance of the allowance for loan and lease losses for the nine months ended September 30, 2018.

Allowance for Credit Losses

The allowance for credit losses is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. The reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets. The following tables present a summary of the activity in the allowance for loan and lease losses and reserve for unfunded loan commitments for the periods indicated:

	Three Months Ended September 30, 2019
	Allowance for			Reserve for			Total
	Loan and			Unfunded Loan			Allowance for
	Lease Losses			Commitments			Credit Losses
	(In thousands)
Balance, beginning of period	$	135,037		$	34,861		$	169,898
Charge-offs	(6,501		)	—			(6,501		)
Recoveries	2,016			—			2,016
Net charge-offs	(4,485		)	—			(4,485		)
Provision (negative provision)	8,000			(1,000		)	7,000
Balance, end of period	$	138,552		$	33,861		$	172,413

	Nine Months Ended September 30, 2019
	Allowance for			Reserve for			Total
	Loan and			Unfunded Loan			Allowance for
	Lease Losses			Commitments			Credit Losses
	(In thousands)
Balance, beginning of period	$	132,472		$	36,861		$	169,333
Charge-offs	(27,603		)	—			(27,603		)
Recoveries	11,683			—			11,683
Net charge-offs	(15,920		)	—			(15,920		)
Provision (negative provision)	22,000			(3,000		)	19,000
Balance, end of period	$	138,552		$	33,861		$	172,413

	Three Months Ended September 30, 2018
	Allowance for			Reserve for		Total
	Loan and			Unfunded Loan		Allowance for
	Lease Losses			Commitments		Credit Losses
	(In thousands)
Balance, beginning of period	$	132,139		$	35,361	$	167,500
Charge-offs	(3,308		)	—		(3,308		)
Recoveries	1,589			—		1,589
Net charge-offs	(1,719		)	—		(1,719		)
Provision	11,500			—		11,500
Balance, end of period	$	141,920		$	35,361	$	177,281

	Nine Months Ended September 30, 2018
	Allowance for			Reserve for		Total
	Loan and			Unfunded Loan		Allowance for
	Lease Losses			Commitments		Credit Losses
	(In thousands)
Balance, beginning of period (1)	$	139,456		$	28,635	$	168,091
Charge-offs	(33,696		)	—		(33,696		)
Recoveries	9,886			—		9,886
Net charge-offs	(23,810		)	—		(23,810		)
Provision	26,274			6,726		33,000
Balance, end of period	$	141,920		$	35,361	$	177,281

_______________________________________ 

(1)

The allowance for loan losses related to PCI loans of $6.4 million as of December 31, 2017 is reflected in the beginning balance of the allowance for loan and lease losses for the nine months ended September 30, 2018.