NOTE 3 - LOANS/LEASES RECEIVABLE (Tables)

3 Months Ended

Mar. 31, 2019

	As of March 31,		As of December 31,
	2019		2018
	(dollars in thousands)

C&I loans *	$	1,479,247	$	1,429,410
CRE loans
Owner-occupied CRE		488,827		500,654
Commercial construction, land development, and other land		267,830		236,787
Other non owner-occupied CRE		1,034,188		1,028,670
		1,790,845		1,766,111

Direct financing leases **		108,543		117,969
Residential real estate loans ***		288,502		290,759
Installment and other consumer loans		123,087		119,381
		3,790,224		3,723,630
Plus deferred loan/lease origination costs, net of fees		9,208		9,124
		3,799,432		3,732,754
Less allowance		(41,164)		(39,847)
	$	3,758,268	$	3,692,907
** Direct financing leases:
Net minimum lease payments to be received	$	119,914	$	130,371
Estimated unguaranteed residual values of leased assets		745		828
Unearned lease/residual income		(12,116)		(13,230)
		108,543		117,969
Plus deferred lease origination costs, net of fees		3,158		3,642
		111,701		121,611
Less allowance		(1,606)		(1,792)
	$	110,095	$	119,819

* Includes equipment financing agreements outstanding at m2, totaling $112.8 million and $103.4 million as of March 31, 2019 and December 31, 2018, respectively.

** Management performs an evaluation of the estimated unguaranteed residual values of leased assets on an annual basis, at a minimum. The evaluation consists of discussions with reputable and current vendors, which is combined with management's expertise and understanding of the current states of particular industries to determine informal valuations of the equipment. As necessary and where available, management will utilize valuations by independent appraisers. The large majority of leases with residual values contain a lease options rider, which requires the lessee to pay the residual value directly, finance the payment of the residual value, or extend the lease term to pay the residual value. In these cases, the residual value is protected and the risk of loss is minimal. There were no losses related to residual values for the three months ended March 31, 2019 and 2018.

*** Includes residential real estate loans held for sale totaling $2.0 million and $1.3 million as of March 31, 2019 and December 31, 2018, respectively.

Changes in accretable yield fo acquired loans

	Three months ended March 31, 2019
	PCI		Performing
	Loans		Loans		Total
	(dollars in thousands)

Balance at the beginning of the period	$	(667)	$	(9,656)	$	(10,324)
Accretion recognized		348		826		1,174
Balance at the end of the period	$	(319)	$	(8,830)	$	(9,150)


	Three months ended March 31, 2018
	PCI		Performing
	Loans		Loans		Total
	(dollars in thousands)

Balance at the beginning of the period	$	(191)	$	(6,280)	$	(6,471)
Accretion recognized		34		621		655
Balance at the end of the period	$	(157)	$	(5,659)	$	(5,816)

Aging of the loan/lease portfolio by classes of loans/leases

	As of March 31, 2019
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total
	(dollars in thousands)

C&I	$	1,466,599		$	1,479		$	7,171		$	—		$	3,998		$	1,479,247
CRE
Owner-Occupied CRE		487,774			238			613			—			202			488,827
Commercial Construction, Land Development, and Other Land		266,591			699			236			—			304			267,830
Other Non Owner-Occupied CRE		1,028,663			299			400			—			4,826			1,034,188
Direct Financing Leases		105,451			1,151			196			—			1,745			108,543
Residential Real Estate		281,729			4,993			100			—			1,680			288,502
Installment and Other Consumer		121,943			406			26			61			651			123,087
	$	3,758,750		$	9,265		$	8,742		$	61		$	13,406		$	3,790,224

As a percentage of total loan/lease portfolio		99.18	%		0.24	%		0.23	%		0.00	%		0.35	%		100.00	%


	As of December 31, 2018
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total
	(dollars in thousands)

C&I	$	1,423,406		$	930		$	597		$	389		$	4,088		$	1,429,410
CRE
Owner-Occupied CRE		500,138			—			193			107			216			500,654
Commercial Construction, Land Development, and Other Land		234,704			1,764			—			—			319			236,787
Other Non Owner-Occupied CRE		1,022,664			484			—			—			5,522			1,028,670
Direct Financing Leases		114,078			1,642			488			—			1,761			117,969
Residential Real Estate		284,844			3,877			206			89			1,743			290,759
Installment and Other Consumer		118,343			356			24			47			611			119,381
	$	3,698,177		$	9,053		$	1,508		$	632		$	14,260		$	3,723,630

As a percentage of total loan/lease portfolio		99.32	%		0.24	%		0.04	%		0.02	%		0.38	%		100.00	%

NPLs by classes of loans/leases

	As of March 31, 2019
	Accruing Past
	Due 90 Days or		Nonaccrual						Percentage of
Classes of Loans/Leases	More*		Loans/Leases*		Accruing TDRs		Total NPLs		Total NPLs
	(dollars in thousands)

C&I	$	—	$	3,998	$	551	$	4,549	26.35	%
CRE
Owner-Occupied CRE		—		202		104		306	1.77	%
Commercial Construction, Land Development, and Other Land		—		304		—		304	1.76	%
Other Non Owner-Occupied CRE		—		4,826		2,984		7,810	45.25	%
Direct Financing Leases		—		1,745		155		1,900	11.01	%
Residential Real Estate		—		1,680		—		1,680	9.73	%
Installment and Other Consumer		61		651		—		712	4.12	%
	$	61	$	13,406	$	3,794	$	17,261	100.00	%

* Nonaccrual loans/leases included $1.5 million of TDRs, including $249 thousand in C&I loans, $679 thousand in CRE loans, $279 thousand in direct financing leases, $291 thousand in residential real estate loans, and $3 thousand in installment loans.


	As of December 31, 2018
	Accruing Past
	Due 90 Days or		Nonaccrual						Percentage of
Classes of Loans/Leases	More*		Loans/Leases **		Accruing TDRs		Total NPLs		Total NPLs
		(dollars in thousands)

C&I	$	389	$	4,088	$	454	$	4,931	26.58	%
CRE
Owner-Occupied CRE		107		216		—		323	1.74	%
Commercial Construction, Land Development, and Other Land		—		319		—		319	1.72	%
Other Non Owner-Occupied CRE		—		5,522		2,984		8,506	45.86	%
Direct Financing Leases		—		1,761		111		1,872	10.09	%
Residential Real Estate		89		1,743		100		1,932	10.41	%
Installment and Other Consumer		47		611		9		667	3.60	%
	$	632	$	14,260	$	3,658	$	18,550	100.00	%

* As of December 31, 2018 accruing past due 90 days or more included $496 thousand of TDRs, including $389 thousand in C&I loans and $107 thousand in CRE loans.

** Nonaccrual loans/leases included $2.3 million of TDRs, including $265 thousand in C&I loans, $1.4 million in CRE loans, $321 thousand in direct financing leases, $344 thousand in residential real estate loans, and $3 thousand in installment loans.

Allowance for credit losses on financing receivables

Changes in the allowance by portfolio segment for the three months ended March 31, 2019 and 2018, respectively, are presented as follows:


	Three Months Ended March 31, 2019
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)

Balance, beginning	$	16,420	$	17,719	$	1,792	$	2,557	$	1,359	$	39,847
Provisions (credits) charged to expense		1,007		534		445		(18)		166		2,134
Loans/leases charged off		(334)		—		(652)		—		(74)		(1,060)
Recoveries on loans/leases previously charged off		166		50		21		—		6		243
Balance, ending	$	17,259	$	18,303	$	1,606	$	2,539	$	1,457	$	41,164


	Three Months Ended March 31, 2018
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)

Balance, beginning	$	14,323	$	13,963	$	2,382	$	2,466	$	1,222	$	34,356
Provisions (credits) charged to expense		808		965		605		(39)		201		2,540
Loans/leases charged off		(95)		—		(284)		(52)		(5)		(436)
Recoveries on loans/leases previously charged off		30		10		27		—		6		73
Balance, ending	$	15,066	$	14,938	$	2,730	$	2,375	$	1,424	$	36,533

The allowance by impairment evaluation and by portfolio segment as of March 31, 2019 and December 31, 2018 is presented as follows:


	As of March 31, 2019
							Direct Financing			Residential Real			Installment and
	C&I			CRE			Leases			Estate			Other Consumer			Total
	(dollars in thousands)

Allowance for impaired loans/leases	$	841		$	2,113		$	142		$	236		$	107		$	3,439
Allowance for nonimpaired loans/leases		16,418			16,190			1,464			2,303			1,350			37,725
	$	17,259		$	18,303		$	1,606		$	2,539		$	1,457		$	41,164

Impaired loans/leases	$	4,301		$	10,155		$	2,185		$	1,693		$	925		$	19,259
Nonimpaired loans/leases		1,474,946			1,780,690			106,358			286,809			122,162			3,770,965
	$	1,479,247		$	1,790,845		$	108,543		$	288,502		$	123,087		$	3,790,224

Allowance as a percentage of impaired loans/leases		19.55	%		20.81	%		6.50	%		13.94	%		11.57	%		17.86	%
Allowance as a percentage of nonimpaired loans/leases		1.11	%		0.91	%		1.38	%		0.80	%		1.11	%		1.00	%
Total allowance as a percentage of total loans/leases		1.17	%		1.02	%		1.48	%		0.88	%		1.18	%		1.08	%


	As of December 31, 2018
							Direct Financing			Residential Real			Installment and
	C&I			CRE			Leases			Estate			Other Consumer			Total
	(dollars in thousands)

Allowance for impaired loans/leases	$	973		$	2,124		$	194		$	257		$	111		$	3,659
Allowance for nonimpaired loans/leases		15,447			15,595			1,598			2,300			1,248			36,188
	$	16,420		$	17,719		$	1,792		$	2,557		$	1,359		$	39,847

Impaired loans/leases	$	4,499		$	10,447		$	2,249		$	2,110		$	898		$	20,203
Nonimpaired loans/leases		1,424,911			1,755,664			115,720			288,649			118,483			3,703,427
	$	1,429,410		$	1,766,111		$	117,969		$	290,759		$	119,381		$	3,723,630

Allowance as a percentage of impaired loans/leases		21.62	%		20.33	%		8.63	%		12.18	%		12.38	%		18.11	%
Allowance as a percentage of nonimpaired loans/leases		1.08	%		0.89	%		1.38	%		0.80	%		1.05	%		0.98	%
Total allowance as a percentage of total loans/leases		1.15	%		1.00	%		1.52	%		0.88	%		1.14	%		1.07	%

Impaired financing receivables

Loans/leases, by classes of financing receivable, considered to be impaired as of and for the three months ended March 31, 2019 are presented as follows:



											Interest Income
							Average				Recognized for
	Recorded		Unpaid Principal		Related		Recorded		Interest Income		Cash Payments
Classes of Loans/Leases	Investment		Balance		Allowance		Investment		Recognized		Received
	(dollars in thousands)

Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	2,256	$	2,300	$	—	$	2,124	$	23	$	23
CRE
Owner-Occupied CRE		104		104		—		106		6		6
Commercial Construction, Land Development, and Other Land		500		500		—		503		7		7
Other Non Owner-Occupied CRE		1,675		1,675		—		1,687		22		22
Direct Financing Leases		1,948		1,948		—		2,011		11		11
Residential Real Estate		705		779		—		713		—		—
Installment and Other Consumer		778		778		—		770		3		3
	$	7,966	$	8,084	$	—	$	7,914	$	72	$	72

Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	2,045	$	2,045	$	841	$	1,946	$	9	$	9
CRE
Owner-Occupied CRE		289		646		33		297		—		—
Commercial Construction, Land Development, and Other Land		144		144		28		146		—		—
Other Non Owner-Occupied CRE		7,443		7,443		2,052		7,510		48		48
Direct Financing Leases		237		237		142		206		—		—
Residential Real Estate		988		988		236		915		1		1
Installment and Other Consumer		147		147		107		137		—		—
	$	11,293	$	11,650	$	3,439	$	11,157	$	58	$	58

Total Impaired Loans/Leases:
C&I	$	4,301	$	4,345	$	841	$	4,070	$	32	$	32
CRE
Owner-Occupied CRE		393		750		33		403		6		6
Commercial Construction, Land Development, and Other Land		644		644		28		649		7		7
Other Non Owner-Occupied CRE		9,118		9,118		2,052		9,197		70		70
Direct Financing Leases		2,185		2,185		142		2,217		11		11
Residential Real Estate		1,693		1,767		236		1,628		1		1
Installment and Other Consumer		925		925		107		907		3		3
	$	19,259	$	19,734	$	3,439	$	19,071	$	130	$	130

Loans/leases, by classes of financing receivable, considered to be impaired as of and for the three months ended March 31, 2018 are presented as follows:


											Interest Income
							Average				Recognized for
	Recorded		Unpaid Principal		Related		Recorded		Interest Income		Cash Payments
Classes of Loans/Leases	Investment		Balance		Allowance		Investment		Recognized		Received
	(dollars in thousands)
Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	5,039	$	5,053	$	—	$	5,298	$	75	$	75
CRE
Owner-Occupied CRE		289		289		—		289		6		6
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		1,227		1,227		—		1,236		—		—
Direct Financing Leases		1,928		1,928		—		2,356		6		6
Residential Real Estate		912		987		—		884		—		—
Installment and Other Consumer		141		141		—		120		—		—
	$	9,536	$	9,625	$	—	$	10,183	$	87	$	87

Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	958	$	958	$	567	$	825	$	2	$	2
CRE
Owner-Occupied CRE		148		148		44		150		—		—
Commercial Construction, Land Development, and Other Land		5,430		5,430		1,627		5,137		—		—
Other Non Owner-Occupied CRE		—		—		—		—		—		—
Direct Financing Leases		1,048		1,048		628		963		—		—
Residential Real Estate		547		570		249		544		3		3
Installment and Other Consumer		140		140		112		128		—		—
	$	8,271	$	8,294	$	3,227	$	7,747	$	5	$	5

Total Impaired Loans/Leases:
C&I	$	5,997	$	6,011	$	567	$	6,123	$	77	$	77
CRE
Owner-Occupied CRE		437		437		44		439		6		6
Commercial Construction, Land Development, and Other Land		5,430		5,430		1,627		5,137		—		—
Other Non Owner-Occupied CRE		1,227		1,227		—		1,236		—		—
Direct Financing Leases		2,976		2,976		628		3,319		6		6
Residential Real Estate		1,459		1,557		249		1,428		3		3
Installment and Other Consumer		281		281		112		248		—		—
	$	17,807	$	17,919	$	3,227	$	17,930	$	92	$	92

Loans/leases, by classes of financing receivable, considered to be impaired as of December 31, 2018 are presented as follows:


			Unpaid
	Recorded		Principal		Related
Classes of Loans/Leases	Investment		Balance		Allowance
	(dollars in thousands)
Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	1,846	$	4,540	$	—
CRE
Owner-Occupied CRE		106		106		—
Commercial Construction, Land Development, and Other Land		507		507		—
Other Non Owner-Occupied CRE		1,804		1,804		—
Direct Financing Leases		1,929		1,929		—
Residential Real Estate		984		1,058		—
Installment and Other Consumer		762		762		—
	$	7,938	$	10,706	$	—

Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	2,653	$	2,653	$	973
CRE
Owner-Occupied CRE		304		660		39
Commercial Construction, Land Development, and Other Land		149		149		33
Other Non Owner-Occupied CRE		7,577		7,577		2,052
Direct Financing Leases		320		320		194
Residential Real Estate		1,126		1,126		257
Installment and Other Consumer		136		136		111
	$	12,265	$	12,621	$	3,659

Total Impaired Loans/Leases:
C&I	$	4,499	$	7,193	$	973
CRE
Owner-Occupied CRE		410		766		39
Commercial Construction, Land Development, and Other Land		656		656		33
Other Non Owner-Occupied CRE		9,381		9,381		2,052
Direct Financing Leases		2,249		2,249		194
Residential Real Estate		2,110		2,184		257
Installment and Other Consumer		898		898		111
	$	20,203	$	23,327	$	3,659

Financing receivable credit quality indicators


	As of March 31, 2019
			CRE
					Non-Owner Occupied
					Commercial
					Construction,
					Land
			Owner-Occupied		Development,						As a % of
Internally Assigned Risk Rating	C&I		CRE		and Other Land		Other CRE		Total		Total
	(dollars in thousands)

Pass (Ratings 1 through 5)	$	1,333,088	$	481,630	$	263,078	$	1,011,063	$	3,088,859	97.83	%
Special Mention (Rating 6)		17,813		4,721		65		2,170		24,769	0.78	%
Substandard (Rating 7)		15,578		2,476		4,687		20,955		43,696	1.38	%
Doubtful (Rating 8)		—		—		—		—		—	—	%
	$	1,366,479	$	488,827	$	267,830	$	1,034,188	$	3,157,324	100.00	%


	As of December 31, 2018
			CRE
					Non-Owner Occupied
					Commercial
					Construction,
					Land
			Owner-Occupied		Development,						As a % of
Internally Assigned Risk Rating	C&I		CRE		and Other Land		Other CRE		Total		Total
	(dollars in thousands)

Pass (Ratings 1 through 5)	$	1,294,418	$	487,949	$	230,473	$	1,008,626	$	3,021,466	97.72	%
Special Mention (Rating 6)		23,302		9,599		3,848		5,309		42,058	1.36	%
Substandard (Rating 7)		8,286		3,106		2,466		14,735		28,593	0.92	%
Doubtful (Rating 8)		—		—		—		—		—	—	%
	$	1,326,006	$	500,654	$	236,787	$	1,028,670	$	3,092,118	100.00	%

Financing receivable credit quality indicators performance status


	As of March 31, 2019
			Direct Financing		Residential Real		Installment and				As a % of
Delinquency Status *	C&I		Leases		Estate		Other Consumer		Total		Total
	(dollars in thousands)

Performing	$	112,371	$	106,642	$	286,822	$	122,374	$	628,209	99.26	%
Nonperforming		397		1,901		1,680		713		4,691	0.74	%
	$	112,768	$	108,543	$	288,502	$	123,087	$	632,900	100.00	%


	As of December 31, 2018
			Direct Financing		Residential Real		Installment and				As a % of
Delinquency Status *	C&I		Leases		Estate		Other Consumer		Total		Total
	(dollars in thousands)

Performing	$	102,713	$	116,097	$	288,827	$	118,714	$	626,351	99.18	%
Nonperforming		691		1,872		1,932		667		5,162	0.82	%
	$	103,404	$	117,969	$	290,759	$	119,381	$	631,513	100.00	%

* Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual, accruing loans/leases that are greater than or equal to 90 days past due, and accruing TDRs.

Number and recorded investment of TDRs, by type of concession

For the three months ended March 31, 2019

Pre-

Post-

Modification

Number of

Recorded

Specific

Classes of Loans/Leases

Loans / Leases

Investment

Allowance

(dollars in thousands)

CONCESSION - Significant Payment Delay

Direct Financing Leases

122,126

—

122,126

—


	For the three months ended March 31, 2018
		Pre-		Post-
		Modification		Modification
	Number of	Recorded		Recorded		Specific
Classes of Loans/Leases	Loans/Leases	Investment		Investment		Allowance
	(dollars in thousands)
CONCESSION - Significant Payment Delay
Residential Real Estate	1	$	46	$	46	$	—
Direct Financing Leases	2		48		48		—
	3	$	94	$	94	$	—