NOTE 4 - LOANS/LEASES RECEIVABLE (Tables)

9 Months Ended

Sep. 30, 2019



	As of September 30,		As of December 31,
	2019		2018
	(dollars in thousands)

C&I loans *	$	1,469,978	$	1,429,410
CRE loans
Owner-occupied CRE		441,122		500,654
Commercial construction, land development, and other land		369,123		236,787
Other non owner-occupied CRE		877,677		1,028,670
		1,687,922		1,766,111

Direct financing leases **		92,307		117,969
Residential real estate loans ***		245,667		290,759
Installment and other consumer loans		106,540		119,381
		3,602,414		3,723,630
Plus deferred loan/lease origination costs, net of fees		7,856		9,124
		3,610,270		3,732,754
Less allowance		(36,116)		(39,847)
	$	3,574,154	$	3,692,907
** Direct financing leases:
Net minimum lease payments to be received	$	101,869	$	130,371
Estimated unguaranteed residual values of leased assets		547		828
Unearned lease/residual income		(10,109)		(13,230)
		92,307		117,969
Plus deferred lease origination costs, net of fees		2,153		3,642
		94,460		121,611
Less allowance		(1,302)		(1,792)
	$	93,158	$	119,819

* Includes equipment financing agreements outstanding at m2, totaling $131.0 million and $103.4 million as of September 30, 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 and nine months ended September 30, 2019 and 2018.

*** Includes residential real estate loans held for sale totaling $8.9 million and $1.3 million as of September 30, 2019 and December 31, 2018, respectively.

Changes in accretable yield for acquired loans


	Three months ended September 30, 2019						Nine months ended September 30, 2019
	PCI		Performing				PCI		Performing
	Loans		Loans		Total		Loans		Loans		Total
	(dollars in thousands)

Balance at the beginning of the period	$	(151)	$	(8,489)	$	(8,640)	$	(667)	$	(10,127)	$	(10,794)
Reclassification of nonaccretable discount to accretable		—		—		—		(159)		—		(159)
Accretion recognized		94		1,344		1,438		769		2,982		3,751
Balance at the end of the period	$	(57)	$	(7,145)	$	(7,202)	$	(57)	$	(7,145)	$	(7,202)


	Three months ended September 30, 2018						Nine months ended September 30, 2018
	PCI		Performing				PCI		Performing
	Loans		Loans		Total		Loans		Loans		Total
	(dollars in thousands)

Balance at the beginning of the period	$	(142)	$	(5,051)	$	(5,193)	$	(191)	$	(6,280)	$	(6,471)
Discount added at acquisition		(293)		(7,800)		(8,093)		(293)		(7,800)		(8,093)
Reclassification of nonaccretable discount to accretable		(892)		—		(892)		(892)		—		(892)
Accretion recognized		269		1,579		1,848		318		2,808		3,126
Balance at the end of the period	$	(1,058)	$	(11,272)	$	(12,330)	$	(1,058)	$	(11,272)	$	(12,330)

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


	As of September 30, 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	$	1,466,347		$	2,067		$	246		$	—		$	1,318		$	1,469,978
CRE
Owner-Occupied CRE		440,668			276			—			—			178			441,122
Commercial Construction, Land Development, and Other Land		368,422			701			—			—			—			369,123
Other Non Owner-Occupied CRE		872,591			1,491			—			—			3,595			877,677
Direct Financing Leases		89,776			816			318			—			1,397			92,307
Residential Real Estate		243,785			58			704			—			1,120			245,667
Installment and Other Consumer		105,580			337			—			—			623			106,540
	$	3,587,169		$	5,746		$	1,268		$	—		$	8,231		$	3,602,414

As a percentage of total loan/lease portfolio		99.58	%		0.16	%		0.04	%		—	%		0.22	%		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 September 30, 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	$	—	$	1,318	$	565	$	1,883	20.94	%
CRE
Owner-Occupied CRE		—		178		—		178	1.98	%
Commercial Construction, Land Development, and Other Land		—		—		—		—	-	%
Other Non Owner-Occupied CRE		—		3,595		—		3,595	39.97	%
Direct Financing Leases		—		1,397		198		1,595	17.73	%
Residential Real Estate		—		1,120		—		1,120	12.45	%
Installment and Other Consumer		—		623		—		623	6.93	%
	$	—	$	8,231	$	763	$	8,994	100.00	%

* Nonaccrual loans/leases included $932 thousand of TDRs, including $26 thousand in C&I loans, $513 thousand in CRE loans, $304 thousand in direct financing leases, $32 thousand in residential real estate loans, and $57 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 and nine months ended September 30, 2019 and 2018, respectively, are presented as follows:


	Three Months Ended September 30, 2019
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)

Balance, beginning	$	18,248	$	17,363	$	1,459	$	2,582	$	1,452	$	41,104
Reclassification of allowance related to held for sale assets		(2,814)		(2,392)		—		(628)		(288)		(6,122)
Provisions (credits) charged to expense *		998		220		80		241		45		1,584
Loans/leases charged off		(349)		—		(351)		(37)		(4)		(741)
Recoveries on loans/leases previously charged off		68		100		114		—		9		291
Balance, ending	$	16,151	$	15,291	$	1,302	$	2,158	$	1,214	$	36,116


	Three Months Ended September 30, 2018
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)

Balance, beginning	$	15,234	$	15,819	$	2,724	$	2,433	$	1,335	$	37,545
Provisions (credits) charged to expense		3,699		2,254		125		132		(4)		6,206
Loans/leases charged off		(87)		(387)		(428)		(58)		(31)		(991)
Recoveries on loans/leases previously charged off		71		30		211		—		5		317
Balance, ending	$	18,917	$	17,716	$	2,632	$	2,507	$	1,305	$	43,077


	Nine Months Ended September 30, 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
Reclassification of allowance related to held for sale assets		(2,814)		(2,392)		—		(628)		(288)		(6,122)
Provisions charged to expense *		3,120		1,168		856		309		206		5,659
Loans/leases charged off		(876)		(1,369)		(1,501)		(109)		(99)		(3,953)
Recoveries on loans/leases previously charged off		300		164		155		31		36		685
Balance, ending	$	16,151	$	15,291	$	1,302	$	2,158	$	1,214	$	36,116


	Nine Months Ended September 30, 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	$	1,221	$	34,355
Provisions charged to expense		5,284		4,091		1,418		150		104		11,046
Loans/leases charged off		(911)		(388)		(1,506)		(110)		(36)		(2,951)
Recoveries on loans/leases previously charged off		221		50		338		1		16		626
Balance, ending	$	18,917	$	17,716	$	2,632	$	2,507	$	1,305	$	43,077

*Excludes provision related to loans included in assets held for sale of $428 thousand for the three and nine months ended September 30, 2019.

The allowance by impairment evaluation and by portfolio segment as of September 30, 2019 and December 31, 2018 is presented as follows:


	As of September 30, 2019
							Direct Financing			Residential Real			Installment and
	C&I			CRE			Leases			Estate			Other Consumer			Total
	(dollars in thousands)

Allowance for impaired loans/leases	$	160		$	374		$	59		$	27		$	84		$	704
Allowance for nonimpaired loans/leases		15,991			14,917			1,243			2,131			1,130			35,412
	$	16,151		$	15,291		$	1,302		$	2,158		$	1,214		$	36,116

Impaired loans/leases	$	1,764		$	4,148		$	1,581		$	1,062		$	623		$	9,178
Nonimpaired loans/leases		1,468,214			1,683,774			90,726			244,605			105,917			3,593,236
	$	1,469,978		$	1,687,922		$	92,307		$	245,667		$	106,540		$	3,602,414

Allowance as a percentage of impaired loans/leases		9.07	%		9.02	%		3.73	%		2.54	%		13.48	%		7.67	%
Allowance as a percentage of nonimpaired loans/leases		1.09	%		0.89	%		1.37	%		0.87	%		1.07	%		0.99	%
Total allowance as a percentage of total loans/leases		1.10	%		0.91	%		1.41	%		0.88	%		1.14	%		1.00	%


	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 nine months ended September 30, 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	$	1,545	$	1,585	$	—	$	1,026	$	18	$	18
CRE
Owner-Occupied CRE		40		56		—		21		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		733		733		—		751		22		22
Direct Financing Leases		1,440		1,440		—		1,246		19		19
Residential Real Estate		648		764		—		522		—		—
Installment and Other Consumer		539		539		—		510		—		—
	$	4,945	$	5,117	$	—	$	4,076	$	59	$	59

Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	219	$	219	$	160	$	102	$	—	$	—
CRE
Owner-Occupied CRE		121		121		18		127		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		3,254		3,254		356		1,995		—		—
Direct Financing Leases		141		141		59		108		2		2
Residential Real Estate		414		414		27		381		—		—
Installment and Other Consumer		84		84		84		57		—		—
	$	4,233	$	4,233	$	704	$	2,770	$	2	$	2

Total Impaired Loans/Leases:
C&I	$	1,764	$	1,804	$	160	$	1,128	$	18	$	18
CRE
Owner-Occupied CRE		161		177		18		148		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		3,987		3,987		356		2,746		22		22
Direct Financing Leases		1,581		1,581		59		1,354		21		21
Residential Real Estate		1,062		1,178		27		903		—		—
Installment and Other Consumer		623		623		84		567		—		—
	$	9,178	$	9,350	$	704	$	6,846	$	61	$	61

Loans/leases, by classes of financing receivable, considered to be impaired as of and for the three months ended September 30, 2019 and 2018, respectively are presented as follows:


	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
					Interest Income						Interest Income
	Average				Recognized for		Average				Recognized for
	Recorded		Interest Income		Cash Payments		Recorded		Interest Income		Cash Payments
Classes of Loans/Leases	Investment		Recognized		Received		Investment		Recognized		Received
	(dollars in thousands)

Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	1,433	$	6	$	6	$	2,795	$	17	$	17
CRE
Owner-Occupied CRE		42		—		—		289		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		739		7		7		1,009		9		9
Direct Financing Leases		1,359		6		6		1,780		3		3
Residential Real Estate		540		—		—		666		—		—
Installment and Other Consumer		543		—		—		115		—		—
	$	4,656	$	19	$	19	$	6,654	$	29	$	29

Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	141	$	—	$	—	$	3,401	$	2	$	2
CRE
Owner-Occupied CRE		123		—		—		141		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		5,484		—		—
Other Non Owner-Occupied CRE		3,254		—		—		3,848		8		8
Direct Financing Leases		120		—		—		558		—		—
Residential Real Estate		390		—		—		461		3		3
Installment and Other Consumer		84		—		—		113		—		—
	$	4,112	$	—	$	—	$	14,006	$	13	$	13

Total Impaired Loans/Leases:
C&I	$	1,574	$	6	$	6	$	6,196	$	19	$	19
CRE
Owner-Occupied CRE		165		—		—		430		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		5,484		—		—
Other Non Owner-Occupied CRE		3,993		7		7		4,857		17		17
Direct Financing Leases		1,479		6		6		2,338		3		3
Residential Real Estate		930		—		—		1,127		3		3
Installment and Other Consumer		627		—		—		228		—		—
	$	8,768	$	19	$	19	$	20,660	$	42	$	42

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 September 30, 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)	$	1,306,314	$	435,761	$	368,659	$	861,561	$	2,972,295	98.19	%
Special Mention (Rating 6)		14,043		2,888		40		6,224		23,195	0.77	%
Substandard (Rating 7)		18,597		2,473		424		9,892		31,386	1.04	%
Doubtful (Rating 8)		—		—		—		—		—	—	%
	$	1,338,954	$	441,122	$	369,123	$	877,677	$	3,026,876	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	$	3,092,117	100.00	%

Financing receivable credit quality indicators performance status


	As of September 30, 2019
			Direct Financing		Residential Real		Installment and				As a % of
Delinquency Status *	C&I		Leases		Estate		Other Consumer		Total		Total
	(dollars in thousands)

Performing	$	130,291	$	90,712	$	244,547	$	105,917	$	571,467	99.29	%
Nonperforming		733		1,595		1,120		623		4,071	0.71	%
	$	131,024	$	92,307	$	245,667	$	106,540	$	575,538	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 September 30, 2019							For the three months ended September 30, 2018
		Pre-		Post-					Pre-		Post-
		Modification		Modification					Modification		Modification
	Number of	Recorded		Recorded		Specific		Number of	Recorded		Recorded		Specific
Classes of Loans/Leases	Loans / Leases	Investment		Investment		Allowance		Loans / Leases	Investment		Investment		Allowance
	(dollars in thousands)
CONCESSION - Significant Payment Delay
C&I	—	$	—	$	—	$	—	1	$	274	$	274	$	274
Other Non Owner-Occupied CRE	—		—		—		—	2		981		981		60
Direct Financing Leases	3		116		116		—	2		44		44		—
	3	$	116	$	116	$	—	5	$	1,299	$	1,299	$	334

CONCESSION - Extension of Maturity
Installment and Other Consumer	1		56		56		56	—		—		—		—
	1	$	56	$	56	$	56	—	$	—	$	—	$	—

TOTAL	4	$	172	$	172	$	56	5	$	1,299	$	1,299	$	334


	For the nine months ended September 30, 2019							For the nine months ended September 30, 2018
		Pre-		Post-					Pre-		Post-
		Modification		Modification					Modification		Modification
	Number of	Recorded		Recorded		Specific		Number of	Recorded		Recorded		Specific
Classes of Loans/Leases	Loans/Leases	Investment		Investment		Allowance		Loans/Leases	Investment		Investment		Allowance
	(dollars in thousands)
CONCESSION - Significant Payment Delay
C&I	1	$	19	$	19	$	—	1	$	274	$	274	$	274
Other Non Owner-Occupied CRE	—		—		—		—	2		981		981		60
Residential Real Estate	—		—		—		—	1		46		46		—
Direct Financing Leases	6		219		219		20	4		92		92		—
	7	$	238	$	238	$	20	8	$	1,393	$	1,393	$	334

CONCESSION - Forgiveness of Principal
C&I	1	$	587	$	537	$	—	—	$	—	$	—	$	—
	1	$	587	$	537	$	—	—	$	—	$	—	$	—

CONCESSION - Extension of Maturity
Other Non Owner-Occupied CRE	—	$	—	$	—	$	—	2	$	2,976	$	2,976	$	816
Installment and Other Consumer	1		56		56		56
Direct Financing Leases	—		—		—		—	1		35		35		—
	1	$	56	$	56	$	56	3	$	3,011	$	3,011	$	816

TOTAL	9	$	881	$	831	$	76	11	$	4,404	$	4,404	$	1,150