10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2018

☐     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transitions period from ______________ to ______________

Commission File Number   001-15955
CoBiz Financial Inc.
(Exact name of registrant as specified in its charter)
COLORADO	84-0826324
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1401 Lawrence St., Ste. 1200
Denver, CO	80202
(Address of principal executive offices)	(Zip Code)
(303) 312-3400
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑	No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☑	No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer		☐	Accelerated filer	☑
Non-accelerated filer		☐	Smaller reporting company	☐
(do not check if a smaller reporting company)			Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐	No ☑

There were 42,399,225 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding at July 20, 2018.

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TABLE OF CONTENTS

	PART I.  FINANCIAL INFORMATION	Page
Item 1.	Condensed Consolidated Financial Statements (unaudited)	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59
Item 4.	Controls and Procedures	60
	PART II.  OTHER INFORMATION
Item 1A	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 6.	Exhibits	67
	SIGNATURES	67

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Part I.  Financial Information

The following are acronyms, abbreviations and definitions of terms used in this report:

GLOSSARY OF ACRONYMS, ABBREVIATIONS AND ENTITIES
ABB	Arizona Business Bank	FHLMC	Federal Home Loan Mortgage Corporation
ALCO	Asset/Liability Management Committee	FNMA	Federal National Mortgage Association
ALLL	Allowance for Loan and Lease Losses	FOMC	Federal Open Market Committee
AOCI	Accumulated Other Comprehensive Income	FRB	Federal Reserve Board
ASC	Accounting Standards Codification	GAAP	Generally Accepted Accounting Principles
ASU	Accounting Standards Update	GNMA	Government National Mortgage Association
AUM	Assets Under Management	ICS	Insured Cash Sweep Service
Bank	CoBiz Bank	MBS	Residential Mortgage-Backed Securities
BOLI	Bank-Owned Life Insurance	NAICS	North American Industry Classification System
CBB	Colorado Business Bank	NII	Net Interest Income
CCB	Capital Conservation Buffer	NIM	Net Interest Margin
CDARS	Certificate Deposit Account Registry Service	NM	Not Meaningful
CDs	Certificate of Deposit	OCI	Other Comprehensive Income
CECL	Current Expected Credit Loss under ASU 2016-13	OREO	Other Real Estate Owned
CFO	Chief Financial Officer	OTTI	Other-Than-Temporary Impairment
CoBiz	CoBiz Financial Inc.	Parent or Holding Company	CoBiz Financial Inc.
CoBiz Insurance	CoBiz Insurance Inc.	P&C	Property and Casualty Insurance
CoBiz Wealth	CoBiz Wealth LLC	Sarbanes-Oxley Act	Sarbanes-Oxley Act of 2002
Company	CoBiz Financial Inc.	SBA	Small Business Administration
Customer Repurchase Agreements	Securities sold under agreements to repurchase	SBIC	Small Business Investment Company
EPS	Earnings Per Share	SEC	Securities and Exchange Commission
FASB	Financial Accounting Standards Board	TCJA	Tax Cuts and Jobs Act
FDIC	Federal Deposit Insurance Corporation	TPS	Trust Preferred Securities
Federal Reserve	Board of Governors of the Federal Reserve System	VIE	Variable Interest Entity
FHLB	Federal Home Loan Bank

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Item 1.  Condensed Consolidated Financial Statements (unaudited)

CoBiz Financial Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

At June 30, 2018 and December 31, 2017

	June 30,		December 31,
(in thousands, except share amounts)	2018		2017
Assets
Cash and due from banks	$	66,600	$	78,735
Interest-bearing deposits and federal funds sold		18,258		1,445
Total cash and cash equivalents		84,858		80,180
Investment securities available for sale (cost of $240,751 and $164,012, respectively)		241,108		166,753
Investment securities held to maturity (fair value of $383,534 and $360,071, respectively)		388,917		362,544
Other investments		16,623		10,119
Total investments		646,648		539,416
Loans - net of allowance for loan losses of $35,834 and $37,941, respectively		3,030,420		3,107,622
Intangible assets - net of amortization of $7,809 and $7,704, respectively		621		726
Bank-owned life insurance		55,387		55,040
Premises and equipment - net of depreciation of $38,831 and $37,459, respectively		9,604		10,827
Accrued interest receivable		14,087		14,150
Deferred income taxes, net		13,672		13,114
Other real estate owned - net of valuation allowance of $8,666 and $8,666, respectively		4,979		5,079
Other		21,599		20,118
TOTAL ASSETS	$	3,881,875	$	3,846,272
Liabilities
Deposits
Noninterest-bearing demand	$	1,450,894	$	1,473,650
Interest-bearing demand		712,061		737,934
Money market		864,190		875,936
Savings		21,218		21,453
Certificates of deposits		96,178		116,247
Total deposits		3,144,541		3,225,220
Securities sold under agreements to repurchase		38,994		52,959
Other short-term borrowings		190,000		77,640
Accrued interest and other liabilities		30,831		29,808
Subordinated notes payable - net of unamortized discount and issuance costs of $761 and $805, respectively		59,239		59,195
Junior subordinated debentures		72,166		72,166
TOTAL LIABILITIES		3,535,771		3,516,988
Commitments and contingencies
Shareholders' Equity
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding		-		-
Common stock, $.01 par value; 100,000,000 shares authorized; 42,389,975 and 42,217,318 issued and outstanding, respectively		420		418
Additional paid-in capital		204,342		202,111
Retained earnings		144,039		126,896
Accumulated other comprehensive loss, net of income tax of $(874) and $(85), respectively		(2,697)		(141)
TOTAL SHAREHOLDERS' EQUITY		346,104		329,284
TOTAL LIABILITIES AND EQUITY	$	3,881,875	$	3,846,272

See Notes to Condensed Consolidated Financial Statements

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CoBiz Financial Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

For the three and six months ended June 30, 2018 and 2017

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands, except per share amounts)	2018		2017		2018		2017
INTEREST INCOME:
Interest and fees on loans	$	34,612	$	31,405	$	68,385	$	60,796
Interest and dividends on investment securities:
Taxable securities		4,046		3,601		7,567		6,799
Nontaxable securities		245		93		489		381
Dividends on securities		204		253		364		401
Interest on federal funds sold and other		70		54		149		110
Total interest income		39,177		35,406		76,954		68,487
INTEREST EXPENSE:
Interest on deposits		1,423		955		2,410		1,942
Interest on short-term borrowings and securities sold under agreements to repurchase		752		602		1,099		786
Interest on subordinated debentures and notes payable		1,853		1,844		3,687		3,676
Total interest expense		4,028		3,401		7,196		6,404
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		35,149		32,005		69,758		62,083
Provision for loan losses		(901)		673		(1,226)		1,280
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		36,050		31,332		70,984		60,803
NONINTEREST INCOME:
Service charges		1,577		1,714		3,232		3,459
Investment advisory income		1,678		1,500		3,333		3,031
Insurance income		3,138		3,427		6,597		6,549
Other income		1,816		1,670		4,008		3,600
Total noninterest income		8,209		8,311		17,170		16,639
NONINTEREST EXPENSE:
Salaries and employee benefits		20,761		18,335		40,508		37,455
Occupancy expenses, premises and equipment		3,651		3,685		7,362		7,290
Amortization of intangibles		49		150		105		300
FDIC and other assessments		267		349		691		599
Other real estate owned and loan workout costs		50		93		121		182
Net (gain) loss on securities, other assets and other real estate owned		(4)		32		(124)		(313)
Other expense		5,580		4,011		10,261		8,256
Total noninterest expense		30,354		26,655		58,924		53,769
INCOME BEFORE INCOME TAXES		13,905		12,988		29,230		23,673
Provision for income taxes		2,511		3,499		4,855		5,570
NET INCOME	$	11,394	$	9,489	$	24,375	$	18,103
EARNINGS PER COMMON SHARE:
Basic	$	0.27	$	0.23	$	0.58	$	0.43
Diluted	$	0.27	$	0.23	$	0.58	$	0.43

See Notes to Condensed Consolidated Financial Statements

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CoBiz Financial Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

For the three and six months ended June 30, 2018 and 2017

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Net income	$	11,394	$	9,489	$	24,375	$	18,103
Other comprehensive income (loss) items:
Available for sale securities:
Net unrealized gain (loss)		(850)		1,180		(2,380)		3,000
Reclassification to operations		(4)		-		(4)		3
		(854)		1,180		(2,384)		3,003
Held to maturity securities:
Reclassification to operations		(288)		(390)		(596)		(844)
		(288)		(390)		(596)		(844)
Cash flow hedges:
Net unrealized gain (loss)		(278)		168		(894)		96
Reclassification to operations		271		122		528		231
		(7)		290		(366)		327
Total other comprehensive income (loss) items	$	(1,149)	$	1,080	$	(3,346)	$	2,486
Income tax provision:
Available for sale debt securities:
Net unrealized gain (loss)	$	(208)	$	446	$	(583)	$	1,134
Reclassification to operations		(1)		-		(1)		1
		(209)		446		(584)		1,135
Held to maturity securities:
Reclassification to operations		(70)		(146)		(145)		(319)
		(70)		(146)		(145)		(319)
Cash flow hedges:
Net unrealized gain (loss)		(68)		63		(219)		36
Reclassification to operations		65		45		128		87
		(3)		108		(91)		123
Total income tax provision (benefit)	$	(282)	$	408	$	(820)	$	939
Other comprehensive income (loss), net of tax		(867)		672		(2,526)		1,547
Comprehensive income	$	10,527	$	10,161	$	21,849	$	19,650

See Notes to Condensed Consolidated Financial Statements

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CoBiz Financial Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

For the six months ended June 30, 2018 and 2017

	Six months ended
	June 30,
(in thousands)	2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	24,375	$	18,103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		1,408		2,872
Provision for loan losses		(1,226)		1,280
Stock-based compensation		1,681		1,840
Deferred income taxes		262		409
Bank-owned life insurance		(753)		(659)
Net gain on securities, other assets and other real estate owned		(124)		(313)
Other operating activities, net		(748)		(211)
Changes in operating assets and liabilities:
Other assets		2,851		2,271
Other liabilities		(854)		(2,293)
Net cash provided by operating activities		26,872		23,299
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other investments		(12,012)		(12,876)
Proceeds from other investments		5,960		9,401
Purchase of investment securities available for sale		(89,280)		(70,300)
Purchase of investment securities held to maturity		(61,370)		(41,319)
Maturity, call and principal payments on investment securities available for sale		12,455		24,500
Maturity, call and principal payments on investment securities held to maturity		33,587		32,497
Net proceeds from sale of loans, OREO and repossessed assets		100		-
Loan originations and repayments, net		77,512		(125,400)
Purchase of premises and equipment		(211)		(1,927)
Other investing activities, net		47		635
Net cash used in investing activities		(33,212)		(184,789)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, money market and savings accounts		(60,610)		54,800
Net decrease in certificates of deposits		(20,069)		(11,944)
Net increase in short-term borrowings		112,360		75,770
Net increase (decrease) in securities sold under agreements to repurchase		(13,965)		41,564
Proceeds from issuance of common stock		769		948
Taxes paid in net settlement of restricted stock		(907)		(1,113)
Dividends paid on common stock		(6,560)		(4,166)
Net cash provided by financing activities		11,018		155,859
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,678		(5,631)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		80,180		96,050
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	84,858	$	90,419

See Notes to CondensedConsolidated Financial Statements

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CoBiz Financial Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Nature of Operations and Significant Accounting Policies

The accompanying unaudited Condensed Consolidated Financial Statements of CoBiz Financial Inc. and its wholly-owned subsidiaries: CoBiz Bank; CoBiz Insurance, Inc.; and CoBiz IM, Inc.; all collectively referred to as the “Company”, “CoBiz”, “we”, “us”, or “our” conform to GAAP in the United States of America for interim financial information and prevailing practices within the banking industry. The operations of the Company are comprised predominantly of the Bank, which operates in its Colorado market areas under the name Colorado Business Bank and in its Arizona market areas under the name Arizona Business Bank.

Organization — The Bank is a commercial banking institution with seven locations in the Denver metropolitan area; one in Boulder; one near Vail; one in Colorado Springs; one in Fort Collins; and four in the Phoenix metropolitan area.  As a state chartered bank, deposits are insured by the Bank Insurance Fund of the FDIC and the Bank is subject to supervision, regulation and examination by the Federal Reserve, Colorado Division of Banking and the FDIC. Pursuant to such regulations, the Bank is subject to special restrictions, supervisory requirements and potential enforcement actions. CoBiz Insurance, Inc. provides commercial and personal P&C insurance brokerage, risk management consulting services to small and medium-sized businesses and individuals and provides employee benefits consulting, insurance brokerage and related administrative support to employers.  CoBiz IM provides wealth planning and investment management to institutions and individuals through its SEC-registered investment advisor subsidiary, CoBiz Wealth, LLC.

On June 18, 2018, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with BOK Financial Corporation, an Oklahoma corporation ("BOK"), and BOKF Merger Corporation Number Sixteen ("Merger Sub"), an Oklahoma corporation and direct wholly-owned subsidiary of BOK. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, CoBiz will merge with and into Merger Sub (the "Merger"), with Merger Sub as the surviving corporation in the Merger. The Merger Agreement was approved by the Board of Directors of each of CoBiz and BOK.  Closing of the transaction, which is expected to occur in the fourth quarter of 2018, is contingent upon shareholder approval and receipt of necessary regulatory approvals, along with the satisfaction of other customary closing conditions.

Subject to the terms and conditions of the Merger Agreement, CoBiz shareholders will have the right to receive upon the effectiveness of the Merger (i) 0.17 shares of BOK common stock, and (ii) $5.70 in cash, for each share of CoBiz common stock.

The following is a summary of certain of the Company’s significant accounting and reporting policies.

Basis of Presentation — The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information,  the instructions to Form 10-Q and, where applicable, prevailing practices within the financial services industry.  The December 31, 2017 Condensed Consolidated balance sheet has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

In the opinion of management, all adjustments (consisting only of normally recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.  In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.

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These Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with, and are qualified in their entirety by, the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC.

The Condensed Consolidated Financial Statements include entities in which the Parent has a controlling financial interest.  These entities include: the Bank; CoBiz Insurance, Inc.; and CoBiz IM. Intercompany balances and transactions are eliminated in consolidation.  The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a VIE.

The voting interest model is used when the equity investment is sufficient to absorb the expected losses and the equity investment has all of the characteristics of a controlling financial interest. Under the voting interest model, the party with the controlling voting interest consolidates the legal entity.  The VIE model is used when any of the following conditions exist: the equity investment at risk is not sufficient to finance the entity’s activities without additional subordinated financial support; the holders of the equity investment do not have a controlling voting interest; or the holders of the equity investment are not obligated to absorb the expected losses or residual returns of the legal entity. An enterprise is considered to have a controlling financial interest of a VIE if it has both the power to direct the activities that most significantly impact economic performance and the obligation to absorb losses, or receive benefits, that are significant to the VIE. An enterprise that has a controlling financial interest is considered the primary beneficiary and must consolidate the VIE.  The Company was not the primary beneficiary of a VIE at June 30, 2018 or December 31, 2017.

Certain reclassifications have been made to prior years’ Condensed Consolidated Financial Statements and related notes to conform to the current year presentation.

Cash and Cash Equivalents — The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include amounts that the Company is required to maintain at the Federal Reserve Bank of Kansas City to meet certain regulatory reserve balance requirements.  The following table shows supplemental disclosures of certain cash and noncash items:

	Six months ended
	June 30,
(in thousands)	2018		2017
Cash paid during the period for:
Interest	$	7,275	$	6,489
Income taxes		1,397		2,750

Investments — The Company classifies its investment securities as held to maturity, available for sale or trading, according to management’s intent.  Investments in debt securities are recorded on a trade date basis.  At June 30, 2018 and December 31, 2017, the Company had no trading securities.

Available for sale securities consist of bonds, notes and debentures (including corporate debt and TPS) not classified as held to maturity securities and are reported at fair value as determined by quoted market prices. Unrealized holding gains and losses, net of tax, are reported as a net amount in AOCI until realized.

Investment securities held to maturity consist of residential MBS, bonds, notes and debentures for which the Company has the positive intent and ability to hold to maturity and are reported at cost, adjusted for amortization or accretion of premiums and discounts.

Premiums and discounts, adjusted for prepayments as applicable, are recognized in interest income.  Other than temporary declines in the fair value of individual investment securities held to maturity and available for sale are charged against earnings. Gains and losses on disposal of investment securities are determined using the specific-identification method.

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OTTI on debt securities is separated between the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between a security’s amortized cost basis and the discounted present value of expected future cash flows. The amount due to all other factors is recognized in OCI.

Bank Stocks — FHLB, Federal Reserve and other correspondent bank stocks are accounted for under the cost method.

Loans Held for Investment— Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans. Interest is accrued and credited to income daily based on the principal balance outstanding. Loans that are 30 days or more past due based on payments received and applied to the loan are considered delinquent, excluding loans that are cash-secured.  The accrual of interest income is generally discontinued when a loan becomes 90 days past due as to principal and interest. When a loan is designated as nonaccrual, the current period’s accrued interest receivable is charged against current earnings while any portions relating to prior periods are charged against the ALLL. Interest payments received on nonaccrual loans are generally applied to the principal balance of the loan. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured and there has been demonstrated performance in accordance with contractual terms.  The Company may elect to continue the accrual of interest when the loan is in the process of collection and the realizable value of collateral is sufficient to cover the principal balance and accrued interest.

Impaired Loans — Impaired loans, with the exception of groups of smaller-balance homogenous loans that are collectively evaluated for impairment, are defined as loans for which, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays of less than 90 days and monthly payment shortfalls of less than 10% of the contractual payment on a consumer loan generally are not classified as impaired if the Company ultimately expects to recover its full investment. The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Loans that are deemed to be impaired are evaluated in accordance with ASC Topic 310-10-35, Receivables – Subsequent Measurement (ASC 310) and ASC Topic 450-20, Loss Contingencies (ASC 450).

Included in impaired loans are troubled debt restructurings.  A troubled debt restructuring is a formal restructure of a loan where the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including but not limited to reduction in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date.  Troubled debt restructurings are evaluated in accordance with ASC Topic 310-40, Troubled Debt Restructurings by Creditors. Interest payments on impaired loans are typically applied to principal unless collectability of principal is reasonably assured. Loans that have been modified in a formal restructuring are typically returned to accrual status when there has been a sustained period of performance (generally six months) under the modified terms, the borrower has shown the ability and willingness to repay and the Company expects to collect all amounts due under the modified terms.

Loan Origination Fees and Costs — Loan fees and certain costs of originating loans are deferred and the net amount is amortized over the contractual life of the related loans in accordance with ASC Topic 310-20, Nonrefundable Fees and Other Costs.

Allowance for Loan and Lease Losses — The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged against earnings. Loan losses are charged against the

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ALLL when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the ALLL.

The ALLL is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as new information becomes available.

Allowance for Credit Losses — The allowance for credit losses is established as losses are estimated to have occurred through a provision for credit losses charged to earnings. The allowance for credit losses represents management’s recognition of a separate reserve for off-balance sheet loan commitments and letters of credit. While the ALLL is recorded as a contra-asset to the loan portfolio on the Condensed Consolidated Balance Sheets, the allowance for credit losses is recorded under the caption “Accrued interest and other liabilities”. Although the allowances are presented separately on the balance sheets, any losses incurred from credit losses would be reported as a charge-off in the ALLL, as any loss would be recorded after the off-balance sheet commitment had been funded.

BOLI – The Bank has invested in BOLI policies to fund certain future employee benefit costs.  The policies are recorded at net realizable value.  Changes in the amount that could be realized, including death benefits in excess of the carrying amount, are recorded in the Condensed Consolidated Statements of Income as “Other income”.

Derivative Instruments — Derivative financial instruments are accounted for at fair value. The Company utilizes interest rate swaps to hedge a portion of its exposure to interest rate changes. These instruments are accounted for as cash flow hedges, as defined by ASC Topic 815, Derivatives and Hedging (ASC 815). The Company also uses interest rate swaps to hedge against adverse changes in fair value on fixed-rate loans.  These instruments are accounted for as fair value hedges in accordance with ASC 815.  The net cash flows from the cash flow and fair value hedges are classified in operating activities within the Condensed Consolidated Statements of Cash Flows with the hedged items.  The Company also offers an interest-rate hedge program that includes various derivative products, including swaps, to customers of the Bank. The fair value amounts recognized for derivative instruments and the fair value amounts recognized for the right to reclaim or obligation to return cash collateral are not offset when represented under a master netting arrangement.  The Company also uses foreign currency forward contracts (FX forwards) giving it the right to sell underlying currencies at specified future dates and predetermined prices in order to mitigate foreign exchange risk associated with long positions.  FX forwards are carried at fair value with changes in value recognized in current earnings as the contracts are not designated as hedging instruments. 

Fair Value Measurements — The Company measures financial assets, financial liabilities, nonfinancial assets and nonfinancial liabilities pursuant to ASC Topic 820, Fair Value Measurement and Disclosures (ASC 820).  ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

2.  Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9 (ASU 2014-09), Revenue from Contracts with Customers. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 to fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08 which clarified the revenue recognition implementation guidance on principal versus agent considerations and is effective during the same period as ASU 2014-09. In April 2016, the FASB issued ASU 2016-10 which clarified the revenue recognition guidance regarding the identification of performance obligations and the licensing implementation and is effective during the same period as ASU 2014-09. In May 2016, the FASB issued ASU 2016-12 which narrowly amended the revenue recognition guidance regarding

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collectability, noncash consideration, presentation of sales tax and transition. ASU 2016-12 is effective during the same period as ASU 2014-09. Effective January 2018, the Company adopted the aforementioned ASUs using the modified retrospective method.  In evaluating the effects of these ASUs on its financial statements and disclosures, the Company has determined the following:

· The primary revenue lines subject to these ASUs are deposit service charges, investment advisory income and insurance income, which represented 16% of total operating revenue in 2017.

· The adoption of these ASUs did not have a material impact on the Company’s financial statements.  However, the Company has expanded disclosures on the nature, amount and timing of revenue from the impacted revenue lines.  See Note 12 for additional information.

Effective January 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01).  The main objective of ASU 2016-01 is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Some of the amendments in ASU 2016-01 include the following:  1)  Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2)  Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3)  Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4)  Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.  For public business entities, the amendments of ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The adoption of ASU 2016-01, through application of a cumulative effect adjustment to retained earnings, did not have a material impact on the consolidated financial statements. See Note 10 for fair value measurement disclosures.

Effective January 2018, the Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), regarding how certain cash receipts and cash payments are presented and classified in the statements of cash flows.  ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.  The Company implemented ASU 2016-15 during the quarter ended March 31, 2018 with application of the retrospective method and cumulative earnings approach for equity method investments. The adoption of ASU 2016-15 did not have a material impact on the consolidated financial statements.

Effective January 2018, the Company adopted ASU 2017-09, Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting (ASU 2017-09).  ASU 2017-09 clarifies when changes to the terms and conditions of share-based payment awards must be treated as modifications.  Specifically, the new guidance permits companies to make certain changes to awards without accounting for them as modifications.  The adoption of ASU 2017-09 did not have a material impact on the consolidated financial statements.  

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AOCI (ASU 2018-02).  ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects of the application of the TCJA.  ASU 2018-02 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  The Company early adopted and applied the provisions of ASU 2018-02 during the quarter ended March 31, 2018.  The reclassification from AOCI to retained earnings did not have a material effect on the Company’s financial statements or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about lease arrangements.  For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning

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after December 15, 2018.  The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures by reviewing all existing lease arrangements.  Preliminarily, the Company expects the primary impact of ASU 2016-02 will relate to its office locations, which are designated as operating leases.  The Company has future operating lease obligations for its locations of $27.7 million that are being evaluated as potential lease assets and liabilities, as defined in ASU 2016-02. The Company has formed a lease implementation team which includes members of accounting, facilities and operations to review lease contracts and the requirements of ASU 2016-02.  The implementation team has evaluated third party software solutions to assist with the implementation of ASU 2016-02.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13).  The objective of ASU 2016-13 is to provide financial statement users with decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit.  ASU 2016-13 includes provisions that require financial assets measured at amortized cost (such as loans and held to maturity (HTM) debt securities) to be presented at the net amount expected to be collected.  This will be accomplished through recognition of an estimate of all current expected credit losses.  The estimate will include forecasted information for the timeframe that an entity is able to develop reasonable and supportable forecasts.  This is a change from the current practice of recognizing incurred losses based on the probable initial recognition threshold under current GAAP.  In addition, credit losses on available for sale (AFS) debt securities will be recorded through an allowance for credit losses rather than as a write-down.  Under ASU 2016-13, an entity will be able to record reversals of credit losses in current period income when the estimate of credit losses declines, whereas current GAAP prohibits reflecting those improvements in current period earnings.

ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted for fiscal years, including interim periods, beginning after December 15, 2018.  ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date.  A prospective transition approach is required for these debt securities.  The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures.  While the effects cannot yet be quantified, the Company expects ASU 2016-13 to add complexity and costs to its current credit loss evaluation process.  In planning for the implementation of ASU 2016-13, the Company has formed a CECL implementation team that includes the CFO, Chief Credit Officer and members of credit, accounting, finance, and information technology.  The team meets on a weekly basis and is currently evaluating data requirements and loss methodologies.  In the first quarter of 2018, the implementation team finalized its recommendation of a third-party software solution.  The Company continues to evaluate the effects of ASU 2016-13 on its financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) (ASU 2017-08).  ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium.  Prior to the issuance of this guidance, premiums were amortized as an adjustment of yield over the contractual life of the instrument.  ASU 2017-08 requires premiums on purchased callable debt securities that have explicit, noncontingent call features that are callable at fixed prices to be amortized to the earliest call date.  There are no accounting changes for securities held at a discount.  This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  ASU 2017-08 will be applied through a cumulative effect adjustment through equity (modified-retrospective approach).  The Company is currently evaluating the effects of ASU 2017-08 on its financial statements and disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12).  The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities.  ASU 2017-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  ASU 2017-12 requires the modified-retrospective approach for adoption.  The Company is currently evaluating the effects of ASU 2017-12 on its financial statements and disclosures. 

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3.  Earnings per Common Share and Dividends Declared per Common Share

Earnings per common share is calculated based on the two-class method prescribed in ASC 260, Earnings per Share.  The two-class method is an allocation of undistributed earnings to common stock and securities that participate in dividends with common stock.  The Company’s restricted stock awards are considered participating securities since the recipients receive non-forfeitable dividends on unvested awards.  The impact of participating securities is included in basic earnings per common share for the three and six months ended June 30, 2018 and 2017.  Income allocated to common shares and weighted average shares outstanding used in the calculation of basic and diluted earnings per common share are as follows:

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands, except share and per share amounts)	2018		2017		2018		2017
Net income available to common shareholders	$	11,394	$	9,489	$	24,375	$	18,103
Dividends and undistributed earnings allocated to participating securities		(95)		(94)		(208)		(187)
Earnings allocated to common shares (1)	$	11,299	$	9,395	$	24,167	$	17,916
Weighted average common shares - issued		42,378,688		41,749,192		42,323,339		41,678,367
Average unvested restricted share awards		(357,246)		(412,229)		(363,035)		(428,681)
Weighted average common shares outstanding - basic		42,021,442		41,336,963		41,960,304		41,249,686
Dilutive potential common shares		60,933		375,774		62,540		399,330
Weighted average common shares outstanding - diluted		42,082,375		41,712,737		42,022,844		41,649,016
Weighted average antidilutive securities outstanding (2)		10,833		30,028		10,833		20,340
Earnings per common share:
Basic	$	0.27	$	0.23	$	0.58	$	0.43
Diluted	$	0.27	$	0.23	$	0.58	$	0.43
Dividends declared per share	$	0.100	$	0.050	$	0.155	$	0.100

(1) Earnings allocated to common shareholders for basic earnings per common share under the two-class method may differ from earnings allocated for diluted earnings per common share when use of the treasury method results in greater dilution than the two-class method.

(2) Antidilutive shares excluded from the diluted earnings per common share computation.

(3)

4.  Investments

The amortized cost and estimated fair values of investment securities are summarized as follows:

	At June 30, 2018								At December 31, 2017
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Fair		Amortized		unrealized		unrealized		Fair
(in thousands)	cost		gains		losses		value		cost		gains		losses		value
Available for sale securities (AFS):
Trust preferred securities	$	20,035	$	1,638	$	475	$	21,198	$	20,318	$	1,870	$	205	$	21,983
Corporate debt securities		217,475		1,446		2,271		216,650		140,445		1,153		103		141,495
Municipal securities		3,241		24		5		3,260		3,249		41		15		3,275
Total AFS	$	240,751	$	3,108	$	2,751	$	241,108	$	164,012	$	3,064	$	323	$	166,753
Held to maturity securities (HTM):
Mortgage-backed securities	$	344,675	$	125	$	7,381	$	337,419	$	318,128	$	118	$	3,262	$	314,984
Trust preferred securities		10,773		1,507		-		12,280		10,721		783		18		11,486
Municipal securities		33,469		433		67		33,835		33,695		73		167		33,601
Total HTM	$	388,917	$	2,065	$	7,448	$	383,534	$	362,544	$	974	$	3,447	$	360,071

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The amortized cost and estimated fair value of investments in debt securities at June 30, 2018, by contractual maturity are shown below.  Expected maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Availablefor sale				Heldtomaturity
	Amortized		Fair		Amortized		Fair
(in thousands)	cost		value		cost		value
Due in one year or less	$	8,106	$	8,083	$	1,691	$	1,688
Due after one year through five years		158,235		156,927		23,389		23,557
Due after five years through ten years		48,490		48,656		-		-
Due after ten years		25,920		27,442		19,162		20,870
Mortgage-backed securities		-		-		344,675		337,419
	$	240,751	$	241,108	$	388,917	$	383,534

The Company uses investment securities to collateralize public and governmental deposits.  Investment securities with an approximate fair value of $156.9 million and $164.4 million were pledged to secure these deposits of $116.9 million and $116.5 million at June 30, 2018 and December 31, 2017, respectively. 

Changes in interest rates and market liquidity may cause adverse fluctuations in the market price of securities resulting in temporary unrealized losses.  In reviewing the realizable value of its securities in a loss position, the Company considered the following factors: (1) the length of time and extent to which the market had been less than cost; (2) the financial condition and near-term prospects of the issuer; (3) investment downgrades by rating agencies; and (4) whether it is more likely than not that the Company will have to sell the security before a recovery in value.  When it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the security, and the fair value of the investment security is less than its amortized cost, an other-than-temporary impairment is recognized in earnings. 

For debt securities that are considered other-than-temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, an OTTI is recognized.  OTTI is separated into the amount that is credit-related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between a security’s amortized cost basis and the discounted present value of expected future cash flows.  The amount due to all other factors is recognized in other comprehensive income.The Company did not have any credit impaired securities at June 30, 2018 and December 31, 2017.

There were 218 and 181 securities in the tables below at June 30, 2018 and December 31, 2017, respectively, in an unrealized loss position.

	June 30, 2018
	Lessthan12 months				12months or greater				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	value		loss		value		loss		value		loss
AFS
Trust preferred securities	$	-	$	-	$	7,449	$	475	$	7,449	$	475
Corporate debt securities		153,058		2,262		971		9		154,029		2,271
Municipal securities		793		5		-		-		793		5
Total AFS	$	153,851	$	2,267	$	8,420	$	484	$	162,271	$	2,751
HTM
Mortgage-backed securities	$	195,392	$	4,305	$	117,651	$	3,076	$	313,043	$	7,381
Municipal securities		11,998		65		679		2		12,677		67
Total HTM	$	207,390	$	4,370	$	118,330	$	3,078	$	325,720	$	7,448

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	December 31, 2017
	Lessthan 12 months				12months or greater				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	value		loss		value		loss		value		loss
AFS
Trust preferred securities	$	700	$	43	$	7,020	$	162	$	7,720	$	205
Corporate debt securities		40,068		94		1,216		9		41,284		103
Municipal securities		1,252		15		-		-		1,252		15
Total AFS	$	42,020	$	152	$	8,236	$	171	$	50,256	$	323
HTM
Mortgage-backed securities	$	182,974	$	1,457	$	104,464	$	1,805	$	287,438	$	3,262
Trust preferred securities		-		-		864		18		864		18
Municipal securities		20,445		163		684		4		21,129		167
Total HTM	$	203,419	$	1,620	$	106,012	$	1,827	$	309,431	$	3,447

Other investments at June 30, 2018 and December 31, 2017, consisted of the following:

	June 30,		December 31,
(in thousands)	2018		2017
Bank stocks — at cost	$	14,447	$	7,945
Investment in statutory trusts — equity method		2,176		2,174
Total	$	16,623	$	10,119

Bank stocks consist primarily of stock in the FHLB, which is part of the Federal Home Loan Bank System.  The purpose of the FHLB investment relates to maintenance of a borrowing base with the FHLB.  FHLB stock holdings are largely dependent upon the Company’s liquidity position.  To the extent the need for wholesale funding increases or decreases, the Company may purchase additional or sell excess FHLB stock, respectively.  The Company evaluates impairment in these investments based on the ultimate recoverability of the par value.  At June 30, 2018, the Company did not consider these investments to be other-than-temporarily impaired.

5.  Loans

The following disclosure reports the Company’s loan portfolio segments and classes.  Segments are groupings of similar loans at a level which the Company has adopted systematic methods of documentation for determining its ALLL. Classes are a disaggregation of the portfolio segments.  The Company’s loan portfolio segments are:

· Commercial loans – Commercial loans consist of loans to small and medium-sized businesses in a wide variety of industries.  The Bank’s areas of emphasis in commercial lending include, but are not limited to, loans to wholesalers, manufacturers, municipalities, construction and business services companies.  Commercial loans are generally collateralized by inventory, accounts receivable, equipment, real estate and other commercial assets, and may be supported by other credit enhancements such as personal guarantees.  Risk arises primarily due to a difference between expected and actual cash flows of the borrowers.  However, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans.  The fair value of the collateral securing these loans may fluctuate as market conditions change.  In the case of loans secured by accounts receivable, the recovery of the Company’s investment is dependent upon the borrowers’ ability to collect amounts due from its customers.

· Real estate - mortgage loans – Real estate mortgage loans include various types of loans for which the Company holds real property as collateral.  Commercial real estate lending activity is typically restricted to owner-occupied properties or to investor properties that are owned by customers with a current banking relationship.  The primary risks of real estate mortgage loans include the borrower’s inability to pay, material decreases in the value of the real estate that is being held as collateral and significant increases in interest rates, which may make the real estate mortgage loan unprofitable. 

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Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.  

· Construction and land loans – The Company originates loans to finance construction projects including one- to four-family residences, multifamily residences, commercial office, senior housing, and industrial projects.  Residential construction loans are due upon the sale of the completed project and are generally collateralized by first liens on the real estate and have floating interest rates.  Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans.  Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project.  Additionally, the fair value of the underlying collateral may fluctuate as market conditions change.  The Company also originates loans for the acquisition and future development of land for residential building projects, as well as finished lots prepared to enter the construction phase.  The primary risks include the borrower’s inability to pay and the inability of the Company to recover its investment due to a decline in the fair value of the underlying collateral.

· Consumer loans–The Company provides a broad range of consumer loans to customers, including personal lines of credit, home equity loans, mortgage loans and automobile loans.  Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral.

· Other loans–Other loans include lending products, such as taxable and tax exempt leasing, not defined as commercial, real estate, acquisition and development, construction, or consumer loans.

The loan portfolio segments at June 30, 2018 and December 31, 2017 were as follows:

(in thousands)	At June 30, 2018		At December 31, 2017
Commercial	$	1,222,036	$	1,250,356
Real estate - mortgage		1,234,414		1,250,423
Construction & land		244,444		266,081
Consumer		273,900		282,101
Other		93,267		98,916
Loans held for investment		3,068,061		3,147,877
Allowance for loan losses		(35,834)		(37,941)
Unearned net loan fees		(1,807)		(2,314)
Total net loans	$	3,030,420	$	3,107,622

The Company routinely acquires participating interests in loans originated by other banks which are subsequently included in the loan portfolio.

At June 30, 2018 and December 31, 2017, overdraft demand deposits totaling $0.4 million and $0.2 million, respectively, were reclassified from deposits to loans. 

The Company maintains a loan review program independent of the lending function that is designed to reduce and control risk in lending. It includes the continuous monitoring of lending activities with respect to underwriting and processing new loans, preventing insider abuse and timely follow-up and corrective action for loans showing signs of deterioration in quality.  The Company also has a systematic process to evaluate individual loans and pools of loans within our loan portfolio. The Company maintains a loan grading system whereby each loan is assigned a grade between 1 and 8, with 1 representing the highest quality credit, 7 representing a nonaccrual loan where collection or liquidation in full is highly questionable and improbable, and 8 representing a loss that has been or will be charged-off.  Grades are assigned based upon the degree of risk associated with repayment of a loan in the normal course of business pursuant to the original terms.  Loans that are graded 5 or lower are categorized as non-classified credits while loans graded 6 and higher are categorized as classified credits.  Loan grade changes are evaluated on a monthly basis.  Loans above a certain dollar amount that are adversely graded are reported to the Special Assets Group Manager and the Chief Credit Officer along with current financial information, a collateral analysis and an action plan.

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The loan portfolio showing total non-classified and classified balances by loan class at June 30, 2018 and December 31, 2017 is summarized below:

	At June 30, 2018
(in thousands)	Non-classified		Classified		Total
Commercial
Manufacturing	$	72,323	$	6,509	$	78,832
Finance and insurance		53,978		117		54,095
Healthcare		158,643		1,766		160,409
Real estate services		115,451		2,507		117,958
Construction		72,111		3,702		75,813
Public administration		249,606		534		250,140
Other		447,490		37,299		484,789
		1,169,602		52,434		1,222,036
Real estate - mortgage
Residential & commercial owner-occupied		508,871		16,467		525,338
Residential & commercial investor		706,067		3,009		709,076
		1,214,938		19,476		1,234,414
Construction & land		239,632		4,812		244,444
Consumer		270,200		3,700		273,900
Other		91,961		1,306		93,267
Total loans held for investment	$	2,986,333	$	81,728	$	3,068,061
Unearned net loan fees						(1,807)
Net loans held for investment					$	3,066,254

	At December 31, 2017
(in thousands)	Non-classified		Classified		Total
Commercial
Manufacturing	$	82,275	$	2,912	$	85,187
Finance and insurance		40,796		1,722		42,518
Healthcare		161,162		2,623		163,785
Real estate services		124,861		3,986		128,847
Construction		67,232		758		67,990
Public administration		239,230		847		240,077
Other		468,562		53,390		521,952
		1,184,118		66,238		1,250,356
Real estate - mortgage
Residential & commercial owner-occupied		481,061		3,574		484,635
Residential & commercial investor		765,210		578		765,788
		1,246,271		4,152		1,250,423
Construction & land		266,081		-		266,081
Consumer		279,191		2,910		282,101
Other		97,542		1,374		98,916
Total loans held for investment	$	3,073,203	$	74,674	$	3,147,877
Unearned net loan fees						(2,314)
Net loans held for investment					$	3,145,563

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Transactions in the ALLL by segment for the three and six months ended June 30, 2018 and 2017 are summarized below:

	Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017
Allowance for loan losses, beginning of period
Commercial	$	16,523	$	15,900	$	16,837	$	15,398
Real estate - mortgage		12,892		11,797		12,690		11,475
Construction & land		3,250		2,277		4,034		1,997
Consumer		2,597		2,448		2,617		2,803
Other		842		916		826		945
Unallocated		692		873		937		675
Total		36,796		34,211		37,941		33,293
Provision
Commercial	$	(1,212)	$	(22)	$	(689)	$	392
Real estate - mortgage		40		848		239		1,165
Construction & land		366		(507)		(435)		(521)
Consumer		85		116		68		(163)
Other		(28)		105		(12)		76
Unallocated		(152)		133		(397)		331
Total		(901)		673		(1,226)		1,280
Charge-offs
Commercial	$	(255)	$	(196)	$	(1,361)	$	(222)
Consumer		(49)		(6)		(58)		(86)
Other		(29)		-		(29)		-
Total		(333)		(202)		(1,448)		(308)
Recoveries
Commercial	$	163	$	67	$	432	$	181
Real estate - mortgage		8		159		11		164
Construction & land		84		714		101		1,008
Consumer		14		3		20		7
Other		3		-		3		-
Total		272		943		567		1,360
Allowance for loan losses, end of period
Commercial	$	15,219	$	15,749	$	15,219	$	15,749
Real estate - mortgage		12,940		12,804		12,940		12,804
Construction & land		3,700		2,484		3,700		2,484
Consumer		2,647		2,561		2,647		2,561
Other		788		1,021		788		1,021
Unallocated		540		1,006		540		1,006
Total	$	35,834	$	35,625	$	35,834	$	35,625

The Company estimates the ALLL in accordance with ASC 310 for purposes of evaluating loan impairment on a loan-by-loan basis and ASC 450 for purposes of collectively evaluating loan impairment by grouping loans with common risk characteristics (i.e. risk classification, past-due status, type of loan, and collateral).  The ALLL is comprised of the following components:

· Specific Reserves – The Company continuously evaluates its reserve for loan losses to maintain an adequate level to absorb loan losses incurred in the loan portfolio. Reserves on loans identified as impaired, including troubled debt restructurings, are based on discounted expected cash flows using the loan’s initial effective interest rate, the observable market value of the loan or the fair value of the collateral for certain collateral-dependent loans. The fair value of the collateral is determined in accordance with ASC 820. Loans are considered to be impaired in accordance with the provisions of ASC 310 when it is probable that all amounts due in accordance with the contractual terms will not be collected. Factors contributing to the determination of specific reserves include the financial condition of the borrower, changes in the value of pledged collateral and general economic conditions. 

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Troubled debt restructurings meet the definition of an impaired loan under ASC 310 and therefore, troubled debt restructurings are subject to impairment evaluation on a loan-by-loan basis.

For collateral dependent loans that have been specifically identified as impaired, the Company measures fair value based on third-party appraisals, adjusted for estimated costs to sell the property.  Upon impairment, the Company will obtain a new appraisal if one had not been previously obtained in the last 12 months.  For credits over $2.0 million, the Company typically engages an additional third-party appraiser to review the appraisal.  For credits under $2.0 million, the Company’s internal appraisal department reviews the appraisal.  All appraisals are reviewed for adherence to regulations and mathematical accuracy and reasonableness based on recent sales transactions that may have occurred subsequent to or at the time of the appraisal.  Based on this analysis, the appraised value may be adjusted downward if there is evidence that the appraised value may not be indicative of fair value.  Each appraisal is updated on an annual basis, either through a new appraisal or through the Company’s comprehensive internal review process.

Values are reviewed and monitored internally and fair value is re-assessed at least quarterly or more frequently when events or circumstances occur that indicate a change in fair value. 

· General Reserves – General reserves are considered part of the allocated portion of the ALLL. The Company uses a comprehensive loan grading process for our loan portfolios. Based on this process, a loss factor is assigned to each pool of graded loans.  A combination of loss experience and external loss data is used in determining the appropriate loss factor.  This estimate represents the probable incurred losses within the portfolio. In evaluating the adequacy of the ALLL, management considers historical losses (Migration), as well as other factors including changes in:

· Lending policies and procedures

· National and local economic and business conditions and developments

· Nature and volume of portfolio

· Trends of the volume and severity of past-due and classified loans

· Trends in the volume of nonaccrual loans, troubled debt restructurings, and other loan modifications

· Credit concentrations

Troubled debt restructurings have a direct impact on the ALLL to the extent a loss has been recognized in relation to the loan modified.  This is consistent with the Company’s consideration of Migration in determining general reserves.

The aforementioned factors enable management to recognize environmental conditions contributing to incurred losses in the portfolio, which have not yet manifested in Migration.  Management believes Migration history adequately captures a substantial percentage of probable incurred losses within the portfolio.

In addition to the allocated reserve for graded loans, a portion of the ALLL is determined by segmenting the portfolio into product groupings with similar risk characteristics.  Part of the segmentation involves assigning increased reserve factors to those lending activities deemed higher-risk, such as leverage-financings, unsecured loans, certain loans lacking personal guarantees, senior housing, speculative residential construction and multifamily loans.   

· Unallocated Reserves – The unallocated reserve, which is judgmentally determined, is maintained to recognize the imprecision in estimating and measuring loss when evaluating reserves for individual loans or pools of loans.  The unallocated reserve consists of a missed grade component that is intended to capture the inherent risk that certain loans may be assigned an incorrect loan grade.

In assessing the reasonableness of management’s assumptions, consideration is given to select peer ratios, industry standards and directional consistency of the ALLL.  Ratio analysis highlights divergent trends in the relationship of the ALLL to nonaccrual loans, to total loans and to historical charge-offs.  Although these comparisons can be helpful as a supplement to assess reasonableness of management assumptions, they are not, by themselves, sufficient basis for determining the adequacy of the ALLL.  While management

20 | Page

utilizes its best judgment and information available, the ultimate adequacy of the ALLL is dependent upon a variety of factors beyond the Company’s control, including the performance of the loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

The following table summarizes loans held for investment and the ALLL on the basis of the impairment method:

	At June 30, 2018								At December 31, 2017
	Individually evaluated for impairment				Collectively evaluated for impairment				Individually evaluated for impairment				Collectively evaluated for impairment
(in thousands)	Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses
Commercial	$	46,102	$	4,838	$	1,176,678	$	10,381	$	56,566	$	5,862	$	1,194,005	$	10,975
Real estate - mortgage		4,041		382		1,229,509		12,558		1,331		109		1,248,166		12,581
Construction & land		1,019		71		241,634		3,629		1,071		91		263,330		3,943
Consumer		231		109		273,755		2,538		1,366		148		280,783		2,469
Other		22		22		93,263		766		-		-		98,945		826
Unallocated		-		-		-		540		-		-		-		937
Total	$	51,415	$	5,422	$	3,014,839	$	30,412	$	60,334	$	6,210	$	3,085,229	$	31,731

Information on impaired loans at June 30, 2018 and December 31, 2017 is reported in the following tables:

	At June 30, 2018
					Recorded		Recorded
			Recorded		investment		investment
	Unpaid		investment		with a		with no
	principal		in impaired		related		related		Related
(in thousands)	balance		loans		allowance		allowance		allowance
Commercial
Manufacturing	$	3,991	$	3,991	$	3,991	$	-	$	1,132
Finance and insurance		210		117		14		103		14
Healthcare		652		652		490		162		98
Real estate services		4,992		4,992		4,992		-		262
Construction		2,324		2,324		2,119		205		98
Other		34,252		34,026		32,269		1,757		3,234
		46,421		46,102		43,875		2,227		4,838
Real estate - mortgage
Residential & commercial owner-occupied		3,295		3,295		2,962		333		370
Residential & commercial investor		746		746		169		577		12
		4,041		4,041		3,131		910		382
Construction & land		1,019		1,019		1,019		-		71
Consumer		231		231		167		64		109
Other		22		22		22		-		22
Total	$	51,734	$	51,415	$	48,214	$	3,201	$	5,422

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	At December 31, 2017
					Recorded		Recorded
			Recorded		investment		investment
	Unpaid		investment		with a		with no
	principal		in impaired		related		related		Related
(in thousands)	balance		loans		allowance		allowance		allowance
Commercial
Manufacturing	$	3,302	$	3,302	$	3,302	$	-	$	238
Finance and insurance		473		473		17		456		17
Healthcare		718		718		459		259		207
Real estate services		7,982		7,982		7,982		-		544
Construction		1,689		1,457		977		480		71
Public administration		313		313		313		-		27
Other		42,660		42,321		41,030		1,291		4,758
		57,137		56,566		54,080		2,486		5,862
Real estate - mortgage
Residential & commercial owner-occupied		1,159		1,159		1,102		57		94
Residential & commercial investor		172		172		172		-		15
		1,331		1,331		1,274		57		109
Construction & land		1,071		1,071		1,071		-		91
Consumer		1,366		1,366		212		1,154		148
Total	$	60,905	$	60,334	$	56,637	$	3,697	$	6,210

	Impairedloans
	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
(in thousands)	Average recorded		Interest income		Average recorded		Interest income		Average recorded		Interest income		Average recorded		Interest income
Commercial
Manufacturing	$	5,052	$	84	$	2,028	$	30	$	4,469	$	171	$	2,037	$	59
Finance and insurance		295		6		513		10		354		13		286		10
Healthcare		627		10		550		8		657		20		398		14
Real estate services		5,014		-		5,717		52		6,003		-		5,981		102
Construction		1,959		37		1,663		20		1,791		72		1,625		40
Public administration		-		-		-		-		104		-		-		-
Other		36,526		548		19,665		223		38,457		1,069		14,635		402
		49,473		685		30,136		343		51,835		1,345		24,962		627
Real estate - mortgage
Residential & commercial owner-occupied		3,450		65		1,223		9		2,686		131		1,275		18
Residential & commercial investor		747		10		2,332		20		555		19		2,366		40
		4,197		75		3,555		29		3,241		150		3,641		58
Construction & land		1,032		8		1,850		15		1,045		17		1,871		31
Consumer		719		4		253		1		887		7		246		2
Other		90		-		-		-		107		1		-		-
Total	$	55,511	$	772	$	35,794	$	388	$	57,115	$	1,520	$	30,720	$	718

Interest income recognized on impaired loans presented in the table above primarily represents interest earned on troubled debt restructurings that meet the definition of an impaired loan and are subject to disclosure.  Interest income that would have been recorded if nonaccrual loans performed in accordance with their contractual terms was immaterial in the periods presented.

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The table below summarizes transactions related to troubled debt restructurings during the six months ended June 30, 2018.

(in thousands)	Performing		Nonperforming		Total
Beginning balance at December 31, 2017	$	52,817	$	3,682	$	56,499
New restructurings		6,893		173		7,066
Change in accrual status		(11,934)		11,934		-
Net paydowns		(13,102)		(877)		(13,979)
Charge-offs		-		(1,091)		(1,091)
Ending balance at June 30, 2018	$	34,674	$	13,821	$	48,495

The tables below provides information regarding troubled debt restructurings that occurred during the three and six months ended June 30, 2018 and 2017.  Pre-modification outstanding recorded investment reflects the Company’s recorded investment immediately before the modification.  Post-modification outstanding recorded investment represents the Company’s recorded investment at the end of the reporting period.  The tables below do not include loans restructured and paid off during the periods presented.

	Three months ended June 30, 2018						Three months ended June 30, 2017
			Pre-modification		Post-modification				Pre-modification		Post-modification
			outstanding		outstanding				outstanding		outstanding
	Number of		recorded		recorded		Number of		recorded		recorded
($ in thousands)	contracts		investment		investment		contracts		investment		investment
Commercial
Manufacturing		2	$	610	$	210		-	$	-	$	-
Finance and insurance		-		-		-		1		456		456
Healthcare		2		225		200		1		167		90
Construction		1		600		600		-		-		-
Other		3		1,450		1,424		8		4,031		3,427
Total commercial		8		2,885		2,434		10		4,654		3,973
Consumer		1		10		10		-		-		-
Total		9	$	2,895	$	2,444		10	$	4,654	$	3,973

	Six months ended June 30, 2018						Six months ended June 30, 2017
			Pre-modification		Post-modification				Pre-modification		Post-modification
			outstanding		outstanding				outstanding		outstanding
	Number of		recorded		recorded		Number of		recorded		recorded
($ in thousands)	contracts		investment		investment		contracts		investment		investment
Commercial
Manufacturing		3	$	460	$	439		-	$	-	$	-
Finance and insurance		-		-		-		1		456		456
Healthcare		2		225		200		3		465		362
Construction		3		1,546		1,455		-		-		-
Other		6		1,883		1,869		9		11,978		11,439
Total commercial		14		4,114		3,963		13		12,899		12,257
Real estate - mortgage
Residential and commercial owner-occupied		2		2,109		2,048		-		-		-
Residential & commercial investor		1		578		578		-		-		-
Total real estate - mortgage		3		2,687		2,626		-		-		-
Consumer		1		10		10		1		83		79
Total		18	$	6,811	$	6,599		14	$	12,982	$	12,336

Troubled debt restructurings during the three and six months ended June 30, 2018 and 2017 resulted primarily from the extension of repayment terms and interest rate concessions.  The Company had no charge-offs in conjunction with loans restructured during the three and six months ended June 30, 2018 and 2017.

At June 30, 2018 and December 31, 2017, there were $2.7 million and $4.0 million in outstanding commitments on restructured loans, respectively.

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The table below presents troubled loans restructured within the past 12 months that had a payment default during six months ended June 30, 2018 and 2017.

	Six months ended June 30,
	2018			2017
Troubled debt restructurings that subsequently defaulted ($ in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Commercial
Finance and insurance	1	$	1,366	-	$	-
Construction	-		-	1		48
Other	2		10,557	-		-
Total	3	$	11,923	1	$	48

The Company’s nonaccrual loans by class at June 30, 2018 and December 31, 2017 are reported in the following table:

(in thousands)	At June 30, 2018		At December 31, 2017
Commercial
Manufacturing	$	1,846	$	-
Finance and insurance		117		473
Healthcare		452		718
Construction		205		681
Other		13,618		4,313
Total commercial		16,238		6,185
Real estate-mortgage
Residential & commercial owner-occupied		333		57
Total real estate - mortgage		333		57
Consumer		148		1,275
Other		22		-
Total nonaccrual loans	$	16,741	$	7,517

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The tables below summarize the aging of the Company’s loan portfolio at June 30, 2018 and December 31, 2017.

	At June 30, 2018
	30 - 59		60 - 89										90 days or more
	Days		Days		90+ Days		Total						past due and
(in thousands)	past due		past due		past due		past due		Current		Total loans		accruing
Commercial
Manufacturing	$	-	$	-	$	1,846	$	1,846	$	76,986	$	78,832	$	-
Finance and insurance		-		4,000		-		4,000		50,095		54,095		-
Healthcare		4		-		-		4		160,405		160,409		-
Real estate services		-		-		-		-		117,958		117,958		-
Construction		1,001		-		75		1,076		74,737		75,813		-
Public administration		-		-		-		-		250,140		250,140		-
Other		2,216		626		11,503		14,345		470,444		484,789		-
		3,221		4,626		13,424		21,271		1,200,765		1,222,036		-
Real estate - mortgage
Residential & commercial owner-occupied		-		2,048		295		2,343		522,995		525,338		-
Residential & commercial investor		-		577		-		577		708,499		709,076		-
		-		2,625		295		2,920		1,231,494		1,234,414		-
Construction & land		202		-		-		202		244,242		244,444		-
Consumer		1,488		-		24		1,512		272,388		273,900		-
Other		-		-		-		-		93,267		93,267		-
Total loans held for investment	$	4,911	$	7,251	$	13,743	$	25,905	$	3,042,156	$	3,068,061	$	-
Unearned net loan fees												(1,807)
Net loans held for investment											$	3,066,254

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	At December 31, 2017
													Recorded
													investment
													in loans
	30 - 59		60 - 89										90 days or more
	Days		Days		90+ Days		Total						past due and
(in thousands)	past due		past due		past due		past due		Current		Total loans		accruing
Commercial
Manufacturing	$	-	$	-	$	-	$	-	$	85,187	$	85,187	$	-
Finance and insurance		-		456		213		669		41,849		42,518		213
Healthcare		370		-		113		483		163,302		163,785		-
Real estate services		1,503		-		135		1,638		127,209		128,847		135
Construction		721		600		681		2,002		65,988		67,990		-
Public administration		-		-		-		-		240,077		240,077		-
Other		3,463		459		2,302		6,224		515,728		521,952		-
		6,057		1,515		3,444		11,016		1,239,340		1,250,356		348
Real estate - mortgage
Residential & commercial owner-occupied		426		689		-		1,115		483,520		484,635		-
Residential & commercial investor		875		299		-		1,174		764,614		765,788		-
		1,301		988		-		2,289		1,248,134		1,250,423		-
Construction & land		730		-		-		730		265,351		266,081		-
Consumer		1,423		15		1,107		2,545		279,556		282,101		-
Other		-		2		-		2		98,914		98,916		-
Total loans held for investment	$	9,511	$	2,520	$	4,551	$	16,582	$	3,131,295	$	3,147,877	$	348
Unearned net loan fees												(2,314)
Net loans held for investment											$	3,145,563

6.  Accumulated Other Comprehensive Income

The following table provides information on reclassifications out of AOCI.

	Three months ended				Six months ended
	June 30,				June 30,
AOCI component (in thousands)	2018		2017		2018		2017		Line item in Condensed Consolidated Statements of Income
Available for sale securities:
Realized gain (loss)	$	4	$	-	$	4	$	(3)	Net (gain) loss on securities, other assets and OREO
Taxes		(1)		-		(1)		1	Provision for income taxes
Subtotal		3		-		3		(2)
Held to maturity securities:
Amortization of net unrealized gain on HTM securities		288		390		596		844	Interest on taxable / nontaxable securities
Taxes		(70)		(146)		(145)		(319)	Provision for income taxes
Subtotal		218		244		451		525
Cash flow hedges:
Loans		(126)		217		(142)		466	Interest and fees on loans
Debt		(145)		(339)		(386)		(697)	Interest on subordinated debentures and notes payable
Realized loss		(271)		(122)		(528)		(231)
Taxes		65		45		128		87	Provision for income taxes
Subtotal		(206)		(77)		(400)		(144)
Total reclassifications out of AOCI	$	15	$	167	$	54	$	379

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The following table provides the beginning and ending balances of AOCI and changes during the six months ended June 30, 2018.

Accumulated other comprehensive income (in thousands)	AFS		HTM		Cash flow hedges		Total
Balance at December 31, 2017	$	1,700	$	2,125	$	(3,966)	$	(141)
Other comprehensive loss, net of tax		(1,800)		(451)		(275)		(2,526)
Reclassification to retained earnings		369		448		(847)		(30)
Balance at June 30, 2018	$	269	$	2,122	$	(5,088)	$	(2,697)

7. Derivatives

ASC 815 contains the authoritative guidance on accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities.  As required by ASC 815, the Company records all derivatives on the consolidated balance sheets at fair value.

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and unknown cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain variable-rate loan assets and variable-rate borrowings.  The Company also enters into derivative financial instruments to protect against adverse changes in fair value on fixed-rate loans. 

The Company’s objective in using derivatives is to minimize the impact of interest rate fluctuations on the Company’s NII. To accomplish this objective, the Company uses interest rate swaps as part of its cash flow hedging strategy. The Company also offers an interest rate hedge program that includes various derivative products, including swaps, to assist its customers in managing their interest rate risk profile. In order to eliminate the interest rate risk associated with offering these products, the Company enters into derivative contracts with third parties to offset the customer contracts.  These customer accommodation interest rate swap contracts are not designated as hedging instruments.

The Company has also expanded its product offering by adding international banking products, which exposes the Company to foreign exchange risk.  The Company utilizes foreign exchange forward contracts to manage the risk associated with fluctuation in foreign exchange rates.

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.  Also, the Company has agreements with certain of its derivative counterparties that contain a provision where if the Bank fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

At June 30, 2018, the fair value of derivatives in a net liability position, excluding accrued interest and any adjustment for nonperformance risk, related to these agreements was $2.8 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $2.8 million against its obligations under these agreements.  At June 30, 2018, the Company was not in default under any of its debt or capitalization covenants.

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The table below presents the fair value of the Company’s derivative financial instruments as well as the classification within the Condensed Consolidated Balance Sheets.

	Asset derivatives					Liability derivatives
		Fair value at					Fair value at
	Balance sheet	June 30,		December 31,		Balance sheet	June 30,		December 31,
(in thousands)	classification	2018		2017		classification	2018		2017
Derivatives designated as hedging instruments under ASC 815:
Cash flow hedge - interest rate swap	Other assets	$	569	$	113	Accrued interest and other liabilities	$	7,410	$	6,732
Fair value hedge - interest rate swap	Other assets	$	2,114	$	628	Accrued interest and other liabilities	$	45	$	633
Derivatives not designated as hedging instruments under ASC 815:
Interest rate swap	Other assets	$	4,196	$	2,081	Accrued interest and other liabilities	$	4,195	$	2,176
Foreign exchange forward contracts	Other assets	$	52	$	28	Accrued interest and other liabilities	$	12	$	44

The tables below include information about financial instruments that are eligible for offset. 

	At June 30, 2018
	Assets						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(1)	$	2,683	$	-	$	2,683	$	(2,099)	$	-	$	584
Derivatives not designated as hedges(1)		4,248		-		4,248		(2,963)		-		1,285
Total	$	6,931	$	-	$	6,931	$	(5,062)	$	-	$	1,869

	At June 30, 2018
	Liabilities						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(2)	$	(7,455)	$	-	$	(7,455)	$	5,010	$	2,445	$	-
Derivatives not designated as hedges(2)		(4,207)		-		(4,207)		52		348		(3,807)
Securities sold under agreements to repurchase(3)		(38,994)		-		(38,994)		-		38,994		-
Total	$	(50,656)	$	-	$	(50,656)	$	5,062	$	41,787	$	(3,807)

	At December 31, 2017
	Assets						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(1)	$	741	$	-	$	741	$	(741)	$	-	$	-
Derivatives not designated as hedges(1)		2,109		-		2,109		(1,222)		-		887
Total	$	2,850	$	-	$	2,850	$	(1,963)	$	-	$	887

	At December 31, 2017
	Liabilities							Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(2)	$	(7,365)	$	-	$	(7,365)	$	741	$	6,624	$	-
Derivatives not designated as hedges(2)		(2,220)		-		(2,220)		1,222		968		(30)
Securities sold under agreements to repurchase(3)		(52,959)		-		(52,959)		-		52,959		-
Total	$	(62,544)	$	-	$	(62,544)	$	1,963	$	60,551	$	(30)

(1) Included in other assets.

(2) Included in accrued interest and other liabilities.

(3) Separately stated in the Condensed Consolidated Balance Sheets.

Cash Flow Hedges of Interest Rate Risk — For hedges of the Company’s variable-rate loan assets, interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

In October 2016, the Company entered into two interest rate swaps to hedge the risk of changes in cash flow on its LIBOR-based loan portfolio.  The interest rate swaps have a weighted average term of approximately

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five years and have a combined notional value of $100.0 million.  The Company pays a variable rate based on 1-month LIBOR and receives a weighted average fixed-rate of 1.20%.

For hedges of the Company’s variable-rate borrowings, interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments.  The Company has executed a series of interest rate swap transactions in order to fix the effective interest rate for payments due on its junior subordinated debentures with the objective of reducing the Company’s exposure to adverse changes in cash flows relating to payments on its LIBOR-based floating rate debt.  Select critical terms of the cash flow hedges are as follows:

(in thousands)	Notional		Fixedrate		Terminationdate
Hedged item - Junior subordinated debentures issued by:
CoBiz Statutory Trust I	$	20,000	4.99	%	March 17, 2022
CoBiz Capital Trust II	$	30,000	5.99	%	April 23, 2020
CoBiz Capital Trust III	$	20,000	5.02	%	March 30, 2024

Based on the Company’s ongoing assessments (including at inception of the hedging relationship), it is probable that there will be sufficient variable interest payments through the maturity date of the swaps.  The Company also monitors the risk of counterparty default on an ongoing basis.  The Company uses a regression analysis and the “Hypothetical Derivative” method described in ASC 815, for both prospective and retrospective assessments of hedge effectiveness on a quarterly basis.  The Company also uses the Hypothetical Derivative methodology to measure hedge ineffectiveness each period.  The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.The Company’s derivatives did not have any hedge ineffectiveness recognized in earnings during the three and six months ended June 30, 2018 and 2017.

Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received/paid on the Company’s variable-rate assets.  Payments received/paid on variable-rate liabilities will be reclassified to interest expense.  During the next 12 months, the Company estimates that $1.6 million will be reclassified as an increase to interest expense and $0.2 million will be reclassified as an increase to interest income.

Fair Value Hedges of Fixed-Rate Assets – The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates based on LIBOR.  The Company uses interest rate swaps to manage its exposure to changes in fair value on certain fixed-rate loans.  Interest rate swaps designated as fair value hedges involve the receipt of variable-rate payments from a counterparty in exchange for the Company’s fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.  Certain interest rate swaps met the criteria to qualify for the shortcut method of accounting.  Under the shortcut method of accounting, no ineffectiveness is assumed.  For interest rate swaps not accounted for under the shortcut method, the Company performs ongoing retrospective and prospective effectiveness assessments (including at inception) using a regression analysis to compare periodic changes in fair value of the swaps to periodic changes in fair value of the fixed-rate loans attributable to changes in the benchmark interest rate.  At June 30, 2018, the Company had interest rate swaps with a notional amount of $58.0 million used to hedge the change in the fair value of 11 commercial loans.  For derivatives that are designated and qualify as fair value hedges that are not accounted for under the shortcut method, the gain or loss on the derivative as well as the gain or loss on the hedged item attributable to the hedged risk are recognized in earnings.  The net amount representing hedge ineffectiveness that was recognized in “Other income” in the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2018 was immaterial.

Non-designated Hedges — Derivatives not designated as hedges are not speculative and primarily result from a service the Company provides to its customers.  The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions.  As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements,

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changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.   At June 30, 2018, the Company had 102 interest rate swaps with an aggregate notional amount of $325.1 million related to this program.  During the three and six months ended June 30, 2018 and 2017, gains and losses arising from changes in the fair value of these swaps, which are included in “Other income,” in the Condensed Consolidated Statements of Income, were immaterial.

The Company’s product offerings also include international banking products that create foreign currency exchange-rate risk exposure.  In order to economically reduce the risk associated with the fluctuation of foreign exchange rates, the Company utilizes short-term foreign exchange forward contracts to lock in exchange rates so the gain or loss on the forward contracts approximately offsets the transaction gain or loss.  These contracts are not designated as hedging instruments.  Ineffectiveness in the economic hedging relationship may occur as the foreign currency holdings are revalued based upon changes in the currency’s spot rate, while the forward contracts are revalued using the currency’s forward rates.  Forward contracts in gain positions are recorded at fair value in “Other assets” and, forward contracts in loss positions are recorded in “Accrued interest and other liabilities” in the Condensed Consolidated Balance Sheets.  Net changes in the fair value of the forward contracts are recognized through earnings, disclosed as ‘other’ noninterest income in the Condensed Consolidated Statements of Income.  At June 30, 2018, the Company had forward contracts with a notional amount of $5.9 million that mature in less than one year.  Net gains from forward contracts recognized and included in “Other income” in the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2018 and 2017 were immaterial.

8. Borrowed Funds

A summary of borrowed funds (excluding long-term debt) at June 30, 2018 and December 31, 2017 is included below.

	June 30,		December 31,
(in thousands)	2018		2017
Securities sold under agreements to repurchase (secured by pledge of mortgage-backed securities with an estimated fair value of $39,773 and $54,018, respectively)	$	38,994	$	52,959
Other short-term borrowings		190,000		77,640

The Company enters into sales of securities under agreements to repurchase. The amounts received under these agreements represent short-term borrowings and are reflected as a liability in the Condensed Consolidated Balance Sheets. The securities underlying these agreements are included in investment securities in the Condensed Consolidated Balance Sheets. At June 30, 2018, all securities sold under agreements to repurchase had a maturity date of less than three months.  The Company has no control over the market value of the securities, which fluctuates due to market conditions.  However, the Company is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price.  The Company manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

Securities sold under agreements to repurchase averaged $44.9 million in the first half of 2018 and $59.6 million in the year ended December 31, 2017.  The maximum amount outstanding at any month-end during the first half of 2018 was $48.5 million.  The maximum amount outstanding at any month-end during 2017 was $69.9 million.  At June 30, 2018 and December 31, 2017, the weighted average interest rate was 0.10%and 0.06%, respectively.  The assets underlying the securities sold under agreements to repurchase are GNMA, FNMA and FHLMC mortgage-backed securities.  All securities sold under agreements to repurchase had a maturity date of less than three months.

The Company has a line of credit with the FHLB with a rolling one-year term that matures every July with automatic renewals unless canceled.  The average FHLB line of credit balance was $116.6 million in the first six months of 2018 and $107.3 million in the year ended December 31, 2017.  The line of credit is collateralized by either qualifying loans or investment securities not otherwise pledged as collateral.  The Company pledged loans of $851.5 million and $877.9 million with a lending value of $583.9 million and $605.4 million at June 30, 2018 and December 31, 2017, respectively, as collateral for the FHLB line of credit. 

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The variable rate on the line of credit was 2.11% and 1.47% at June 30, 2018 and December 31, 2017, respectively.  The Company has also pledged $833.9 million of loans at June 30, 2018 to the Federal Reserve Bank of Kansas City as collateral for borrowing through the discount window lending program.  At June 30, 2018 and December 31, 2017, there was no amount outstanding with the discount window.

The Company had a revolving Line of Credit (LOC) agreement with an aggregate principal sum of up to $20.0 million bearing interest at 1-month LIBOR plus 225 basis points (2.25%).  The Company paid a quarterly commitment fee of 0.35% per annum on the unused portion of the LOC.  The LOC matured in May 2018 and was not renewed. 

The Company has approved federal funds purchase lines with eight banks with an aggregate credit line of $180.0 million.  At June 30, 2018 there were no outstanding amounts on the federal funds purchase lines, and $4.6 million was outstanding at December 31, 2017.  The average balance of federal funds purchased was $2.2 million in the first six months of 2018 and $1.5 million during the year ended December 31, 2017.

9. Segments

The Company’s operating segments consist of Commercial Banking, Fee-Based Lines and Corporate Support and Other.

The financial information for the Commercial Banking and Fee-Based Lines segments reflect activities which are specifically identifiable or which are allocated based on an internal allocation method.  The Corporate Support and Other segment includes activities that are not directly attributable to the other reportable segments including centralized bank operations and the activities of the Parent. The following tables report the results of operations for the three and six months ended June 30, 2018 and 2017 by segment.

	Three months ended June 30, 2018
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	39,090	$	-	$	87	$	39,177
Total interest expense		2,183		-		1,845		4,028
Provision for loan losses		(893)		-		(8)		(901)
Noninterest income		3,318		4,816		75		8,209
Noninterest expense		6,216		4,545		19,593		30,354
Management fees and allocations, net of tax		13,344		515		(13,859)		-
Provision (benefit) for income taxes		7,070		31		(4,590)		2,511
Net income (loss)	$	14,488	$	(275)	$	(2,819)	$	11,394

	Six months ended June 30, 2018
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	76,778	$	-	$	176	$	76,954
Total interest expense		3,524		-		3,672		7,196
Provision for loan losses		(1,209)		-		(17)		(1,226)
Noninterest income		7,064		9,930		176		17,170
Noninterest expense		12,261		8,891		37,772		58,924
Management fees and allocations, net of tax		26,907		990		(27,897)		-
Provision (benefit) for income taxes		14,383		245		(9,773)		4,855
Net income (loss)	$	27,976	$	(196)	$	(3,405)	$	24,375

	Three months ended June 30, 2017
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	35,320	$	1	$	85	$	35,406
Total interest expense		1,567		1		1,833		3,401
Provision for loan losses		682		-		(9)		673
Noninterest income		3,266		4,927		118		8,311

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Noninterest expense		8,016		4,262		14,377		26,655
Management fees and allocations, net of tax		8,345		317		(8,662)		-
Provision (benefit) for income taxes		9,179		224		(5,904)		3,499
Net income (loss)	$	10,797	$	124	$	(1,432)	$	9,489

	Six months ended June 30, 2017
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	68,314	$	1	$	172	$	68,487
Total interest expense		2,758		14		3,632		6,404
Provision for loan losses		1,374		-		(94)		1,280
Noninterest income		6,670		9,580		389		16,639
Noninterest expense		17,564		8,766		27,439		53,769
Management fees and allocations, net of tax		16,049		592		(16,641)		-
Provision (benefit) for income taxes		16,762		272		(11,464)		5,570
Net income (loss)	$	20,477	$	(63)	$	(2,311)	$	18,103

10. Fair Value Measurements

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability.  As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

· Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

· Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals.

· Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.  The Company evaluates fair value measurement inputs on an ongoing basis in order to determine if there is a change of sufficient significance to warrant a transfer between levels.  For example, changes in market activity or the addition of new unobservable inputs could, in the Company’s judgment, cause a transfer to either a higher or lower level. 

Assets and liabilities measured on a recurring basis

A description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Available for sale securities – At June 30, 2018, the Company held, as part of its investment portfolio, available for sale securities reported at fair value consisting of municipal securities, corporate debt securities, and TPS.  The fair value of the majority of municipal securities is determined using widely accepted valuation

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techniques including matrix pricing and broker-quote based applications.  Inputs include benchmark yields, reported trades, issuer spreads, and other relevant items.  As a result, the Company has determined that these valuations fall within Level 2 of the fair value hierarchy.  The Company also holds TPS that are recorded at fair value based on unadjusted quoted market prices for identical securities in an active market.  The majority of the TPS are actively traded in the market and as a result, the Company has determined that the valuation of these securities falls within Level 1 of the fair value hierarchy.  The Company also holds certain TPS and corporate debt securities for which unadjusted market prices are not available or the markets are not active and are therefore classified as Level 2 or Level 3.  The Company uses broker-dealer quotes, valuations based on similar but not identical securities, or the most recent market trade (which may not be current) to price these securities.  Total net unrealized gain recognized in AOCI at June 30, 2018 on TPS Level 3 securities was immaterial.

Derivative financial instruments – The Company uses interest rate swaps as part of its cash flow strategy to manage its interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques as discussed further below.  The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

Pursuant to guidance in ASC 820, credit valuation adjustments are incorporated into the valuation to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings and thresholds.

The Company uses Level 2 and Level 3 inputs to determine the valuation of its derivatives portfolio.  The valuation of derivative instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs (Level 2 inputs), including interest rate curves and implied volatilities. The estimates of fair value are made using a standardized methodology that nets the discounted expected future cash receipts and cash payments (based on observable market inputs). Level 3 inputs include the credit valuation adjustments which use estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.  At June 30, 2018 and December 31, 2017, the Company assessed the impact of the Level 3 inputs on the overall derivative valuations in terms of the significance of the credit valuation adjustments in basis points and as a percentage of the overall derivative portfolio valuation and the overall notional value.  The Company’s assessment determined that credit valuation adjustments were not significant to the overall valuation of the portfolio.  In addition, the significance of the credit value adjustments and overall derivative portfolio to the Company’s financial statements was considered.  As a result of the insignificance of the credit value adjustments to the derivative portfolio valuations and the Company’s financial statements, the Company classified the derivative valuations in their entirety in Level 2.

The Company uses foreign exchange forward contracts to mitigate exchange-rate risk arising from the Company’s foreign currency holdings to support its international banking product offering.  Fair value measurements of these assets or liabilities are priced based on spot and forward foreign currency rates and the credit worthiness of the contract counterparty.  These contracts are classified in Level 2.  Forward contracts in gain positions and in loss positions are classified in the Condensed Consolidated Balance Sheets as “Other assets” and “Accrued interest and other liabilities”, respectively.

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The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
	Balance at		identical assets		inputs		inputs
(in thousands)	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Assets
Available for sale securities:
Trust preferred securities	$	21,198	$	-	$	12,078	$	9,120
Corporate debt securities		216,650		-		216,650		-
Municipal securities		3,260		-		3,260		-
Total available for sale securities	$	241,108	$	-	$	231,988	$	9,120
Derivatives:
Cash flow hedges	$	569	$	-	$	569	$	-
Fair value hedges		2,114		-		2,114		-
Non-designated hedges		4,196		-		4,196		-
Foreign exchange forward contracts		52		-		52		-
Total derivative assets	$	6,931	$	-	$	6,931	$	-
Liabilities
Derivatives:
Cash flow hedges	$	7,410	$	-	$	7,410	$	-
Fair value hedges		45		-		45		-
Non-designated hedges		4,195		-		4,195		-
Foreign exchange forward contracts		12		-		12		-
Total derivative liabilities	$	11,662	$	-	$	11,662	$	-

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
	Balance at		identical assets		inputs		inputs
(in thousands)	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets
Available for sale securities:
Trust preferred securities	$	21,983	$	363	$	12,521	$	9,099
Corporate debt securities		141,495		-		141,495		-
Municipal securities		3,275		-		3,275		-
Total available for sale securities	$	166,753	$	363	$	157,291	$	9,099
Derivatives:
Cash flow hedges	$	113	$	-	$	113	$	-
Fair value hedges		628		-		628		-
Non-designated hedges		2,081		-		2,081		-
Foreign exchange forward contracts		28		-		28		-
Total derivative assets	$	2,850	$	-	$	2,850	$	-
Liabilities
Derivatives:
Cash flow hedges	$	6,732	$	-	$	6,732	$	-
Fair value hedge		633		-		633		-
Non-designated hedges		2,176		-		2,176		-
Foreign exchange forward contracts		44		-		44		-
Total derivative liabilities	$	9,585	$	-	$	9,585	$	-

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A reconciliation of the beginning and ending balances of assets measured at fair value, on a recurring basis, using Level 3 inputs follows:

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Beginning balance	$	9,128	$	10,017	$	9,099	$	9,448
Transfers and purchases		-		-		-		-
Net accretion		31		30		61		59
Sales / calls / maturities		-		-		-		-
Unrealized gain (loss) included in comprehensive income		(39)		151		(40)		691
Ending balance	$	9,120	$	10,198	$	9,120	$	10,198

Assets and liabilities measured on a nonrecurring basis

Fair value is used on a nonrecurring basis to evaluate certain financial assets and financial liabilities in specific circumstances.  Similarly, fair value is used on a nonrecurring basis for nonfinancial assets and nonfinancial liabilities such as foreclosed assets, other real estate owned, intangible assets, nonfinancial assets and liabilities evaluated in a goodwill impairment analysis and other nonfinancial assets measured at fair value for purposes of assessing impairment.  A description of the valuation methodologies used for financial and nonfinancial assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy, is set forth below.

Impaired loans – Certain collateral-dependent impaired loans are reported at the fair value of the underlying collateral.  Impairment is measured based on the fair value of the collateral, which is typically derived from appraisals that take into consideration prices in observed transactions involving similar assets and similar locations.  Each appraisal is updated on an annual basis, either through a new appraisal, a new evaluation or through the Company’s comprehensive internal review process. Appraised values are reviewed and monitored internally and fair value is assessed at least quarterly or more frequently when circumstances occur that indicate a change in fair value has occurred.  The Company classified impaired loans as Level 3.

Other real estate owned (OREO) – OREO represents real property taken by the Company either through foreclosure or through a deed in lieu thereof from the borrower.  The fair value of OREO is based on property appraisals adjusted at management’s discretion to reflect a further decline in the fair value of properties since the time the appraisal analysis was performed.  Therefore, the inputs used to determine the fair value of OREO fall within Level 3. The Company may include within OREO other repossessed assets received as partial satisfaction of a loan.  Other repossessed assets are not material and do not typically have readily determinable market values and are considered Level 3 inputs.

The following table presents the Company’s assets measured at fair value on a nonrecurring basis at the dates specified in the following table, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
			identical assets		inputs		inputs
(in thousands)		Total	(Level 1)		(Level 2)		(Level 3)
At June 30, 2018
Impaired loans	$	14,423	$	-	$	-	$	14,423
OREO	$	5,245	$	-	$	-	$	5,245
At December 31, 2017
Impaired loans	$	3,792	$	-	$	-	$	3,792
OREO	$	5,351	$	-	$	-	$	5,351

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Gains and losses, which include the provision for losses on impaired loans, recorded in relation to assets and liabilities measured on a nonrecurring basis are presented below:

	Gain for the three months ended				Gain (loss) for the six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Impaired loans	$	479	$	567	$	(807)	$	971

In accordance with ASC 310, the fair value of OREO recorded as an asset is reduced by estimated selling costs.  The following table is a reconciliation of the fair value measurement of OREO disclosed pursuant to ASC 820 to the amount recorded on the Condensed Consolidated Balance Sheets:

	At		At
(in thousands)	June 30, 2018		December 31, 2017
OREO recorded at fair value	$	5,245	$	5,351
Estimated selling costs		(266)		(272)
OREO	$	4,979	$	5,079

The following tables provide information describing the valuation techniques used to determine recurring and nonrecurring fair value measurements categorized within Level 3 of the fair value hierarchy at June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Fair value				Weighted
Category	(in thousands)		Valuation technique	Unobservable input	average		Range
Trust preferred securities	$	9,120	Market approach	Discount to carrying value using broker quotes or observable prices on similar securities	7	%	4% - 19%
Impaired loans:
Commercial	$	13,449	Sales comparison(1)	Management discount for asset type	81	%	0% -  86%
Real estate - mortgage		910	Sales comparison(2)	Sales comparison adjustments	(2)	%	(4)% - 0%
Consumer		64	Sales comparison(2)	Sales comparison adjustments	(11)	%	(12)% - (7)%
Total impaired loans	$	14,423
OREO:
Commercial	$	190	Property appraisals(2)	Management discount for property type	0	%	NA
Construction & land		5,055	Property appraisals(2)	Management discount for property type	50	%	NA
Total OREO	$	5,245

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	At December 31, 2017
	Fair value				Weighted
Category	(in thousands)		Valuation technique	Unobservable input	average		Range
Trust preferred securities	$	9,099	Market approach	Discount to carrying value using broker quotes or observable prices on similar securities	7	%	5% - 15%
Impaired loans:
Commercial	$	2,581	Sales comparison(1)	Management discount for asset type	59	%	0% - 98%
Real estate - mortgage		57	Sales comparison(2)	Sales comparison adjustments	(4)	%	NA
Consumer		1,154	Sales comparison(2)	Sales comparison adjustments	(11)	%	(20)% - (7)%
Total impaired loans	$	3,792
OREO:
Commercial	$	190	Property appraisals(2)	Management discount for property type	0	%	NA
Construction & land		5,161	Property appraisals(2)	Management discount for property type	17	%	NA
Total OREO	$	5,351

(1) Discount represents management’s discounts applied to market valuation of various business asset types including accounts receivable and other commercial assets. 

(2) The fair value of OREO and collateral-dependent impaired loans is based on third-party property appraisals. The majority of the appraisals utilize at least two valuation approaches or a combination of approaches including a market approach, where prices and other relevant information generated by market transactions involving similar or comparable properties are used to determine fair value. Appraisals may include an ‘as is’ and ‘upon completion’ valuation approach. Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Also, prospective values are based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal. Positive adjustments disclosed in these tables represent increases and negative adjustments represent decreases in fair value.

The following table includes the estimated fair value of the Company’s financial instruments.  The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and nonrecurring basis are discussed above.  The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies and are based on the exit price notion set forth by ASU 2016-01 effective January 1, 2018 and applied to this disclosure on a prospective basis. Estimated fair value of assets and liabilities carried at cost at December 31, 2017 were based on an entry price notion.  Considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.  The use of different

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market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts at June 30, 2018 and December 31, 2017.

	Fair Value	June 30, 2018				December 31, 2017
	Classification	Carrying		Estimated		Carrying		Estimated
(in thousands)	level	value		fair value		value		fair value
Financial assets:
Cash and cash equivalents	2	$	84,858	$	84,858	$	80,180	$	80,180
Investment securities available for sale(1)			241,108		241,108		166,753		166,753
Investment securities held to maturity(1)			388,917		383,534		362,544		360,071
Other investments	2		2,176		2,176		2,174		2,174
Loans — net	3		3,030,421		2,989,891		3,107,622		3,080,935
Accrued interest receivable(2)			14,087		14,087		14,150		14,150
Derivatives	2		6,931		6,931		2,850		2,850
Financial liabilities:
Deposits	2	$	3,144,541	$	3,143,432	$	3,225,220	$	3,224,417
Securities sold under agreements  to repurchase	2		38,994		31,240		52,959		49,436
Short-term borrowings	2		190,000		190,000		77,640		77,640
Accrued interest payable(2)			998		998		1,077		1,077
Subordinated notes payable	3		59,239		56,635		59,195		58,451
Junior subordinated debentures	2		72,166		72,166		72,166		72,166
Derivatives	2		11,662		11,662		9,585		9,585

(1) AFS and HTM securities are primarily classified as Level 2 and Level 3 of the fair value hierarchy.

(2) Accrued interest receivable/payables are classified in the same level hierarchy as the underlying assets and liabilities.

The fair value estimates presented herein are based on pertinent information available to management at June 30, 2018 and December 31, 2017.  Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

11.  Regulatory Matters

The following table presents the regulatory capital ratios of the Bank and Holding Company, including regulatory thresholds, at June 30, 2018.  The minimum CCB for 2018 increased to 1.875% from 1.25% in 2017. The CCB increases 0.625% annually through 2019 to 2.5% and is designed to establish a capital range for banking organizations above minimum requirements to insulate banks from periods of stress and impose constraints on dividends, share repurchases and discretionary bonus payments when capital levels fall below prescribed levels.

	At June 30, 2018				Capitalized Ratio
	Bank		Company				Minimum ratio
(in thousands)	Ratios		Ratios		Well(1)		plus fully phased-in CCB
Common equity tier 1 capital	11.1	%	10.6	%	6.5	%	7.0	%
Tier 1 capital	11.1	%	12.4	%	8.0	%	8.5	%
Total capital	14.0	%	15.2	%	10.0	%	10.5	%
Tier 1 leverage	9.6	%	10.7	%	5.0	%	4.0	%

(1) The ratios for the well-capitalized requirement are only applicable to the Bank.  However, the Company manages its capital position as if the requirement applies to the consolidated entity and has presented the ratios as if they also applied to the Company.

12.  Revenue and Expense

Revenue from Contracts with Customers and Supplemental Financial Data

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On January 1, 2018 the Company adopted ASC Topic 606, as revised under ASUs 2014-09, 2014-08 and 2016-20, using the modified retrospective method.  Other income disclosures for periods beginning after January 1, 2018 are presented under revised ASC Topic 606, which have not materially changed from the prior year amounts.  Consistent with Topic 606, noninterest income covered by this guidance is recognized as services are transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services. See Note 9 for disclosure of noninterest income by operating segment.

Deposit Service Charges — Deposit service charges primarily consist of fees earned from our treasury management services.  These services include account reconciliation, bill pay, ACH, positive pay, lockbox, remote deposit, online banking and cash vault, among others.  Customers are given the option to pay for these services in cash or by offsetting the fees for these services against an earnings credit that is given for maintaining noninterest-bearing deposits.  The Company’s performance obligations on its treasury services are satisfied either at the time of the transaction or over the course of a month.  Most customers pay deposit charges on a monthly basis.  

Investment Advisory Income — Investment advisory income consists of fees earned from providing investment supervisory and financial planning services.  The Company’s obligation to provide investment management services to customers are a series of distinct services that form a single performance obligation that is provided on a continuous basis over the course of each quarter.  Fees earned are based upon a percentage of AUM that is assessed for each calendar quarter during any part of which a client agreement is in effect. The fee is paid quarterly, normally in arrears, based on the market value of the AUM on the last day of the quarter.

Insurance Income — Insurance income is comprised of three primary sources: Employee Benefits brokerage, P&C brokerage and Bonus income.  Under most of our insurance contracts, the Company acts a broker between the client and the insurance carrier with the carrier billing the insured party. The Company’s involvement in a direct billing arrangement is limited to commissions paid to the Company by the insurance carrier. Additionally, for certain policies the Company enters into an agency billing arrangement and directly bills and collects payment from the insured and remits funds to the insurance carrier in accordance with the agreement.  Commission expense paid to production staff is variable and recorded in the same period in which the performance obligation is satisfied.  

· Employee Benefits (EB) brokerage — The EB division assists companies in designing and managing comprehensive employee benefit programs. The services provided by the Company are collectively benefit management services which are considered a bundle of services that are highly interrelated. Each of the underlying services are activities to fulfill the benefit management service and are not distinct and separate performance obligations. Revenue is recognized over the contract term as services are rendered on a monthly basis.  Customer payments are usually received on a monthly basis.

· P&C brokerage — P&C insurance includes the brokerage of both personal and commercial coverages. The placement of the policy constitutes the completion of the performance obligation for a P&C contract and revenue is recognized at that time.  Customers can elect to pay premiums at the time of placement or on an installment basis over the term of the policy, which is predominantly an annual period.  The Company’s commission is based on a percentage of the premium.

· Bonus income — The Company earns supplemental compensation based on volume metrics and loss ratios. Bonus income variables differ by contract but generally include metrics used to stimulate performance improvement and sales growth.  The Company calculates reasonable estimates of minimum variable consideration for which it is probable that a significant reversal of cumulative revenue will not occur as the underlying policies are placed.

Merchant and Bankcard Fees — The Company earns various types of network transaction fees from third party payment network providers which consist of (i) interchange fees earned from the payment network as a debit card issuer, (ii) referral fee income in the form of a percentage of interchange income earned on credit cards, and (iii) ongoing merchant fees earned by the Company for referring our clients to the payment processing provider which allows our clients to accept credit cards as a form of payment. The Company is an

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issuer of debit cards only as it relates to merchant and bankcard fees.  Interchange income, which is settled on a daily basis, is recognized as settlement occurs. Chargebacks have not historically been, nor are they expected to be significant to the overall fee revenue and will be recognized upon occurrence.  Referral and merchant fees are recognized when the transaction occurs.

Contract Costs — Costs associated with revenue from contracts with customers predominantly relate to contracts that have a period of one year or less.  The Company has elected to expense the applicable costs as incurred.

At June 30, 2018 and December 31, 2017, the Company had receivables from customers of $3.3 million and $3.7 million, respectively.

The following table presents our noninterest income disaggregated by revenue source.

	Three months ended				Six months ended
Noninterest income	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Depository service charges	$	1,577		1,714	$	3,232	$	3,459
Investment advisory income		1,678		1,500		3,333		3,031
Property and casualty		988		1,114		2,220		2,243
Employee benefits		2,001		2,114		4,076		3,753
Bonus income and merchant and bankcard fees		560		663		1,189		1,483
Revenue from contracts with customers		6,804		7,105		14,050		13,969
Loan fees		526		347		1,269		863
Other customer service fees		340		259		579		492
Bank-owned life insurance		355		310		753		659
Other investments		124		372		299		747
Derivative valuation		45		(80)		201		(137)
Other		15		(2)		19		46
Other noninterest income		1,405		1,206		3,120		2,670
Total noninterest income	$	8,209		8,311	$	17,170	$	16,639

The following table provides supplemental information on the detail of other noninterest expense.

	Three months ended				Six months ended
Other noninterest expense	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Marketing and business development	$	679	$	682	$	1,380	$	1,388
Service contracts		1,414		1,428		2,759		2,721
Professional fees		2,375		794		3,907		1,698
Office supplies and delivery		251		278		502		581
Other		861		829		1,713		1,868
Total	$	5,580	$	4,011	$	10,261	$	8,256

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, CoBiz Financial Inc.'s and BOK Financial Corporation's expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "target," "estimate," "continue," "positions," "plan," "predict," "project," "forecast," "guidance," "goal," "objective," "prospects," "possible" or "potential," by future conditional verbs such as "assume," "will," "would," "should," "could" or "may", or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made and we assume no duty to update forward-looking statements. Actual results may differ materially from current projections.

In addition to factors previously disclosed in CoBiz Financial Inc.'s and BOK Financial Corporation's reports filed with the SEC and those identified elsewhere in this Report, including the risk factors in Part II, Item 1A, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the ability to obtain regulatory approvals and meet other closing conditions to the Merger, including approval by CoBiz Financial Inc.'s shareholders on the expected terms and schedule, including the risk that regulatory approvals required for the Merger are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the Merger; difficulties and delays in integrating CoBiz Financial Inc.'s business or fully realizing cost savings and other benefits; business disruption following the Merger; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer acceptance of BOK Financial Corporation's products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and notes thereto included in this Report. Certain terms used in this discussion are defined in the notes to those financial statements. For a description of our accounting policies, see Note 1 of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2017. For a discussion of the segments included in our principal activities, see Note 9 of the Notes to the Condensed Consolidated Financial Statements in this Report.

Executive Summary

CoBiz Financial Inc. is a $3.9 billion financial holding company offering a broad array of financial service products to its target market of professionals, small and medium-sized businesses, and high-net-worth individuals primarily in Arizona and Colorado.  Our operating segments include Commercial Banking and Fee-Based Lines.

Earnings are derived primarily from our NII, which is interest income less interest expense, and our noninterest income earned from fee-based business lines and banking service fees, offset by noninterest expense. As the majority of our assets are interest-earning and our liabilities are interest-bearing, changes in interest rates impact our net interest income, the largest component of our operating revenue (defined as NII plus noninterest income).

Recent Developments

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On June 17, 2018, the Company entered into a Merger Agreement with BOK and its Merger Sub, an Oklahoma corporation and direct wholly-owned subsidiary of BOK.  Subject to the terms and conditions of the Merger Agreement, CoBiz shareholders will have the right to receive upon the effectiveness of the Merger 0.17 shares of BOK common stock and $5.70 in cash, for each share of CoBiz common stock.The completion of the Merger, which is expected to occur in the fourth quarter of 2018, is subject to customary conditions, including, among others, (1) the approval of the Merger Agreement by CoBiz's shareholders, (2) authorization for listing on the Nasdaq of the shares of BOK common stock to be issued in the Merger, (3) the effectiveness of the registration statement on Form S-4 for the BOK common stock to be issued in the Merger, (4) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the consummation of the Merger illegal and (5) the receipt of required regulatory approvals, including the approval of the Federal Reserve Board and the Office of the Comptroller of the Currency. Each party's obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) performance in all material respects by the other party of its obligations under the Merger Agreement and (iii) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

The Company adopted the TCJA in the first quarter of 2018, resulting in impacts to comparability with prior periods in the following areas: net interest income, NIM, the efficiency ratio, the provision for income taxes, and net income.

Financial and Operational Highlights

Noted below are some of the Company’s significant financial performance measures and operational results:

INCOME STATEMENT	Three months ended June 30,						Six months ended June 30,
(in thousands, except per share amounts)	2018			2017			2018			2017
Net interest income before provision	$	35,149		$	32,005		$	69,758		$	62,083
Provision for loan losses		(901)			673			(1,226)			1,280
Noninterest income		8,209			8,311			17,170			16,639
Noninterest expense		30,354			26,655			58,924			53,769
Net income		11,394			9,489			24,375			18,103
Diluted earnings per common share	$	0.27		$	0.23		$	0.58		$	0.43
Net interest margin		3.94	%		3.76	%		3.94	%		3.76	%
Return on average assets		1.19	%		1.01	%		1.28	%		0.99	%
Return on average shareholders' equity		13.34	%		12.10	%		14.60	%		11.74	%

· NII for the three and six months ended June 30, 2018 increased $3.1 million and $7.7 million, respectively, over the prior year periods.  The increases were due to growth in average assets and expansion of loan yields.  The net interest margin was 3.94% for both the three and six months ended June 30, 2018, compared to 3.76% in the prior year periods.   

· Provision for loan losses for the three and six months ended June 30, 2018 was a negative $0.9 million and negative $1.2 million, respectively, compared to a provision of $0.7 million and $1.3 million in the prior year periods.  The negative provision for loan losses in the 2018 periods was driven primarily by decrease in the loan portfolio in the first six months of 2018.

· The Company’s effective tax rate declined to 18.1% and 16.6% for the three and six months ended June 30, 2018, compared to 26.9% and 23.5% in the prior year periods due to the lowered federal tax rate pursuant to the TCJA.  The effective tax rate in the second quarter of 2018 increased due to certain non-deductible expenses related to the Merger transaction and a decrease in excess tax benefits compared to the first quarter of 2018.

· Net income for the three and six months ended June 30, 2018 of $11.4 million and $24.4 million, respectively, increased $1.9 million and $6.3 million, respectively, over the prior year periods.  Merger-related costs of $1.7 million were recognized in the second quarter of 2018.

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BALANCE SHEET AND CREDIT QUALITY	At June 30,			At December 31,
(in thousands)	2018			2017
Total assets	$	3,881,875		$	3,846,272
Total investments		646,648			539,416
Total loans		3,066,254			3,145,563
Total deposits		3,144,541			3,225,220
Total shareholders' equity		346,104			329,284
Allowance for loan losses	$	35,834		$	37,941
Nonperforming assets		21,720			12,944
Allowance for loan losses to total loans		1.17	%		1.21	%
Nonperforming assets to total assets		0.56	%		0.34	%

· The loan portfolio at June 30, 2018 decreased $79.3 million, or 2.5%, over the balance at December 31, 2017. 

· The ALLL was 1.17% of total loans at June 30, 2018 and 1.21% at December 31, 2017.  In the first half of 2018, net charge-offs in the ALLL were $0.9 million. 

· Total deposits at June 30, 2018 decreased $80.7 million, or 2.5%, over the balance at December 31, 2017.

· The Company’s total risk-based capital ratio was 15.2% at June 30, 2018.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In making those critical accounting estimates, we are required to make assumptions about matters that may be highly uncertain at the time of the estimate. Different estimates we could reasonably have used, or changes in the assumptions that could occur, could have a material effect on our financial condition or results of operations.  A description of our critical accounting policies is provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2017.

Financial Condition

Total assets at June 30, 2018 were $3.88 billion, an increase of $35.6 million or 0.9% from $3.85 billion at December 31, 2017.  Assets consist primarily of net loans and investment securities, accounting for 95% of total assets.  Total liabilities at June 30, 2018 were $3.54 billion, compared to $3.52 billion at December 31, 2017.  Deposits, securities sold under an agreement to repurchase and other short-term borrowings total 95% of total liabilities.  Shareholders’ equity at June 30, 2018 was $346.1 million, an increase of $16.8 million or 5.1% from $329.3 million at December 31, 2017.  The following paragraphs discuss changes in the relative mix of certain assets and liability classes and reasons for such changes.

Investments.  The Company manages its investment portfolio to provide interest income and to meet the collateral requirements for public deposits, customer repurchases and wholesale borrowings. Investments were $646.6 million at June 30, 2018 and $539.4 million at December 31, 2017 and accounted for 16.7% of total assets at June 30, 2018 and 14.0% of total assets at December 31, 2017.  The Company expanded the investment portfolio in 2018 due to the increase in yields on certain investments and the decrease in the loan portfolio.

The investment portfolio is primarily comprised of MBS explicitly (GNMA) and implicitly (FNMA and FHLMC) backed by the U.S. Government. The portfolio does not include any securities exposed to sub-prime mortgage loans. The investment portfolio also includes single-issuer TPS, corporate debt and municipal

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securities.  The corporate debt securities portfolio primarily consists of senior and subordinated debentures issued by the financial services industry.  None of the issuing institutions are in default, nor have interest payments on the TPS been deferred. 

The net unrealized gain on AFS securities was $0.4 million at June 30, 2018 compared to $2.7 million at December 31, 2017.  The Company did not recognize any OTTI in earnings during the three and six months ended June 30, 2018.  The following table presents the composition of the Company’s investment portfolio at June 30, 2018 and December 31, 2017.

	Carrying Value at				Increase (decrease)
(in thousands)	June 30, 2018		December 31, 2017		Amount		%
AFS:
Trust preferred securities	$	21,198	$	21,983	$	(785)	(3.6)	%
Corporate debt securities		216,650		141,495		75,155	53.1	%
Municipal securities		3,260		3,275		(15)	(0.5)	%
Total AFS	$	241,108	$	166,753	$	74,355	44.6	%
HTM:
Mortgage-backed securities	$	344,675	$	318,128	$	26,547	8.3	%
Trust preferred securities		10,773		10,721		52	0.5	%
Municipal securities		33,469		33,695		(226)	(0.7)	%
Total HTM	$	388,917	$	362,544	$	26,373	7.3	%

Loans.  Gross loans decreased $79.3 million to $3.07 billion at June 30, 2018, from $3.15 billion at December 31, 2017. In the first six months of 2018, the Company extended $529.1 million in new credit relationships and advances on existing lines.  Offsetting credit extensions were paydowns and maturities of $606.9 million and gross charge-offs of $1.4 million.  The following table presents the composition of the Company’s loan portfolio at the dates indicated.

	At June 30, 2018				At December 31, 2017				At June 30, 2017
LOANS			%of				% of				% of
(in thousands)	Amount		portfolio		Amount		portfolio		Amount		portfolio
Commercial	$	1,222,780	40.4	%	$	1,250,571	40.2	%	$	1,272,304	42.1	%
Owner-occupied real estate		525,020	17.3	%		484,526	15.6	%		481,180	15.9	%
Investor real estate		708,530	23.4	%		764,971	24.6	%		747,765	24.7	%
Construction & land		242,653	8.0	%		264,401	8.5	%		162,318	5.4	%
Consumer		273,986	9.0	%		282,149	9.1	%		287,790	9.5	%
Other		93,285	3.1	%		98,945	3.2	%		109,597	3.6	%
Total loans		3,066,254	101.2	%		3,145,563	101.2	%		3,060,954	101.2	%
Allowance for loan losses		(35,834)	(1.2)	%		(37,941)	(1.2)	%		(35,625)	(1.2)	%
Total net loans	$	3,030,420	100.0	%	$	3,107,622	100.0	%	$	3,025,329	100.0	%

Geographically, Colorado loans totaled $1.97 billion, a decrease of $50.0 million from December 31, 2017.  Arizona loans totaled $1.10 billion, a decrease of $29.3 million from December 31, 2017.

The ALLL decreased $2.1 million during the first half of 2018 due to a negative provision for loan losses of $1.2 million and net charge-offs of $0.9 million.  See the Provision for Loan Losses and Allowance for Loan Losses sections below and Note 5 for additional discussion.

Deferred Income Taxes.  Net deferred income tax assets increased $0.6 million to $13.7 million at June 30, 2018, from $13.1 million at December 31, 2017. The increase was primarily related to the tax effect of the change in the fair value of the investment portfolio. 

Other Assets.  Other assets increased $1.5 million to $21.6 million at June 30, 2018, from $20.1 million at December 31, 2017.  The change was primarily from a $4.1 million increase in the value of derivative assets due to the upward movement in short-term rates.  This increase was partially offset by a $2.0 million decrease in tax receivables which were used to satisfy the Company’s first quarter tax liability.

Deposits.  Total deposits decreased $80.7 million to $3.14 billion at June 30, 2018 from $3.23 billion at December 31, 2017.  The Company typically has a seasonal decrease in deposits during the first half of each calendar year as customers make tax and bonus payments.  Noninterest-bearing deposits at June 30, 2018 comprised 46.1% of total deposits, compared to 45.7% at December 31, 2017. 

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The Company has reciprocal Certificate of Deposit Account Registry Service ® (CDARS) accounts and Insured Cash Sweep (ICS) accounts that are viewed as customer-related deposits. The CDARS and ICS programs are provided through a third party and are designed to provide full FDIC insurance on deposit amounts by exchanging or reciprocating larger depository relationships with other member banks. Depositor funds are broken into smaller amounts and placed with other banks that are members of the network. Each member bank issues deposit amounts at a level that the entire deposit is eligible for FDIC insurance. CDARS and ICS are technically brokered deposits; however, the Company considers the reciprocal deposits placed through these programs as core funding due to the customer relationship that generated the transaction and does not report the balances as brokered sources in its internal or external financial reports.  The Company had balances of $309.3 million and $344.9 million in CDARS and ICS accounts at June 30, 2018 and December 31, 2017, respectively.  The following table presents the composition of the Company’s deposit portfolio at the dates indicated. 

	At June 30, 2018				At December 31, 2017				At June 30, 2017
DEPOSITS			% of				% of				% of
(in thousands)	Amount		portfolio		Amount		portfolio		Amount		portfolio
Money market	$	864,190	27.5	%	$	875,936	27.2	%	$	898,615	29.2	%
Interest-bearing demand		712,061	22.6	%		737,934	22.9	%		696,971	22.7	%
Savings		21,218	0.7	%		21,453	0.7	%		22,748	0.7	%
Certificates of deposits under $100		16,897	0.5	%		17,715	0.5	%		18,748	0.6	%
Certificates of deposits $100 and over		64,030	2.0	%		69,736	2.2	%		79,103	2.6	%
Reciprocal CDARS		15,251	0.5	%		28,796	0.9	%		42,046	1.4	%
Total interest-bearing deposits		1,693,647	53.9	%		1,751,570	54.3	%		1,758,231	57.2	%
Noninterest-bearing demand deposits		1,450,894	46.1	%		1,473,650	45.7	%		1,314,408	42.8	%
Total deposits	$	3,144,541	100.0	%	$	3,225,220	100.0	%	$	3,072,639	100.0	%

Securities Sold Under Agreements to Repurchase.  Customer repurchase agreements are transacted with customers as a way to enhance our customers’ interest-earning ability.  The Company does not consider customer repurchase agreements to be a wholesale funding source, but rather an additional treasury management service provided to a limited number of customers. Our customer repurchase agreements are based on an overnight investment sweep that can fluctuate based on our customers’ operating account balances.  The Company has limited the use of customer repurchase agreements and is not marketing the product to new customers.  While the number of customers utilizing this product is not expected to grow, the balance will vary from period-to-period based on the operations of the underlying customers.

Other Short-Term Borrowings.  Other short-term borrowings consist of federal funds purchased, overnight borrowings from the FHLB and advances on a line of credit maintained at the Parent.  Short-term borrowings are used as part of our liquidity management strategy and fluctuate based on the Company’s cash position. The Company’s wholesale funding needs are largely dependent on core deposit levels which can be volatile in uncertain economic conditions and sensitive to competitive pricing. At June 30, 2018, the Company had $190.0 million in short-term borrowings outstanding, compared to $77.6 million at December 31, 2017.  Average balances of short-term borrowings, which are more reflective of the Company’s usage, were $149.4 million and $118.7 million for the three and six months ended June 30, 2018, compared to $224.7 million and $157.7 million for the three and six months ended June 30, 2017, respectively.  Short-term borrowings tend to increase in the first half of each calendar year to fund the seasonal outflow of deposits.  If the Company is unable to retain deposits or maintain deposit balances at a level sufficient to fund asset growth, the composition of interest-bearing liabilities may shift toward additional wholesale funds or other borrowings, which bear a higher interest cost than core deposits.

Accrued Interest and Other Liabilities.  Accrued interest and other liabilities increased $1.0 million to $30.8 million at June 30, 2018 from $29.8 million at December 31, 2017.  The increase was primarily due to an increase in the fair value of derivative liabilities, taxes payable and accrued Merger costs, offset by a decrease in accrued bonuses from bonuses paid in the first quarter of 2018.

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Results of Operations

Overview

The following table presents the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017, followed by a discussion of the major components of the Company’s income, expense and performance.

					2018 vs 2017								2018 vs 2017
INCOME STATEMENT	Three months ended				Increase				Six months ended				Increase
	June 30,				(decrease)				June 30,				(decrease)
(in thousands)	2018		2017		Amount		%		2018		2017		Amount		%
Interest income	$	39,177	$	35,406	$	3,771	10.7	%	$	76,954	$	68,487	$	8,467	12.4	%
Interest expense		4,028		3,401		627	18.4	%		7,196		6,404		792	12.4	%
NET INTEREST INCOME BEFORE PROVISION		35,149		32,005		3,144	9.8	%		69,758		62,083		7,675	12.4	%
Provision for loan losses		(901)		673		(1,574)	(233.9)	%		(1,226)		1,280		(2,506)	(195.8)	%
NET INTEREST INCOME AFTER PROVISION		36,050		31,332		4,718	15.1	%		70,984		60,803		10,181	16.7	%
Noninterest income		8,209		8,311		(102)	(1.2)	%		17,170		16,639		531	3.2	%
Noninterest expense		30,354		26,655		3,699	13.9	%		58,924		53,769		5,155	9.6	%
INCOME BEFORE INCOME TAXES		13,905		12,988		917	7.1	%		29,230		23,673		5,557	23.5	%
Provision for income taxes		2,511		3,499		(988)	(28.2)	%		4,855		5,570		(715)	(12.8)	%
NET INCOME	$	11,394	$	9,489	$	1,905	20.1	%	$	24,375	$	18,103	$	6,272	34.6	%

Annualized return on assets for the three and six months ended June 30, 2018 was 1.19% and 1.28%, respectively, compared to 1.01% and 0.99% in the same periods of 2017.  The improvement in the return on assets in 2018 compared to 2017 was primarily due to an increase in NII, a decrease in the provision for loan losses, and a decrease in taxes.  NII, which is the largest component of the Company’s operating revenue, benefited from both an increase in interest-earning assets and short-term rates. 

Noninterest income as a percentage of taxable equivalent operating revenue(1) was 18.42% and 19.22% for the three and six months ended June 30, 2018, respectively, compared to 19.61% and 20.01% in the same periods of 2017.  The Company’s efficiency ratio – taxable equivalent(1) (efficiency ratio) was 68.13% and 66.10% in the three and six months ended June 30, 2018, respectively, compared to 62.83% and 65.04% in the same periods of 2017.  The efficiency ratio increased in 2018 due to professional service costs related to the pending Merger and certain technology related initiatives.  The efficiency ratio is presented on a taxable equivalent basis and is directly impacted by the tax rate paid by the Company.  The efficiency ratio increases with a decrease in tax rates, and decreases with an increase in tax rates.  Although the TCJA benefits net income due to the reduction in the federal income tax rate from 35% to 21%, it increases the efficiency ratio.

(1) Taxable equivalent operating revenue is a non-GAAP financial measure, and the efficiency ratio-taxable equivalent is computed using non-GAAP financial measures.  Taxable equivalent operating revenue is comprised of taxable equivalent net interest income and noninterest income.  To calculate taxable equivalent net interest income, the interest earned on tax exempt loans and investment securities has been adjusted to reflect the amount that would have been earned had these investments been subject to normal income taxation.  The efficiency ratio equals noninterest expense adjusted to exclude gains and losses on OREO, other assets and investments, divided by the sum of taxable equivalent net interest income.  The Company believes these measures are useful supplementary financial measures that enables investors to assess the performance of the Company’s operations and for comparison to the Company’s peers.   The following table includes non-GAAP financial measures used in the computation of the efficiency ratio and the ratio of noninterest income to taxable equivalent operating revenue and provides reconciliations of non-GAAP financial measures.  

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		Three months ended						Six months ended
		June 30,						June 30,
	(in thousands)	2018			2017			2018			2017
	Noninterest expense - GAAP, adjusted for:	$	30,354		$	26,655		$	58,924		$	53,769
	Net (gain) loss on securities, other assets and OREO		(4)			32			(124)			(313)
A	Adjusted noninterest expense - non-GAAP	$	30,358		$	26,623		$	59,048		$	54,082
	Net interest income - GAAP	$	35,149		$	32,005		$	69,758		$	62,083
B	Noninterest income - GAAP		8,209			8,311			17,170			16,639
	Operating revenue		43,358			40,316			86,928			78,722
	Taxable equivalent adjustment		1,203			2,056			2,408			4,435
C	Operating revenue - taxable equivalent - non-GAAP	$	44,561		$	42,372		$	89,336		$	83,157
A / C	Efficiency ratio - taxable equivalent - non-GAAP		68.13	%		62.83	%		66.10	%		65.04	%
B / C	Noninterest income as a percentage of taxable equivalent operating revenue - non-GAAP		18.42	%		19.61	%		19.22	%		20.01	%

Net Interest Income.  The largest component of our net income is our NII.  NII is the difference between interest income, principally from loans and investment securities, and interest expense, principally on customer deposits and borrowings. Changes in net interest income result from changes in volume, net interest spread and net interest margin. Volume refers to the average dollar levels of interest-earning assets and interest-bearing liabilities. Net interest spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. NIM refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities.

As the majority of our assets are interest-earning and our liabilities are interest-bearing, changes in interest rates may impact our net interest margin.  The FOMC uses the federal funds rate, which is the interest rate used by banks to lend to each other, to influence interest rates and the national economy. Changes in the federal funds rate have a direct correlation to changes in the prime rate, the underlying index for most of the variable-rate loans issued by the Company.  At June 30, 2018, the FOMC has set the target federal funds rate at a range of 175-200 basis points.  The target federal funds rate has been increased 125 basis points since March 2017. 

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The following tables set forth the average amounts outstanding for each category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts on a taxable equivalent basis, and the average rate earned or paid for the three and six months ended June 30, 2018 and 2017. 

.	Three months ended June 30,
	2018							2017
				Interest		Average					Interest		Average
	Average			earned or		yield or		Average			earned or		yield or
(in thousands)	balance			paid		cost(3)		balance			paid		cost(3)
Assets
Federal funds sold and other	$	16,742		$	70	1.65	%	$	21,100		$	54	1.01	%
Investment securities (1)		624,333			4,565	2.92	%		575,363			3,999	2.78	%
Loans (1)(2)		3,056,031			35,745	4.63	%		3,036,949			33,409	4.35	%
Total interest-earning assets	$	3,697,106		$	40,380	4.33	%	$	3,633,412		$	37,462	4.08	%
Noninterest-earning assets		134,872							139,072
Total assets	$	3,831,978						$	3,772,484
Liabilities and Shareholders' Equity
Deposits
Money market	$	856,702		$	956	0.45	%	$	888,217		$	586	0.26	%
Interest-bearing demand		657,720			351	0.21	%		645,243			234	0.15	%
Savings		20,777			5	0.10	%		20,429			3	0.06	%
Certificates of deposit
Reciprocal		17,264			12	0.28	%		42,562			18	0.17	%
Under $100		17,048			17	0.40	%		18,939			17	0.36	%
$100 and over		63,489			82	0.52	%		80,085			97	0.49	%
Total interest-bearing deposits	$	1,633,000		$	1,423	0.35	%	$	1,695,475		$	955	0.23	%
Other borrowings
Securities sold under agreements to repurchase		40,932			11	0.11	%		64,181			9	0.06	%
Other short-term borrowings		149,417			740	1.96	%		224,679			593	1.04	%
Long-term debt		131,393			1,854	5.58	%		131,307			1,844	5.56	%
Total interest-bearing liabilities	$	1,954,742		$	4,028	0.82	%	$	2,115,642		$	3,401	0.64	%
Noninterest-bearing demand accounts		1,507,911							1,317,231
Total deposits and interest-bearing liabilities		3,462,653							3,432,873
Other noninterest-bearing liabilities		26,698							24,942
Total liabilities		3,489,351							3,457,815
Total shareholders' equity		342,627							314,669
Total liabilities and shareholders' equity	$	3,831,978						$	3,772,484
Net interest income - taxable equivalent				$	36,352						$	34,061
Net interest spread						3.51	%						3.44	%
Net interest margin						3.94	%						3.76	%
Ratio of average interest-earning assets to average interest-bearing liabilities		189.14	%						171.74	%

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	Six months ended June 30,
	2018							2017
				Interest		Average					Interest		Average
	Average			earned or		yield or		Average			earned or		yield or
(in thousands)	balance			paid		cost(3)		balance			paid		cost(3)
Assets
Federal funds sold and other	$	16,612		$	149	1.78	%	$	22,815		$	110	0.96	%
Investment securities (1)		596,511			8,558	2.87	%		557,378			7,795	2.80	%
Loans (1)(2)		3,081,880			70,655	4.56	%		2,983,284			65,017	4.33	%
Total interest-earning assets	$	3,695,003		$	79,362	4.27	%	$	3,563,477		$	72,922	4.07	%
Noninterest-earning assets		131,647							139,804
Total assets	$	3,826,650						$	3,703,281
Liabilities and Shareholders' Equity
Deposits
Money market	$	865,987		$	1,571	0.37	%	$	894,378		$	1,178	0.27	%
Interest-bearing demand		668,048			611	0.18	%		648,431			479	0.15	%
Savings		21,593			8	0.07	%		19,693			5	0.05	%
Certificates of deposit
Reciprocal		22,692			27	0.24	%		43,140			39	0.18	%
Under $100		17,312			33	0.38	%		19,203			34	0.36	%
$100 and over		64,169			160	0.50	%		82,972			207	0.50	%
Total interest-bearing deposits	$	1,659,801		$	2,410	0.29	%	$	1,707,817		$	1,942	0.23	%
Other borrowings
Securities sold under agreements to repurchase		44,899			19	0.08	%		57,176			17	0.06	%
Other short-term borrowings		118,705			1,079	1.81	%		157,681			769	0.97	%
Long-term debt		131,382			3,688	5.58	%		131,297			3,676	5.57	%
Total interest-bearing liabilities	$	1,954,787		$	7,196	0.74	%	$	2,053,971		$	6,404	0.62	%
Noninterest-bearing demand accounts		1,510,333							1,311,582
Total deposits and interest-bearing liabilities		3,465,120							3,365,553
Other noninterest-bearing liabilities		24,955							26,897
Total liabilities		3,490,075							3,392,450
Total shareholders' equity		336,575							310,831
Total liabilities and shareholders' equity	$	3,826,650						$	3,703,281
Net interest income - taxable equivalent				$	72,166						$	66,518
Net interest spread						3.53	%						3.45	%
Net interest margin						3.94	%						3.76	%
Ratio of average interest-earning assets to average interest-bearing liabilities		189.02	%						173.49	%

(1) Interest earned has been adjusted to reflect tax exempt assets on a fully taxable equivalent basis using a combined federal and state marginal tax rate of 22% and 36% during the three and six months June 30, 2018 and 2017, respectively.

(2) Loan fees included in interest income are not material.  Nonaccrual loans are included with average loans outstanding.

(3) Yields have been adjusted to reflect a taxable equivalent basis where applicable.

NII on a taxable equivalent basis for the three and six months ended June 30, 2018 grew 6.7% and 8.5%, respectively, over the prior year periods primarily as a result of higher loan volume and an increase in loan yields. As the Company has an asset sensitive balance sheet at June 30, 2018, future interest rate increases should continue to increase NII.

Average interest-earning assets for the three and six months ended June 30, 2018 increased $63.7 million and $131.5 million, respectively, to $3.70 billion, compared to the prior year periods.  The yield on interest-earning assets expanded 0.25% and 0.20% for the three and six months ended June 30, 2018, respectively, compared to the prior year periods, primarily due to loan yields.  Yields on variable-rate loans have increased with the increase in short-term interest rates. 

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Including noninterest-bearing deposits, the Company’s overall deposit interest cost was 0.18% and 0.15% for the three and six months ended June 30, 2018, respectively, compared to 0.13% in each of the comparative prior year periods.  Deposit costs had remained stable in 2017 through the first quarter of 2018, but expanded in the second quarter of 2018 as the Company increased rates.  Short-term borrowing costs have also increased, averaging 1.96% and 1.81% for the three and six months ended June 30, 2018, compared to 1.04% and 0.97% in the same periods of 2017.  Subsequent to the end of the second quarter of 2018, the Company increased most deposit rates by 5-15 basis points.  The Company expects deposit costs to increase over the remainder of 2018 in order to remain competitive.

The following table presents noninterest income for the three and six months ended June 30, 2018 and 2017.

					2018 vs 2017								2018 vs 2017
	Three months ended				Increase				Six months ended				Increase
NONINTEREST INCOME	June 30,				(decrease)				June 30,				(decrease)
(in thousands)	2018		2017		Amount		%		2018		2017		Amount		%
Service charges	$	1,577	$	1,714	$	(137)	(8.0)	%	$	3,232	$	3,459	$	(227)	(6.6)	%
Investment advisory income		1,678		1,500		178	11.9	%		3,333		3,031		302	10.0	%
Insurance income		3,138		3,427		(289)	(8.4)	%		6,597		6,549		48	0.7	%
Other income		1,816		1,670		146	8.7	%		4,008		3,600		408	11.3	%
Total noninterest income	$	8,209	$	8,311	$	(102)	(1.2)	%	$	17,170	$	16,639	$	531	3.2	%

Service Charges. Service charges primarily consist of fees earned from treasury management services.  Customers are given the option to pay for these services in cash or by offsetting the fees for these services against an earnings credit that is given for maintaining noninterest-bearing deposits.  Service charges are influenced by the earnings credit, transaction volumes and the balance of deposits serviced by treasury management. 

Investment Advisory Income.  Investment advisory income increased $0.2 million and $0.3 million, during the three and six months ended June 30, 2018, over the prior year periods.  Fees earned are generally based on a percentage of AUM and market valuations have a direct impact on AUM.  AUM totaled $1.0 billion at June 30, 2018 compared to $901.8 million at June 30, 2017.

Insurance Income.  Insurance income is derived from two main areas: benefits consulting and P&C.  Revenue from benefits consulting and P&C are recurring revenue sources as policies and contracts generally renew or rewrite on an annual or more frequent basis.  Insurance income decreased $0.3 million and was relatively flat during the three and six months ended June 30, 2018, respectively, compared to the prior year periods.

Other Income.  Other income is comprised of increases in the cash surrender value of bank-owned life insurance, loan fees, earnings on equity method investments, merchant charges, bankcard fees, wire transfer fees, foreign exchange fees and safe deposit income.  Other income increased $0.1 million and $0.4 million during the three and six months ended June 30, 2018, respectively, compared to the prior year periods, due to an increase in fees earned on customer swap products.

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The following table presents noninterest expense for the three and six months ended June 30, 2018 and 2017.

					2018 vs 2017								2018 vs 2017
	Three months ended				Increase				Six months ended				Increase
NONINTEREST EXPENSE	June 30,				(decrease)				June 30,				(decrease)
(in thousands)	2018		2017		Amount		%		2018		2017		Amount		%
Salaries and employee benefits	$	20,761	$	18,335	$	2,426	13.2	%	$	40,508	$	37,455	$	3,053	8.2	%
Occupancy expenses, premises and equipment		3,651		3,685		(34)	(0.9)	%		7,362		7,290		72	1.0	%
Amortization of intangibles		49		150		(101)	(67.3)	%		105		300		(195)	(65.0)	%
FDIC and other assessments		267		349		(82)	(23.5)	%		691		599		92	15.4	%
Other real estate owned and loan workout costs		50		93		(43)	(46.2)	%		121		182		(61)	(33.5)	%
Net (gain) loss on securities, other assets and OREO		(4)		32		(36)	(112.5)	%		(124)		(313)		189	60.4	%
Other expense		5,580		4,011		1,569	39.1	%		10,261		8,256		2,005	24.3	%
Total noninterest expense	$	30,354	$	26,655	$	3,699	13.9	%	$	58,924	$	53,769	$	5,155	9.6	%

Salaries and Employee Benefits.  Salaries and employee benefits increased $2.4 million and $3.1 million for the three and six months ended June 30, 2018, respectively, over the prior year periods.  The increase was primarily due to merit raises and an increase in full-time equivalent employees. The Company had 560 full-time equivalent employees at June 30, 2018, compared to 529 at June 30, 2017.  

Occupancy Costs.  Occupancy costs consist primarily of rent, utilities, property taxes, insurance, depreciation and information systems maintenance.  Occupancy costs were relatively flat for the three and six months ended June 30, 2018, compared to the prior year periods.

FDIC and Other Assessments.  FDIC and other assessments consist of premiums paid by the Company that are required for all FDIC-insured institutions and Colorado chartered banks.  FDIC and other assessments decreased $0.1 million and increased $0.1 million during the three and six months ended June 30, 2018, respectively, compared to the prior year periods.  The assessments are determined using a rate (based on statutory and risk classification factors) applied to average net assets of the Company.

OREO and Loan Workout Costs.  Carrying costs and workout expenses of nonperforming loans and OREO are related to the level of nonperforming assets.  While costs may fluctuate from period to period due to specific circumstances, the Company has seen a general decline in these costs over the last few years.

Net (Gain) Loss on Securities, Other Assets and OREO.  The net gain of $0.1 million for the six months ended June 30, 2018 consisted of an earn-out payment from a previous sale of a book of business.  The net gain of $0.3 million for the six months ended June 30, 2017 consisted of a gain on the sale of a Company-owned property.  Amounts related to the three months ended June 30, 2018 and 2017 were not significant.

Other Noninterest Expense.  Other noninterest expense consists primarily of business development expenses (meals, entertainment and travel), charitable donations, and professional services (auditing, legal, courier and service contracts). Other operating expenses increased $1.6 million and $2.0 million for the three and six months ended June 30, 2018, over the prior year periods.  In the second quarter of 2018, noninterest expense included $1.7 million in Merger-related expenses. The Company expects to continue to incur Merger-related expenses throughout the remainder of 2018 which are expected to exceed $10 million, most of which are contingent on the Merger closing. The Company had also invested in a business intelligence project and a planned data center relocation initiative and recognized $0.9 million of noninterest expense in the first quarter of 2018.  As a result of the pending Merger, the Company suspended these projects in the second quarter of 2018.

Provision for Income Taxes.  The effective incometax rate for the three and six months ended June 30, 2018 was 18.1% and 16.6%, respectively, compared to 26.9% and 23.5% in the prior year periods.  A reconciliation of the statutory tax rate to the Company’s actual income tax rate is presented below.

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	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018		2017
Statutory rate	21.0	%	35.0	%	21.0	%	35.0	%
Increase (decrease) resulting from:
State income taxes - net of federal income tax effect	3.2	%	2.5	%	3.0	%	2.2	%
Tax exempt income	(7.3)	%	(10.8)	%	(7.0)	%	(12.8)	%
Nondeductible compensation	0.1	%	0.4	%	0.1	%	0.4	%
Meals and entertainment	0.5	%	0.4	%	0.6	%	0.5	%
Excess tax benefit on stock compensation	(0.3)	%	(0.5)	%	(1.2)	%	(2.4)	%
Other - net	0.9	%	(0.1)	%	0.1	%	0.6	%
Effective income tax rate	18.1	%	26.9	%	16.6	%	23.5	%

Provision for Loan Losses and Allowance for Loan Losses

The following table presents the provision for loan losses for the three and six months ended June 30, 2018 and 2017:

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2018		2017		Decrease		2018		2017		Decrease
Provision for loan losses	$	(901)	$	673	$	(1,574)	$	(1,226)	$	1,280	$	(2,506)

The Company recorded a $0.9 million and a $1.2 million reversal of the provision for loan losses during the three and six months ended June 30, 2018.  The negative provision for loan losses in 2018 was primarily due to the $79.3 million decrease in the loan portfolio.

All loans are continually monitored to identify potential problems with repayment and collateral deficiency.  At June 30, 2018 and December 31, 2017, the ratio of the ALLL to total loans was 1.17% and 1.21%, respectively.  At June 30, 2017, the ratio of the ALLL to total loans was 1.16%.  The ratio of the ALLL to nonperforming loans was 214.05% at June 30, 2018, 482.4% at December 31, 2017 and 792.72% at June 30, 2017.  Though management believes the current ALLL provides adequate coverage of probable incurred losses in the loan portfolio as whole, negative economic trends could adversely affect future earnings and asset quality.

The ALLL represents management’s recognition of the risks of extending credit and its evaluation of the quality of the loan portfolio.  The ALLL is maintained to provide for probable losses related to specifically identified loans and for losses inherent in the loan portfolio that have been incurred as of the balance sheet date.  The ALLL is based on various factors affecting the loan portfolio, including a review of problem loans, business conditions, historical loss experience, evaluation of the quality of the underlying collateral, and holding and disposal costs.  The ALLL is increased by additional charges to operating income and reduced by loans charged off, net of recoveries.  The Company had net charge-offs of $0.1 million and $0.9 million during the three and six months ended June 30, 2018, compared to net recoveries of $0.7 million and $1.1 million and during the six months ended June 30, 2017.  The net charge-offs of $0.9 million related primarily to loans that had been fully reserved prior to 2018 and did not affect the current year provision for loan losses.  Activity in the ALLL for the current and prior year periods is summarized below: 

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	Six months ended			Year ended			Six months ended
(in thousands)	June 30, 2018			December 31, 2017			June 30, 2017
Allowance for loan losses at beginning of period	$	37,941		$	33,293		$	33,293
Charge-offs:
Commercial		(1,361)			(823)			(222)
Consumer		(58)			(99)			(86)
Other		(29)			-			-
Total charge-offs		(1,448)			(922)			(308)
Recoveries:
Commercial		432			1,025			181
Real estate - mortgage		11			186			164
Construction & land		101			1,039			1,008
Consumer		20			35			7
Other		3			-			-
Total recoveries		567			2,285			1,360
Net recoveries (charge-offs)		(881)			1,363			1,052
Provision for loan losses charged to operations		(1,226)			3,285			1,280
Allowance for loan losses at end of period	$	35,834		$	37,941		$	35,625
Ratio of net (recoveries) charge-offs to average loans		0.03	%		(0.04)	%		(0.04)	%

Nonperforming Assets

Nonperforming assets consist of nonaccrual loans, past due loans, repossessed assets and OREO.  The following table presents information regarding nonperforming assets as of the dates indicated:

	At June 30,			At December 31,			At June 30,
(in thousands)	2018			2017			2017
Nonperforming loans:
Loans 90 days or more past due and still accruing interest	$	-		$	348		$	664
Nonaccrual loans:
Commercial		16,238			6,185			3,439
Real estate - mortgage		333			57			245
Consumer & other		170			1,275			146
Total nonaccrual loans		16,741			7,517			3,830
Total nonperforming loans		16,741			7,865			4,494
OREO and repossessed assets		4,979			5,079			5,079
Total nonperforming assets	$	21,720		$	12,944		$	9,573
Performing renegotiated loans	$	34,674		$	52,817		$	31,482
Classified loans	$	81,728		$	74,674		$	50,587
Allowance for loan losses	$	35,834		$	37,941		$	35,625
Nonperforming assets to total assets		0.56	%		0.34	%		0.25	%
Nonperforming loans to total loans		0.55	%		0.25	%		0.15	%
Nonperforming loans and OREO to total loans and OREO		0.71	%		0.41	%		0.31	%
Allowance for loan losses to total loans		1.17	%		1.21	%		1.16	%
Allowance for loan losses to nonperforming loans		214.05	%		482.40	%		792.72	%

Nonperforming assets increased $8.8 million at June 30, 2018, from December 31, 2017 and increased $12.1 million from June 30, 2017.  The increase in nonperforming assets was due to $10.3 million of loans with one customer that became nonaccrual loans in the first quarter of 2018.  Approximately 97% or $21.0 million of nonperforming assets at June 30, 2018 were concentrated in Colorado, while the remaining 3% or $0.7 million were in Arizona.  Nonperforming loans represented 77.1% of total nonperforming assets as of June 30, 2018, with the remaining 22.9% comprised of OREO.

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Segment Results

The Company has three segments: Commercial Banking, Fee-Based Lines and Corporate Support and Other.  See Note 9 to the Condensed Consolidated Financial Statements for additional discussion regarding segments.

Internally, management measures the contribution of the Fee-Based Lines before parent company management fees and overhead allocations.  The Company believes this to be a more useful measurement as centralized administration expenses and overhead are generally not impacted by the Fee-Based Lines, but are most affected by the operations of the Bank.  Certain financial metrics and discussion of results for each segment for the three and six months ended June 30, 2018 and 2017 are presented below.

					2018 vs 2017								2018 vs 2017
Commercial Banking	Three months ended				Increase				Six months ended				Increase
Income Statement	June 30,				(decrease)				June 30,				(decrease)
(in thousands)	2018		2017		Amount		%		2018		2017		Amount		%
Net interest income	$	36,907	$	33,753	$	3,154	9.3	%	$	73,254	$	65,556	$	7,698	11.7	%
Provision for loan losses		(893)		682		(1,575)	(230.9)	%		(1,209)		1,374		(2,583)	(188.0)	%
Noninterest income		3,318		3,266		52	1.6	%		7,064		6,670		394	5.9	%
Noninterest expense		6,216		8,016		(1,800)	(22.5)	%		12,261		17,564		(5,303)	(30.2)	%
Provision for income taxes		7,070		9,179		(2,109)	(23.0)	%		14,383		16,762		(2,379)	(14.2)	%
Net income before management fees and overhead allocations		27,832		19,142		8,690	45.4	%		54,883		36,526		18,357	50.3	%
Management fees and overhead allocations, net of tax		13,344		8,345		4,999	59.9	%		26,907		16,049		10,858	67.7	%
Net income	$	14,488	$	10,797	$	3,691	34.2	%	$	27,976	$	20,477	$	7,499	36.6	%

Net income for the Commercial Banking segment increased $3.7 million and $7.5 million during the three and six months ended June 30, 2018 compared to the prior year periods.  Net income grew on higher loan volume and an expansion in loan yields that increased net interest income over the prior year periods, lower provision for loan losses and the benefit of a lower corporate income tax rate.  Noninterest expense decreased $1.8 million and $5.3 million for the three and six months June 30, 2018, respectively, compared to the prior year periods.  At the beginning of 2018, branch bank support personnel costs previously included in noninterest expense in the Commercial Banking segment were realigned with the central support function and are now reported in the Corporate Support and Other segment.

					2018 vs 2017								2018 vs 2017
Fee-Based Lines	Three months ended				Increase				Six months ended				Increase
Income Statement	June 30,				(decrease)				June 30,				(decrease)
(in thousands)	2018		2017		Amount		%		2018		2017		Amount		%
Net interest income	$	-	$	-	$	-	-	%	$	-	$	(13)	$	13	100.0	%
Noninterest income		4,816		4,927		(111)	(2.3)	%		9,930		9,580		350	3.7	%
Noninterest expense		4,545		4,262		283	6.6	%		8,891		8,766		125	1.4	%
Provision for income taxes		31		224		(193)	(86.2)	%		245		272		(27)	(9.9)	%
Net income before management fees and overhead allocations		240		441		(201)	(45.6)	%		794		529		265	50.1	%
Management fees and overhead allocations, net of tax		515		317		198	62.5	%		990		592		398	67.2	%
Net income (loss)	$	(275)	$	124	$	(399)	(321.8)	%	$	(196)	$	(63)	$	(133)	(211.1)	%

The Fee-Based Lines segment is composed of financial service activities that are complementary to the Company’s core Commercial Banking segment.  Revenue from this segment includes investment advisory fees and insurance income.  Net income before management fees and overhead allocations on the Fee-Based Lines decreased $0.2 million and increased $0.3 million during the three and six months ended June 30, 2018, respectively, compared to the prior year periods.

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					2018 vs 2017								2018 vs 2017
Corporate Support and Other	Three months ended				Increase				Six months ended				Increase
Income Statement	June 30,				(decrease)				June 30,				(decrease)
(in thousands)	2018		2017		Amount		%		2018		2017		Amount		%
Net interest income	$	(1,758)	$	(1,748)	$	(10)	(0.6)	%	$	(3,496)	$	(3,460)	$	(36)	(1.0)	%
Provision for loan losses		(8)		(9)		1	11.1	%		(17)		(94)		77	81.9	%
Noninterest income		75		118		(43)	(36.4)	%		176		389		(213)	(54.8)	%
Noninterest expense		19,593		14,377		5,216	36.3	%		37,772		27,439		10,333	37.7	%
Benefit for income taxes		(4,590)		(5,904)		1,314	22.3	%		(9,773)		(11,464)		1,691	14.8	%
Net loss before management fees and overhead allocations		(16,678)		(10,094)		(6,584)	(65.2)	%		(31,302)		(18,952)		(12,350)	(65.2)	%
Management fees and overhead allocations, net of tax		(13,859)		(8,662)		(5,197)	(60.0)	%		(27,897)		(16,641)		(11,256)	(67.6)	%
Net loss	$	(2,819)	$	(1,432)	$	(1,387)	(96.9)	%	$	(3,405)	$	(2,311)	$	(1,094)	(47.3)	%

The Corporate Support and Other segment is composed of activities of the Parent; non-production, branch and back-office support operations; and eliminating transactions in consolidation. Non-production, back-office operations include human resources, accounting and finance, information technology, special assets, and loan and deposit operations. The Company has a process for allocating these support operations back to the production lines based on an internal allocation methodology that is updated annually. Noninterest expense includes salaries and benefits of employees of the Parent and support functions as well as nonemployee overhead operating costs not directly associated with another segment. Net loss for the segment was $2.8 million and $3.4 million for the three and six months ended June 30, 2018, respectively, compared to a net loss of $1.4 million and $2.3 million in the prior year periods.  The increase in the net loss for the 2018 periods was primarily due to higher noninterest expense from Merger costs, projected incentive compensation payments and retirement benefit contributions.  Salaries and benefits also increased in 2018 from the realignment of branch bank support personnel that were included in the Commercial Banking segment during 2017.

Contractual Obligations and Commitments

Summarized below are the Company’s contractual obligations (excluding deposit liabilities) to make future payments at June 30, 2018:

			After one		After three
	Within		but within		but within		After
(in thousands)	oneyear		three years		five years		five years		Total
FHLB line of credit(1)	$	190,000	$	-	$	-	$	-	$	190,000
Repurchase agreements (1)		38,994		-		-		-		38,994
Operating lease obligations		2,747		8,232		4,718		11,998		27,695
Long-term debt obligations (2)(3)		7,274		12,386		9,601		139,737		168,998
Total contractual obligations	$	239,015	$	20,618	$	14,319	$	151,735	$	425,687

(1) Interest on these obligations has been excluded due to the short-term nature of the instruments.

(2) Principal repayment of the junior subordinated debentures is assumed to be at the contractual maturity, currently beyond five years.  Interest on the junior subordinated debentures is calculated at the fixed rate associated with the applicable hedging instrument through the instrument maturity date and is reported in the "due within" categories during which the interest expense is expected to be incurred.  Interest payments on junior subordinated debentures after maturity of the related fixed-interest rate swap hedges are variable and no estimate of those payments has been included in the preceding table.  The weighted average variable rate applicable to the junior subordinated debentures as of the date of this report is 4.72% and ranges from 3.79% to 5.28%.

(3) Principal repayment of the $60.0 million fixed-to-floating subordinated notes (Notes) issued in June 2015 is assumed to be at the contractual maturity, currently beyond five years.  Interest on the Notes is calculated at an annual fixed rate of 5.625% through June 2025 and is reported in the “due within” categories during which the interest expense is expected to be incurred. From June 25, 2025 to maturity on June 25, 2030, the Notes will bear interest at a floating rate equal to three-month LIBOR plus 317 basis points.  No estimate of interest payments during the floating rate period is included in the preceding table.

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The contractual amount of the Company’s financial instruments with off-balance sheet risk at June 30, 2018, is presented below, classified by the type of commitment and the term within which the commitment expires:

			After one		After three
	Within		but within		but within		After
(in thousands)	one year		three years		five years		five years		Total
Unfunded loan commitments	$	632,076	$	317,494	$	80,776	$	32,038	$	1,062,384
Standby letters of credit		18,757		3,443		-		145		22,345
Commercial letters of credit		1,019		-		-		-		1,019
Unfunded commitments for unconsolidated investments		6,172		-		-		-		6,172
Company guarantees		3,377		-		200		1,055		4,632
Total commitments	$	661,401	$	320,937	$	80,976	$	33,238	$	1,096,552

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the liquidity, credit enhancement and financing needs of its customers.  These financial instruments include legally binding commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.  Credit risk is the principal risk associated with these instruments.  The contractual amounts of these instruments represent the amount of credit risk should the instruments be fully drawn upon and the customer defaults.

To control the credit risk associated with entering into commitments and issuing letters of credit, the Company uses the same credit quality, collateral policies, and monitoring controls in making commitments and letters of credit as it does with its lending activities.  The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation.

Legally binding commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit obligate the Company to meet certain financial obligations of its customers if, under the contractual terms of the agreement, the customers are unable to do so. The financial standby letters of credit issued by the Company are irrevocable.  Payment is only guaranteed under these letters of credit upon the borrower’s failure to perform its obligations to the beneficiary.

Approximately $48.2 million of total loan commitments at June 30, 2018 represented commitments to extend credit at fixed rates of interest, which exposes the Company to some degree of interest rate risk.

The Company has also entered into interest rate swap agreements under which it is required to either receive cash or pay cash to the counterparty depending on changes in interest rates.  The interest rate swaps are carried at fair value on the Condensed Consolidated Balance Sheets with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. The fair value of interest rate swaps recorded on the balance sheet at June 30, 2018 does not represent the actual amount that will ultimately be received or paid under the contracts since the fair value is based on estimated future interest rates and is therefore excluded from the table above.

The Merger Agreement provides certain termination rights for both CoBiz and BOK and further provides that a termination fee of $34.2 million will be payable by CoBiz to BOK upon termination of the Merger Agreement under certain circumstances.

Liquidity and Capital Resources

Liquidity refers to the Company’s ability to generate adequate amounts of cash to meet financial obligations to its customers and shareholders in order to fund loans, to respond to deposit outflows and to cover operating expenses.  Maintaining a level of liquid funds through asset/liability management seeks to ensure that these

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needs are met at a reasonable cost.  Liquidity is essential to compensate for fluctuations in the balance sheet and provide funds for growth and normal operating expenditures.  Sources of funds include customer deposits, scheduled amortization of loans, loan prepayments, scheduled maturities of investments and cash flows from MBS.  Liquidity needs may also be met by deposit growth, converting assets into cash, raising funds in the brokered CD market or borrowing using lines of credit with correspondent banks, the FHLB or the Federal Reserve Bank.  Longer-term liquidity needs may be met by selling securities available for sale or raising additional capital.

Liquidity management is the process by which the Company manages the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost. The objective of liquidity management is to ensure the Company has the ability to satisfy the cash flow requirements of depositors and borrowers and to allow us to sustain our operations. These funding commitments include withdrawals by depositors, credit commitments to borrowers, shareholder dividends, debt payments, expenses of its operations and capital expenditures. Liquidity is monitored and closely managed by the Company’s Asset and Liability Committee (ALCO), a group of senior officers from the lending, deposit gathering, finance and treasury areas. ALCO’s primary responsibilities are to ensure the necessary level of funds are available for normal operations as well as maintain a contingency funding policy to ensure that liquidity stress events are quickly identified and management plans are in place to respond. This is accomplished through the use of policies which establish limits and require measurements to monitor liquidity trends, including management reporting that identifies the amounts and costs of all available funding sources.

The Company's current liquidity position is expected to be more than adequate to fund expected asset growth. Historically, our primary source of funds has been customer deposits.  Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and unscheduled loan prepayments, which are influenced by fluctuations in the general level of interest rates, returns available on other investments, competition, business and economic conditions, and other factors, are less predictable.

Liquidity from asset categories is provided through cash and interest-bearing deposits with other banks, which totaled $84.9 million at June 30, 2018, compared to $80.2 million at December 31, 2017.  Additional asset liquidity sources include principal and interest payments from securities in the Company’s investment portfolio and cash flows from its amortizing loan portfolio.  Liability liquidity sources include attracting deposits at competitive rates and maintaining wholesale borrowing (short-term borrowings and brokered CDs) credit relationships.

The Company’s loan to core deposit ratio was 97.5% at June 30, 2018 and December 31, 2017.  At June 30, 2018, the Company had $190.0 million of outstanding wholesale borrowings and average wholesale borrowings of $118.7 million during the six months ended June 30, 2018.  Average wholesale borrowings were $108.7 million during the year ended December 31, 2017.  Wholesale borrowings are used as part of our liquidity management strategy and fluctuate based on the Company’s cash position. The Company’s wholesale funding needs are largely dependent on core deposit levels and asset growth. 

The Company uses various forms of short-term borrowings for cash management and liquidity purposes, regularly accessing its federal funds and FHLB lines to manage its daily cash position. At June 30, 2018, the Bank had approved federal funds purchase lines with eight correspondent banks with an aggregate credit line of $180.0 million.  The Bank also has a line of credit from the FHLB that is limited by the amount of eligible collateral available to secure it and the Company’s investment in FHLB stock.  Borrowings under the FHLB line are required to be secured by unpledged securities and qualifying loans. Borrowings may also be used on a longer-term basis to support expanded lending activities and to match the maturity or repricing intervals of assets.  The Company also has access to the Federal Reserve Bank discount window lending program.  The Company considers the discount window program a contingent liquidity alternative as it has a higher cost than other short-term borrowing options.  See Note 8 to the Condensed Consolidated Financial Statements for additional discussion of these funding sources and collateral requirements.

Available funding through correspondent lines and the FHLB at June 30, 2018 totaled $570.7 million or 14.7% of the Company’s earning assets.  Available funding is comprised of $180.0 million through the unsecured federal funds purchase lines and $390.7 million in secured FHLB borrowing capacity.  Access to funding through correspondent lines is dependent upon the cash position of the correspondent banks and there may

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be times when certain lines are not available.  In addition, certain lines require a resting period after a specified number of consecutive days of accessing the lines.  The Company believes it has sufficient borrowing capacity and diversity in correspondent banks to meet its needs.

At the Holding Company level, our primary sources of funds are dividends paid from the Bank and fee-based subsidiaries, management fees assessed to the Bank and the fee-based business lines, proceeds from the issuance of common stock, and other capital markets activity.  The main use of this liquidity is the quarterly payment of dividends on our common stock, quarterly interest payments on the subordinated debentures and the Notes, payments for mergers and acquisitions activity, and payments for the salaries and benefits for the employees of the Holding Company. 

The approval of the Colorado State Banking Board is required prior to the declaration of any dividend by the Bank if the total of all dividends declared by the Bank in any calendar year exceeds the total of its net profits for that year combined with the retained net profits for the preceding two years. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 provides that the Bank cannot pay a dividend if it will cause the Bank to be “undercapitalized.”  The Bank was not otherwise restricted in its ability to pay dividends to the Holding Company.  The Company’s ability to pay dividends on its common stock depends upon the availability of dividends from the Bank, earnings from its fee-based lines, and the Company’s compliance with the capital adequacy guidelines of the Federal Reserve Board of Governors.    Pursuant to the terms of the Merger Agreement, the Company is restricted from making, declaring, or paying anyregular quarterly cash dividend in excess of $0.10 per share of Company common stock.  The Holding Company has a liquidity policy that requires the maintenance of liquidity on the balance sheet based on projected cash usages, exclusive of dividends from the Bank.  The Company believes it has the ability to continue paying dividends.

In conjunction with the Merger, we will incur costs that are outside of our normal operating liquidity requirements.  These costs are expected to exceed $10.0 million in 2018, the majority of which are payable contingent upon the Merger closing.  We anticipate that our cash and cash equivalents, expected cash flows from operations together with alternative sources of funding are sufficient to meet our anticipated cash requirements for working capital, loan originations, capital expenditures and other obligations for at least the next 12 months.  We continually monitor existing and alternative financing sources to support our capital and liquidity needs, including but not limited to, debt issuance, common stock issuance and deposit funding sources.  Based on our current financial condition and our results of operations, we believe the Company will be able to sustain its ability to raise adequate capital through one or more of these financing sources.

Changes in shareholders’ equity are due to the following:

	Three months ended		Six months ended
(in thousands)	June 30, 2018		June 30, 2018
Beginning balance	$	338,557	$	329,284
Stock-based compensation		890		1,681
Options and restricted stock, net		368		(138)
Dividends paid-common		(4,238)		(6,560)
Other comprehensive loss, net of tax		(867)		(2,526)
Other		-		(12)
Net income		11,394		24,375
Ending balance	$	346,104	$	346,104

We are subject to minimum risk-based capital limitations as set forth by federal banking regulations at both the consolidated Company level and the Bank level. Under the risk-based capital guidelines, different categories of assets, including certain off-balance sheet items, such as loan commitments in excess of one year and letters of credit, are assigned different risk weights, based generally on the perceived credit risk of the asset. These risk weights are multiplied by corresponding asset balances to determine a “risk-weighted” asset base. For purposes of the risk-based capital guidelines, total capital is defined as the sum of “Common Equity Tier 1”, “Additional Tier 1” and “Tier 2” capital elements. Common Equity Tier 1 is comprised of common stock, related surplus and retained earnings.  Additional Tier 1 capital includes, with certain restrictions, noncumulative perpetual preferred stock, certain grandfathered regulatory capital instruments

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and minority interests in consolidated subsidiaries. Tier 2 capital includes, with certain limitations, perpetual preferred stock not included in Tier 1 capital, subordinated debt, certain maturing capital instruments, and the allowance for loan and credit losses. 

Beginning in 2016, the CCB requirement became effective for banking organizations.  The CCB is designed to establish a capital range above minimum requirements to insulate banks from periods of stress and discourage unacceptable practices that may shift certain risks from an organization’s shareholders to its depositors.  When the capital buffer is breached, an organization’s ability to pay dividends, execute share repurchases and make discretionary bonus payments may be limited to varying degrees depending on the severity of the breach.  When fully phased-in in 2019, the CCB adds a 2.5% capital requirement above existing regulatory minimum ratios.  At June 30, 2018, the Bank and Holding Company maintained capital buffers in excess of the fully phased-in requirements and were not subject to additional constraints on distributions, share repurchases or discretionary bonus payments beyond existing limits.  At June 30, 2018, the Bank was well-capitalized with all capital ratios exceeding the well-capitalized requirement.

See Note 11 to the Condensed Consolidated Financial Statements for additional capital ratio disclosure.  In order to comply with the regulatory capital constraints, the Company and its Board of Directors regularly monitor the capital level and its anticipated needs based on the Company’s growth. The Company has identified sources of additional capital that could be used if needed, and monitors the costs and benefits of these sources, which include both the public and private markets.

The Company’s Condensed Consolidated Financial Statements do not reflect various off-balance sheet commitments that are made in the normal course of business, which may involve some liquidity risk.  Off-balance sheet arrangements are discussed in the Contractual Obligations and Commitments section.  The Company has commitments to extend credit under lines of credit and stand-by letters of credit.  The Company has also committed to investing in certain partnerships.  See the Contractual Obligations and Commitments section of this report for additional discussion on these commitments.

Effects of Inflation and Changing Prices

The primary impact of inflation on our operations is increased operating costs.  Unlike most retail or manufacturing companies, virtually all of the assets and liabilities of a financial institution such as the Bank are monetary in nature.  As a result, the impact of interest rates on a financial institution’s performance is generally greater than the impact of inflation.  Although interest rates do not necessarily move in the same direction, or to the same extent, as the prices of goods and services, increases in inflation generally have resulted in increased interest rates.  Over short periods of time, interest rates may not move in the same direction, or at the same magnitude, as inflation.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management

Asset/liability management is concerned with the timing and magnitude of repricing assets compared to liabilities. It is our objective to generate stable growth in net interest income and to attempt to control risks associated with interest rate movements. In general, our strategy is to reduce the impact of changes in interest rates on net interest income by maintaining a favorable match between the maturities or repricing dates of our interest-earning assets and interest-bearing liabilities. We adjust interest sensitivity during the year through changes in the mix of assets and liabilities. Our asset and liability management strategy is formulated and monitored by ALCO, in accordance with policies approved by the Board of Directors of the Bank. This committee meets regularly to review, among other things, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activity, and maturities of investments and borrowings. ALCO also approves and establishes pricing and funding decisions with respect to our overall asset and liability composition. The committee reviews our liquidity, cash flow flexibility, maturities of investments, deposits and borrowings, deposit activity, current market conditions, and general levels of interest rates. To effectively measure and manage interest rate risk, we use simulation analysis to determine the impact of changes in interest rates on

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NII under various interest rate scenarios. From these simulations, interest rate risk is quantified and appropriate strategies are developed and implemented.

The following table presents an analysis of the interest rate sensitivity inherent in our NII and economic value of equity (EVE). The interest rate scenarios presented in the table includes interest rates at June 30, 2018, as adjusted by rate changes upward of up to 200 basis points.  The downward movement analysis was limited to a 100 basis point change. 

	Net interest income
Change in market interest rates	12 months		24 months		EVE
-100 basis points immediately	(6.9)	%	(11.2)	%	(12.1)	%
+100 basis points immediately	2.8	%	5.0	%	4.9	%
+200 basis points immediately	4.7	%	9.7	%	7.3	%
-100 basis points ramped over next 12 months	(2.9)		(9.6)	%
+100 basis points ramped over next 12 months	0.6	%	3.7	%
+200 basis points ramped over next 12 months	1.0	%	7.6	%

There are two NII simulations presented, the first being an instantaneous or immediate shock to the yield curve in a parallel fashion up and down 100 and 200 basis points and the second being a 12 month ramp of the yield curve in parallel fashion up and down 100 and 200 basis points.  Consequently, the sensitivity in the year 1 ramped simulation is less than the immediate simulation since the rate movements are applied incrementally over the course of the first year.  The NII sensitivity analysis presented includes assumptions that (i) the yield curve used throughout the NII simulation is static as opposed to using implied forward rates; (ii) loan repricing spreads are based on actual originations of new loans over the past year; (iii) deposit average lives and repricing betas are based on a multi-year historical study; (iv) loan prepayment speeds are approximations; and (v) no balance sheet growth is assumed. Further, the analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. Accordingly, this analysis is not intended to and does not provide a precise forecast of the effect actual changes in market rates will have on us.

Our results of operations depend significantly on NII. Like most financial institutions, our interest income and cost of funds are affected by general economic conditions and by competition in the marketplace. Rising and falling interest rate environments can have various impacts on NII, depending on the interest rate profile (i.e., the difference between the repricing of interest-earning assets and interest-bearing liabilities), the relative changes in interest rates that occur when various assets and liabilities reprice, unscheduled repayments of loans and investments, early withdrawals of deposits, and other factors. As a general rule, banks with positive interest rate gaps are more likely to be susceptible to declines in NII in periods of falling interest rates, while banks with negative interest rate gaps are more likely to experience declines in NII in periods of rising interest rates. The Company is currently in a positive interest rate gap position, therefore, assuming no change in our gap position, a rise in interest rates is likely to result in increased NII, while a decline in interest rates is likely to result in decreased NII. This is a point-in-time position that is continually changing and is not indicative of our position at any other time. While the gap position is a useful tool in measuring interest rate risk and contributes toward effective asset and liability management, shortcomings are inherent in gap analysis since certain assets and liabilities may not move proportionally as interest rates change. Consequently, in addition to gap analysis, we use the simulation model discussed above to test the interest rate sensitivity of NII and the balance sheet.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures.  The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures at June 30, 2018, the end of the period covered by this report (“Evaluation Date”), pursuant to Exchange Act Rule 13a-15(e).  Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

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Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control.   During the quarter that ended on the Evaluation Date, there were no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1A. Risk Factors

Risks Related to the Pending Merger and BOK’s Business upon Completion of the Merger

Because the market price of BOK common stock will fluctuate, CoBiz’s shareholders cannot be certain of the market value of the Merger consideration they will receive.

Upon completion of the Merger, each outstanding share of CoBiz common stock (except for specified shares of CoBiz common stock held by CoBiz or BOK (which will be cancelled)) will be converted into the right to receive 0.17 shares of BOK common stock and $5.70 cash. The market value of the BOK common stock to be issued in the Merger will depend upon the market price of BOK common stock. This market price may vary from the closing price of BOK common stock on the date the Merger was announced. There will be no adjustment to the Merger consideration for changes in the market price of either shares of BOK common stock or CoBiz common stock.

The market price of BOK common stock could be subject to significant fluctuations due to changes in sentiment in the market regarding BOK’s operations or business prospects, including market sentiment regarding BOK’s entry into the Merger  Agreement. These risks may be affected by:

· operating results that vary from the expectations of BOK’s management or of securities analysts and investors;

· developments in BOK’s business or in the financial services sector generally;

· regulatory or legislative changes affecting BOK’s industry generally or its business and operations;

· operating and securities price performance of companies that investors consider to be comparable to BOK;

· changes in estimates or recommendations by securities analysts or rating agencies;

· announcements of strategic developments, acquisitions, dispositions, financings and other material events by BOK or its competitors; and

· changes in global financial markets and economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, oil and gas, credit or asset valuations or volatility.

Accordingly, at this time, CoBiz’s shareholders will not necessarily know or be able to calculate the value of the Merger consideration they would be entitled to receive upon completion of the Merger. You should obtain current market quotations for both BOK common stock and CoBiz common stock.

The market price of BOK common stock after the Merger may be affected by factors different from those affecting the shares of BOK or CoBiz currently.

The businesses of BOK and CoBiz differ, and accordingly, the results of operations of the combined company and the market price of the shares of BOK’s common stock after the completion of the Merger may be

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affected by factors different from those currently affecting the independent results of operations and market prices of common stock of each of BOK and CoBiz.

The success of the Merger and integration of BOK and CoBiz will depend on a number of uncertain factors.

The success of the Merger will depend on a number of factors, including:

· BOK’s ability to integrate the business acquired from CoBiz in the Merger ( “acquired business”) into BOK’s current operations;

· BOK’s ability to limit the outflow of deposits held by its new customers in the acquired business and to successfully retain and manage interest-earning assets (i.e., loans) acquired in the Merger;

· BOK’s ability to control the incremental non-interest expense from the acquired business in a manner that enables it to maintain a favorable overall efficiency ratio;

· BOK’s ability to retain certain key employees; and

· BOK’s ability to earn acceptable levels of interest and non-interest income, including fee income, from the acquired business.

Integrating the acquired business will be an operation of substantial size and expense and may be affected by general market and economic conditions or government actions affecting the financial industry generally. Integration efforts will also likely divert BOK’s management’s attention and resources. No assurance can be given that BOK will be able to integrate the acquired business successfully. Additionally, no assurance can be given that the operation of the acquired business will not adversely affect BOK’s existing profitability, that BOK will be able to achieve results in the future similar to those achieved by its existing banking business or that BOK will be able to manage any growth resulting from the Merger effectively.

Regulatory Approvals May Not Be Received, May Take Longer than Expected or May Impose Conditions that Are Not Presently Anticipated or Cannot Be Met.

Before the transactions contemplated in the Merger  Agreement can be completed, various approvals must be obtained from the bank regulatory and other governmental authorities. In deciding whether to grant these approvals, the relevant governmental entities will consider a variety of factors, including the regulatory standing of each of the parties, the effect of the Merger on competition, and the regulatory approvals required for the Merger. An adverse development in either party’s regulatory standing or other factors could result in an inability to obtain one or more of the required regulatory approvals or delay receipt of required approvals. The Federal Reserve Board has stated that if supervisory issues arise during processing of an application for approval of a Merger transaction, a banking organization will be expected to withdraw its application pending resolution of such supervisory concerns. No assurance can be given that the OCC would not also require a similar withdrawal of an application if supervisory issues arise during processing of an application for approval of a Bank Merger Transaction. Accordingly, if there is an adverse development in either party’s regulatory standing, BOK or BOKF Bank may be required to withdraw its application for approval of the proposed Merger and Bank Merger, as applicable, and, if possible, resubmit such application after the applicable supervisory concerns have been resolved.

The terms of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the Merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the Merger Agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the Merger or otherwise reduce the anticipated benefits of the Merger if the Merger were consummated successfully within the expected timeframe. Nor can there be any assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Merger. Additionally, the completion of the Merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the Merger Agreement.

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BOK and CoBiz believe that the proposed transactions should not raise significant regulatory concerns and that BOK will be able to obtain all requisite regulatory approvals in a timely manner. However, the processing time for obtaining regulatory approvals for mergers of banking institutions, particularly for larger institutions, has increased since the financial crisis. In addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulatory entities, under the terms of the Merger Agreement, BOK will not be required and CoBiz will not be permitted to take actions that would reasonably be expected to have a material adverse effect on BOK and its subsidiaries, taken as a whole, after giving effect to the Merger (measured on a scale relative to CoBiz and its subsidiaries, taken as a whole).

Combining BOK and CoBiz may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be realized.

BOK and CoBiz have operated and, until the completion of the Merger, will continue to operate, independently. The success of the Merger, which will represent BOK’s largest transaction to date, including anticipated benefits and cost savings, will depend, in part, on BOK’s ability to successfully combine and integrate the businesses of BOK and CoBiz in a manner that permits growth opportunities and does not materially disrupt existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the Merger. The loss of key employees could adversely affect BOK’s ability to successfully conduct its business, which could have an adverse effect on BOK’s financial results and the value of its common stock. BOK may also encounter unexpected difficulties or costs during the integration that could adversely affect its earnings and financial condition, perhaps materially. If BOK experiences difficulties with the integration process and attendant systems conversion, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause BOK and/or CoBiz to lose customers or cause customers to remove their accounts from BOK and/or CoBiz and move their business to competing financial institutions. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on each of BOK and CoBiz during this transition period and for an undetermined period after completion of the Merger on the combined company. In addition, the actual cost savings of the Merger could be less than anticipated.

The combined company may be unable to retain BOK and/or CoBiz personnel successfully after the Merger is completed.

The success of the Merger will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by BOK and CoBiz. It is possible that these employees may decide not to remain with BOK or CoBiz, as applicable, while the Merger is pending or with the combined company after the Merger is consummated. If key employees terminate their employment or if an insufficient number of employees is retained to maintain effective operations, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating CoBiz to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, BOK and CoBiz may not be able to locate suitable replacements for any key employees who leave either company or to offer employment to potential replacements on reasonable terms.

The Merger Agreement limits CoBiz’s ability to pursue alternatives to the Merger.

The Merger Agreement contains provisions that make it more difficult for CoBiz to sell its business to a party other than BOK. These provisions include a general prohibition on CoBiz’s solicitation of any acquisition proposal or offer for a competing transaction, the requirement that CoBiz pay a termination fee of $34.2 million if the Merger Agreement is terminated in certain circumstances and the requirement that CoBiz submit the approval of the Merger Agreement to a vote of CoBiz’s shareholders even if CoBiz’s board of directors changes its recommendation in favor of the approval of the Merger Agreement in a manner adverse to BOK.

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These provisions might discourage a third party that might have an interest in acquiring all or a significant part of CoBiz from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher per share value than the proposed Merger consideration. Furthermore, a potential competing acquiror may propose to pay a lower per share price to CoBiz’s shareholders than it might otherwise have proposed to pay because of CoBiz’s obligation, in connection with termination of the Merger Agreement under certain circumstances, to pay BOK a $34.2 million termination fee.

The Merger Agreement may be terminated in accordance with its terms, and the Merger may not be completed.

The Merger Agreement is subject to a number of conditions, which must be fulfilled in order to complete the Merger. Those conditions include: (1) the approval of the Merger proposal by the requisite vote of CoBiz’s shareholders; (2) the receipt of all required regulatory approvals and expiration or termination of all statutory waiting periods in respect thereof; (3) authorization for listing on NASDAQ of the shares of BOK common stock to be issued in the Merger; (4) effectiveness of the registration statement with respect to the BOK common stock to be issued upon the closing of the Merger; (5) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal; (6) subject to certain exceptions, the accuracy of the representations and warranties of each of BOK and CoBiz; (7) performance in all material respects by each of BOK and CoBiz of its respective obligations under the Merger Agreement; and (8) receipt by each of BOK and CoBiz of an opinion from its respective counsel to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

In addition, BOK may choose to terminate the Merger Agreement if, prior to obtaining the approval by CoBiz’s shareholders of the Merger Agreement, CoBiz’s board of directors (i) fails to recommend that CoBiz’s shareholders approve the Merger Agreement or makes a material adverse recommendation change with respect thereto or (ii) breaches in any material respect certain of its obligations to call and hold the special meeting of CoBiz’s shareholders for the purpose of voting upon the approval the Merger Agreement and its obligation not to solicit other offers.

Potential Litigation Against CoBiz and BOK Could Result in an Injunction Preventing the Completion of the Merger or a Judgment Resulting in the Payment of Damages.

Shareholders of CoBiz may file lawsuits against BOK, CoBiz and/or the directors and officers of either company in connection with the Merger. These lawsuits could prevent or delay the completion of the Merger and result in significant costs to CoBiz and/or BOK, including any costs associated with the indemnification of directors and officers. The defense or settlement of any lawsuit or claim that remains unresolved at the time the Merger is completed may adversely affect BOK’s business, financial condition, results of operations and cash flows.

CoBiz’s shareholders will have a reduced ownership and voting interest after the Merger and will exercise less influence over management of the combined organization.

CoBiz’s shareholders currently have the right to vote in the election of CoBiz’s board of directors and on other matters affecting CoBiz. Upon the completion of the Merger, each of CoBiz’s shareholders that receives shares of BOK common stock will become a stockholder of BOK with a percentage ownership of the combined organization that is much smaller than the shareholder’s percentage ownership of CoBiz. George Kaiser will continue to own more than 50% of BOK upon completion of the Merger and will maintain significant control over BOK. Because of this, CoBiz’s shareholders as a group will have significantly less influence on the management and policies of BOK than they now have on the management and policies of CoBiz.

Certain of CoBiz’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of CoBiz’s shareholders generally.

You should be aware that some of CoBiz’s executive officers and directors have interests in the Merger that may be different from, or in addition to, the interests of CoBiz’s shareholders generally. These interests include the vesting in full of certain outstanding CoBiz equity compensation awards, rights to continued

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indemnification and insurance coverage by BOK after the Merger for acts or omissions occurring before the Merger and serving on the boards of BOK and BOKF, National Association. These interests and arrangements may create potential conflicts of interest. CoBiz’s board of directors was aware of these interests and considered these interests, among other matters, when making its decision to approve the Merger Agreement and in recommending that CoBiz’s shareholders vote in favor of approving the Merger Agreement.

The fairness opinion delivered by CoBiz’s financial advisor to CoBiz’s board of directors prior to the execution of the Merger Agreement will not reflect changes in circumstances subsequent to the date of the fairness opinion.

BofA Merrill Lynch, CoBiz’s financial advisor in connection with the Merger, delivered its fairness opinion to CoBiz’s board of directors on June 17, 2018. The opinion of BofA Merrill Lynch speaks only as of such date and does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of BOK or CoBiz, changes in general market and economic conditions or regulatory or other factors. Any such changes may materially alter or affect the relative values of BOK and CoBiz.

The Merger is subject to the receipt of consents and approvals from governmental entities that may delay the date of completion of the Merger or impose conditions that could have an adverse effect on BOK.

Before the Merger and the Bank Merger may be completed, various approvals or consents must be obtained from governmental authorities. Satisfying the requirements of these governmental entities may delay the date of completion of the Merger. In addition, these governmental entities may include conditions on the completion of the Merger or require changes to the terms of the Merger. While BOK and CoBiz do not currently expect that any such conditions or changes would result in a material adverse effect on BOK, there can be no assurance that they will not, and such conditions or changes could have the effect of delaying completion of the Merger or imposing additional costs on or limiting the revenues of BOK following the Merger, any of which might have a material adverse effect on BOK following the Merger.

CoBiz and BOK will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainty about the effect of the Merger on employees and customers may have an adverse effect on CoBiz or BOK. These uncertainties may impair CoBiz’s or BOK’s ability to attract, retain and motivate key personnel until the Merger is completed and could cause customers and others that deal with CoBiz or BOK to seek to change existing business relationships with CoBiz or BOK. Retention of certain employees by CoBiz or BOK may be challenging while the Merger is pending, as certain employees may experience uncertainty about their future roles with the combined company. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with CoBiz or BOK, CoBiz’s business or BOK’s business could be harmed. In addition, subject to certain exceptions, CoBiz has agreed to operate its business in the ordinary course prior to closing, and BOK is also subject to certain restrictions on the conduct of its business prior to closing.

Failure to complete the Merger could negatively impact the stock prices, future businesses and financial results of BOK and CoBiz.

If the Merger is not completed, the ongoing businesses of BOK and CoBiz may be adversely affected, and BOK and CoBiz will be subject to several risks, including the following:

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· CoBiz may be required, under certain circumstances, to pay BOK a termination fee of $34.2 million under the Merger Agreement;  

· BOK and CoBiz will be required to pay certain costs relating to the Merger, whether or not the Merger is completed, such as legal, accounting, financial advisor and printing fees;

· under the Merger Agreement, BOK and CoBiz are subject to certain restrictions on the conduct of their business prior to completing the Merger, which may adversely affect their ability to execute certain of their business strategies; and

· matters relating to the Merger may require substantial commitments of time and resources by BOK and CoBiz management, which could otherwise have been devoted to other opportunities that may have been beneficial to BOK and CoBiz as independent companies, as the case may be.

In addition, if the Merger is not completed, BOK and/or CoBiz may experience negative reactions from the financial markets and from their respective customers and employees. For example, BOK’s and CoBiz’s businesses may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. The market price of BOK’s or CoBiz’s common stock could decline to the extent that the current market prices reflect a market assumption that the Merger will be completed. BOK and/or CoBiz also could be subject to litigation related to any failure to complete the Merger or to proceedings commenced against BOK or CoBiz to perform their respective obligations under the Merger Agreement. If the Merger is not completed, BOK and CoBiz cannot assure their stockholders and shareholders, respectively, that the risks described above will not materialize and will not materially affect the business, financial results and stock prices of BOK and/or CoBiz.

If the Merger is not completed, BOK and CoBiz will have incurred substantial expenses without realizing the expected benefits of the Merger.

Each of BOK and CoBiz has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not completed, BOK and CoBiz would have to recognize these expenses without realizing the expected benefits of the Merger.

The shares of BOK common stock to be received by CoBiz’s shareholders as a result of the Merger will have different rights from shares of CoBiz common stock.

Following completion of the Merger, CoBiz’s shareholders will become stockholders of BOK, and their rights as stockholders will be governed by the Oklahoma General Corporation Act and BOK’s charter and bylaws. There will be important differences between your current rights as a shareholder of CoBiz and the rights to which you will be entitled as a stockholder of BOK.

Risks Relating to the Tax Consequences of the Merger

If the Merger does not constitute a reorganization under Section 368(a) of the Internal Revenue Code, then CoBiz shareholders may be responsible for payment of U.S. income taxes related to the consideration they receive in the Merger.

The United States Internal Revenue Service (“IRS”) may determine that the Merger does not qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). In that case, each CoBiz shareholder would recognize a gain or loss equal to the difference between the sum of any cash consideration and the fair market value of the shares of BOK common stock received by the shareholder in the Merger, and such shareholder’s adjusted tax basis in the shares of CoBiz common stock exchanged therefor.

Risks Relating to BOK Business

You should read and consider risk factors specific to BOK’s business that will also affect the combined company after the Merger. These risks are described in the sections entitled “Risk Factors” in BOK’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

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Risks Relating to CoBiz’s Business

You should read and consider risk factors specific to CoBiz’s business that will also affect the combined company after the Merger. These risks are described in the sections entitled “Risk Factors” in CoBiz’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Pursuant to Item 703 of Regulation S-K, the following table summarizes shares acquired and amounts paid per share in net settlement of restricted stock awards during the period.

Period	Total number of shares	Average price paid per share
May 1 - May 31, 2018	75	$	22.32
June 1 - June 30, 2018	906		22.15
Total	981	$	22.16

Item 6.  Exhibits

			Incorporated by Reference
Exhibit		Filed				Filing
Number	Exhibit Description	Herewith	Form	File No.	Exhibit	Date
2.1	Agreement and Plan of Merger, dated as of June 17, 2018, by and among CoBiz Financial Inc., BOK Financial Corporation and BOKF Merger Corporation Number Sixteen		8-K	001-15955	2.1	6/18/2018
10.1	Employment Agreement, dated as of June 17, 2018, by and among BOKF NA, CoBiz Bank, CoBiz and Steven Bangert		8-K	001-15955	10.1	6/18/2018
31.1	Rule13a-14(a)/15d-14(a) Certification of the CEO	X
31.2	Rule13a-14(a)/15d-14(a) Certification of the CFO	X
32.1	Section 1350 Certification of the CEO	X
32.2	Section 1350 Certification of the CFO	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Presentation Linkbase Document	X

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

COBIZ FINANCIAL INC.

Date:	July 27, 2018	By:	/s/ Steven Bangert
			Steven Bangert
			Chairman and Chief Executive Officer
Date:	July 27, 2018	By:	/s/ Lyne B. Andrich
			Lyne B. Andrich
			Chief Operating Officer and Chief Financial Officer

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EX-31.1

Exhibit 31.1

CoBiz Financial Inc.

Certification

I, Steven Bangert, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CoBiz Financial Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 27, 2018

/s/ Steven Bangert

Steven Bangert

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CoBiz Financial Inc.

Certification

I, Lyne B. Andrich, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CoBiz Financial Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 27, 2018

/s/ Lyne B. Andrich

Lyne B. Andrich

Chief Operating Officer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to 18 U.S.C. § 1350, the undersigned officer of CoBiz Financial Inc. (the “Company”), hereby certifies that the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2018 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

3
Date: July 27, 2018	/s/ Steven Bangert
	Steven Bangert
	Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification

Pursuant to 18 U.S.C. § 1350, the undersigned officer of CoBiz Financial Inc. (the “Company”), hereby certifies that the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2018 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

3
Date: July 27, 2018	/s/ Lyne B. Andrich
	Lyne B. Andrich
	Chief Operating Officer and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 20, 2018
Document And Entity Information
Entity Registrant Name	COBIZ FINANCIAL INC
Entity Central Index Key	0001028734
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		42,399,225

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets
Cash and due from banks	$ 66,600	$ 78,735
Interest-bearing deposits and federal funds sold	18,258	1,445
Total cash and cash equivalents	84,858	80,180
Investment securities available for sale (cost of $240,751 and $164,012, respectively)	241,108	166,753
Investment securities held to maturity (fair value of $383,534 and $360,071, respectively)	388,917	362,544
Other investments	16,623	10,119
Total investments	646,648	539,416
Loans - net of allowance for loan losses of $35,834 and $37,941, respectively	3,030,420	3,107,622
Intangible assets - net of amortization of $7,809 and $7,704, respectively	621	726
Bank-owned life insurance	55,387	55,040
Premises and equipment - net of depreciation of $38,831 and $37,459, respectively	9,604	10,827
Accrued interest receivable	14,087	14,150
Deferred income taxes, net	13,672	13,114
Other real estate owned - net of valuation allowance of $8,666 and $8,666, respectively	4,979	5,079
Other	21,599	20,118
TOTAL ASSETS	3,881,875	3,846,272
Liabilities
Noninterest-bearing demand	1,450,894	1,473,650
Interest-bearing demand	712,061	737,934
Money market	864,190	875,936
Savings	21,218	21,453
Certificates of deposits	96,178	116,247
Total deposits	3,144,541	3,225,220
Securities sold under agreements to repurchase	38,994	52,959
Other short-term borrowings	190,000	77,640
Accrued interest and other liabilities	30,831	29,808
Subordinated notes payable - net of unamortized discount and issuance costs of $761 and $805, respectively	59,239	59,195
Junior subordinated debentures	72,166	72,166
TOTAL LIABILITIES	3,535,771	3,516,988
Commitments and contingencies
Shareholders' Equity
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding
Common stock, $.01 par value; 100,000,000 shares authorized; 42,389,975 and 42,217,318 issued and outstanding, respectively	420	418
Additional paid-in capital	204,342	202,111
Retained earnings	144,039	126,896
Accumulated other comprehensive loss, net of income tax of $(874) and $(85), respectively	(2,697)	(141)
TOTAL SHAREHOLDERS' EQUITY	346,104	329,284
TOTAL LIABILITIES AND EQUITY	$ 3,881,875	$ 3,846,272

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Condensed Consolidated Balance Sheets
Investment securities available for sale, cost	$ 240,751	$ 164,012
Investment securities held to maturity, fair value	383,534	360,071
Allowance for loan losses	35,834	37,941
Intangible assets, amortization	7,809	7,704
Premises and equipment, depreciation	38,831	37,459
Other real estate owned assets, allowance	8,666	8,666
Subordinated notes payable, unamortized discount and issuance costs	$ 761	$ 805
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	42,389,975	42,217,318
Common stock, shares outstanding	42,389,975	42,217,318
Accumulated other comprehensive income, tax	$ (874)	$ (85)

XML

Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
INTEREST INCOME:
Interest and fees on loans	$ 34,612	$ 31,405	$ 68,385	$ 60,796
Interest and dividends on investment securities:
Taxable securities	4,046	3,601	7,567	6,799
Nontaxable securities	245	93	489	381
Dividends on securities	204	253	364	401
Interest on federal funds sold and other	70	54	149	110
Total interest income	39,177	35,406	76,954	68,487
INTEREST EXPENSE:
Interest on deposits	1,423	955	2,410	1,942
Interest on short-term borrowings and securities sold under agreements to repurchase	752	602	1,099	786
Interest on subordinated debentures and notes payable	1,853	1,844	3,687	3,676
Total interest expense	4,028	3,401	7,196	6,404
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES	35,149	32,005	69,758	62,083
Provision for loan losses	(901)	673	(1,226)	1,280
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	36,050	31,332	70,984	60,803
NONINTEREST INCOME:
Service charges	1,577	1,714	3,232	3,459
Investment advisory income	1,678	1,500	3,333	3,031
Insurance income	3,138	3,427	6,597	6,549
Other income	1,816	1,670	4,008	3,600
Total noninterest income	8,209	8,311	17,170	16,639
NONINTEREST EXPENSE:
Salaries and employee benefits	20,761	18,335	40,508	37,455
Occupancy expenses, premises and equipment	3,651	3,685	7,362	7,290
Amortization of intangibles	49	150	105	300
FDIC and other assessments	267	349	691	599
Other real estate owned and loan workout costs	50	93	121	182
Net (gain) loss on securities, other assets and other real estate owned	(4)	32	(124)	(313)
Other expense	5,580	4,011	10,261	8,256
Total noninterest expense	30,354	26,655	58,924	53,769
INCOME BEFORE INCOME TAXES	13,905	12,988	29,230	23,673
Provision for income taxes	2,511	3,499	4,855	5,570
NET INCOME	$ 11,394	$ 9,489	$ 24,375	$ 18,103
EARNINGS PER COMMON SHARE:
Basic earnings per share	$ 0.27	$ 0.23	$ 0.58	$ 0.43
Diluted earnings per share	$ 0.27	$ 0.23	$ 0.58	$ 0.43

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income	$ 11,394	$ 9,489	$ 24,375	$ 18,103
Cash flow hedges:
Net unrealized gain (loss)	(278)	168	(894)	96
Reclassification to operations	271	122	528	231
Total	(7)	290	(366)	327
Total other comprehensive income (loss) items	(1,149)	1,080	(3,346)	2,486
Cash flow hedges:
Net unrealized gain (loss)	(68)	63	(219)	36
Reclassification to operations	65	45	128	87
Total tax expense (benefit)	(3)	108	(91)	123
Total income tax provision (benefit)	(282)	408	(820)	939
Other comprehensive income (loss), net of tax	(867)	672	(2,526)	1,547
Comprehensive income	10,527	10,161	21,849	19,650
Available for sale securities
Other comprehensive income (loss) items:
Net unrealized gain (loss)	(850)	1,180	(2,380)	3,000
Reclassification to operations	(4)		(4)	3
Total	(854)	1,180	(2,384)	3,003
Income tax provision:
Net unrealized gain (loss)	(208)	446	(583)	1,134
Reclassification to operations	(1)		(1)	1
Total tax expense (benefit)	(209)	446	(584)	1,135
Held to maturity securities
Other comprehensive income (loss) items:
Reclassification to operations	(288)	(390)	(596)	(844)
Total	288	390	596	844
Income tax provision:
Reclassification to operations	(70)	(146)	(145)	(319)
Total tax expense (benefit)	$ (70)	$ (146)	$ (145)	$ (319)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 24,375	$ 18,103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	1,408	2,872
Provision for loan losses	(1,226)	1,280
Stock-based compensation	1,681	1,840
Deferred income taxes	262	409
Bank-owned life insurance	(753)	(659)
Net gain on securities, other assets and other real estate owned	(124)	(313)
Other operating activities, net	(748)	(211)
Changes in operating assets and liabilities:
Other assets	2,851	2,271
Other liabilities	(854)	(2,293)
Net cash provided by operating activities	26,872	23,299
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other investments	(12,012)	(12,876)
Proceeds from other investments	5,960	9,401
Purchase of investment securities available for sale	(89,280)	(70,300)
Purchase of investment securities held to maturity	(61,370)	(41,319)
Maturity, call and principal payments on investment securities available for sale	12,455	24,500
Maturity, call and principal payments on investment securities held to maturity	33,587	32,497
Net proceeds from sale of loans, OREO and repossessed assets	100
Loan originations and repayments, net	77,512	(125,400)
Purchase of premises and equipment	(211)	(1,927)
Other investing activities, net	47	635
Net cash used in investing activities	(33,212)	(184,789)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, money market and savings accounts	(60,610)	54,800
Net decrease in certificates of deposits	(20,069)	(11,944)
Net increase in short-term borrowings	112,360	75,770
Net increase (decrease) in securities sold under agreements to repurchase	(13,965)	41,564
Proceeds from issuance of common stock	769	948
Taxes paid in net settlement of restricted stock	(907)	(1,113)
Dividends paid on common stock	(6,560)	(4,166)
Net cash provided by financing activities	11,018	155,859
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	4,678	(5,631)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	80,180	96,050
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 84,858	$ 90,419

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Nature of Operations and Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Nature of Operations and Significant Accounting Policies

Nature Of Operations and Significant Accounting Policies

1. Nature of Operations and Significant Accounting Policies

The accompanying unaudited Condensed Consolidated Financial Statements of CoBiz Financial Inc. and its wholly-owned subsidiaries: CoBiz Bank; CoBiz Insurance, Inc.; and CoBiz IM, Inc.; all collectively referred to as the “Company”, “CoBiz”, “we”, “us”, or “our” conform to GAAP in the United States of America for interim financial information and prevailing practices within the banking industry. The operations of the Company are comprised predominantly of the Bank, which operates in its Colorado market areas under the name Colorado Business Bank and in its Arizona market areas under the name Arizona Business Bank.

Organization — The Bank is a commercial banking institution with seven locations in the Denver metropolitan area; one in Boulder; one near Vail; one in Colorado Springs; one in Fort Collins; and four in the Phoenix metropolitan area.  As a state chartered bank, deposits are insured by the Bank Insurance Fund of the FDIC and the Bank is subject to supervision, regulation and examination by the Federal Reserve, Colorado Division of Banking and the FDIC. Pursuant to such regulations, the Bank is subject to special restrictions, supervisory requirements and potential enforcement actions. CoBiz Insurance, Inc. provides commercial and personal P&C insurance brokerage, risk management consulting services to small and medium-sized businesses and individuals and provides employee benefits consulting, insurance brokerage and related administrative support to employers.  CoBiz IM provides wealth planning and investment management to institutions and individuals through its SEC-registered investment advisor subsidiary, CoBiz Wealth, LLC.

On June 18, 2018, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with BOK Financial Corporation, an Oklahoma corporation ("BOK"), and BOKF Merger Corporation Number Sixteen ("Merger Sub"), an Oklahoma corporation and direct wholly-owned subsidiary of BOK. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, CoBiz will merge with and into Merger Sub (the "Merger"), with Merger Sub as the surviving corporation in the Merger. The Merger Agreement was approved by the Board of Directors of each of CoBiz and BOK.  Closing of the transaction, which is expected to occur in the fourth quarter of 2018, is contingent upon shareholder approval and receipt of necessary regulatory approvals, along with the satisfaction of other customary closing conditions.

Subject to the terms and conditions of the Merger Agreement, CoBiz shareholders will have the right to receive upon the effectiveness of the Merger (i) 0.17 shares of BOK common stock, and (ii) $5.70 in cash, for each share of CoBiz common stock.

The following is a summary of certain of the Company’s significant accounting and reporting policies.

Basis of Presentation — The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information,  the instructions to Form 10-Q and, where applicable, prevailing practices within the financial services industry.  The December 31, 2017 Condensed Consolidated balance sheet has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

In the opinion of management, all adjustments (consisting only of normally recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.  In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.

These Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with, and are qualified in their entirety by, the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC.

The Condensed Consolidated Financial Statements include entities in which the Parent has a controlling financial interest.  These entities include: the Bank; CoBiz Insurance, Inc.; and CoBiz IM. Intercompany balances and transactions are eliminated in consolidation.  The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a VIE.

The voting interest model is used when the equity investment is sufficient to absorb the expected losses and the equity investment has all of the characteristics of a controlling financial interest. Under the voting interest model, the party with the controlling voting interest consolidates the legal entity.  The VIE model is used when any of the following conditions exist: the equity investment at risk is not sufficient to finance the entity’s activities without additional subordinated financial support; the holders of the equity investment do not have a controlling voting interest; or the holders of the equity investment are not obligated to absorb the expected losses or residual returns of the legal entity. An enterprise is considered to have a controlling financial interest of a VIE if it has both the power to direct the activities that most significantly impact economic performance and the obligation to absorb losses, or receive benefits, that are significant to the VIE. An enterprise that has a controlling financial interest is considered the primary beneficiary and must consolidate the VIE.  The Company was not the primary beneficiary of a VIE at June 30, 2018 or December 31, 2017.

Certain reclassifications have been made to prior years’ Condensed Consolidated Financial Statements and related notes to conform to the current year presentation.

Cash and Cash Equivalents — The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include amounts that the Company is required to maintain at the Federal Reserve Bank of Kansas City to meet certain regulatory reserve balance requirements.  The following table shows supplemental disclosures of certain cash and noncash items:

	Six months ended
	June 30,
(in thousands)	2018		2017
Cash paid during the period for:
Interest	$	7,275	$	6,489
Income taxes		1,397		2,750

Investments — The Company classifies its investment securities as held to maturity, available for sale or trading, according to management’s intent.  Investments in debt securities are recorded on a trade date basis.  At June 30, 2018 and December 31, 2017, the Company had no trading securities.

Available for sale securities consist of bonds, notes and debentures (including corporate debt and TPS) not classified as held to maturity securities and are reported at fair value as determined by quoted market prices. Unrealized holding gains and losses, net of tax, are reported as a net amount in AOCI until realized.

Investment securities held to maturity consist of residential MBS, bonds, notes and debentures for which the Company has the positive intent and ability to hold to maturity and are reported at cost, adjusted for amortization or accretion of premiums and discounts.

Premiums and discounts, adjusted for prepayments as applicable, are recognized in interest income.  Other than temporary declines in the fair value of individual investment securities held to maturity and available for sale are charged against earnings. Gains and losses on disposal of investment securities are determined using the specific-identification method.

OTTI on debt securities is separated between the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between a security’s amortized cost basis and the discounted present value of expected future cash flows. The amount due to all other factors is recognized in OCI.

Bank Stocks — FHLB, Federal Reserve and other correspondent bank stocks are accounted for under the cost method.

Loans Held for Investment— Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans. Interest is accrued and credited to income daily based on the principal balance outstanding. Loans that are 30 days or more past due based on payments received and applied to the loan are considered delinquent, excluding loans that are cash-secured.  The accrual of interest income is generally discontinued when a loan becomes 90 days past due as to principal and interest. When a loan is designated as nonaccrual, the current period’s accrued interest receivable is charged against current earnings while any portions relating to prior periods are charged against the ALLL. Interest payments received on nonaccrual loans are generally applied to the principal balance of the loan. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured and there has been demonstrated performance in accordance with contractual terms.  The Company may elect to continue the accrual of interest when the loan is in the process of collection and the realizable value of collateral is sufficient to cover the principal balance and accrued interest.

Impaired Loans — Impaired loans, with the exception of groups of smaller-balance homogenous loans that are collectively evaluated for impairment, are defined as loans for which, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays of less than 90 days and monthly payment shortfalls of less than 10% of the contractual payment on a consumer loan generally are not classified as impaired if the Company ultimately expects to recover its full investment. The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Loans that are deemed to be impaired are evaluated in accordance with ASC Topic 310-10-35, Receivables – Subsequent Measurement (ASC 310) and ASC Topic 450-20, Loss Contingencies (ASC 450).

Included in impaired loans are troubled debt restructurings.  A troubled debt restructuring is a formal restructure of a loan where the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including but not limited to reduction in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date.  Troubled debt restructurings are evaluated in accordance with ASC Topic 310-40, Troubled Debt Restructurings by Creditors. Interest payments on impaired loans are typically applied to principal unless collectability of principal is reasonably assured. Loans that have been modified in a formal restructuring are typically returned to accrual status when there has been a sustained period of performance (generally six months) under the modified terms, the borrower has shown the ability and willingness to repay and the Company expects to collect all amounts due under the modified terms.

Loan Origination Fees and Costs — Loan fees and certain costs of originating loans are deferred and the net amount is amortized over the contractual life of the related loans in accordance with ASC Topic 310-20, Nonrefundable Fees and Other Costs.

Allowance for Loan and Lease Losses — The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged against earnings. Loan losses are charged against the ALLL when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the ALLL.

The ALLL is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as new information becomes available.

Allowance for Credit Losses — The allowance for credit losses is established as losses are estimated to have occurred through a provision for credit losses charged to earnings. The allowance for credit losses represents management’s recognition of a separate reserve for off-balance sheet loan commitments and letters of credit. While the ALLL is recorded as a contra-asset to the loan portfolio on the Condensed Consolidated Balance Sheets, the allowance for credit losses is recorded under the caption “Accrued interest and other liabilities”. Although the allowances are presented separately on the balance sheets, any losses incurred from credit losses would be reported as a charge-off in the ALLL, as any loss would be recorded after the off-balance sheet commitment had been funded.

BOLI – The Bank has invested in BOLI policies to fund certain future employee benefit costs.  The policies are recorded at net realizable value.  Changes in the amount that could be realized, including death benefits in excess of the carrying amount, are recorded in the Condensed Consolidated Statements of Income as “Other income”.

Derivative Instruments — Derivative financial instruments are accounted for at fair value. The Company utilizes interest rate swaps to hedge a portion of its exposure to interest rate changes. These instruments are accounted for as cash flow hedges, as defined by ASC Topic 815, Derivatives and Hedging (ASC 815). The Company also uses interest rate swaps to hedge against adverse changes in fair value on fixed-rate loans.  These instruments are accounted for as fair value hedges in accordance with ASC 815.  The net cash flows from the cash flow and fair value hedges are classified in operating activities within the Condensed Consolidated Statements of Cash Flows with the hedged items.  The Company also offers an interest-rate hedge program that includes various derivative products, including swaps, to customers of the Bank. The fair value amounts recognized for derivative instruments and the fair value amounts recognized for the right to reclaim or obligation to return cash collateral are not offset when represented under a master netting arrangement.  The Company also uses foreign currency forward contracts (FX forwards) giving it the right to sell underlying currencies at specified future dates and predetermined prices in order to mitigate foreign exchange risk associated with long positions.  FX forwards are carried at fair value with changes in value recognized in current earnings as the contracts are not designated as hedging instruments. 

Fair Value Measurements — The Company measures financial assets, financial liabilities, nonfinancial assets and nonfinancial liabilities pursuant to ASC Topic 820, Fair Value Measurement and Disclosures (ASC 820).  ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. 

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Recent Accounting Pronouncements

Recent Accounting Pronouncements

2.  Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9 (ASU 2014-09), Revenue from Contracts with Customers. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 to fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08 which clarified the revenue recognition implementation guidance on principal versus agent considerations and is effective during the same period as ASU 2014-09. In April 2016, the FASB issued ASU 2016-10 which clarified the revenue recognition guidance regarding the identification of performance obligations and the licensing implementation and is effective during the same period as ASU 2014-09. In May 2016, the FASB issued ASU 2016-12 which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. ASU 2016-12 is effective during the same period as ASU 2014-09. Effective January 2018, the Company adopted the aforementioned ASUs using the modified retrospective method.  In evaluating the effects of these ASUs on its financial statements and disclosures, the Company has determined the following:

· The primary revenue lines subject to these ASUs are deposit service charges, investment advisory income and insurance income, which represented 16% of total operating revenue in 2017.

· The adoption of these ASUs did not have a material impact on the Company’s financial statements.  However, the Company has expanded disclosures on the nature, amount and timing of revenue from the impacted revenue lines.  See Note 12 for additional information.

Effective January 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01).  The main objective of ASU 2016-01 is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Some of the amendments in ASU 2016-01 include the following:  1)  Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2)  Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3)  Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4)  Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.  For public business entities, the amendments of ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The adoption of ASU 2016-01, through application of a cumulative effect adjustment to retained earnings, did not have a material impact on the consolidated financial statements. See Note 10 for fair value measurement disclosures.

Effective January 2018, the Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), regarding how certain cash receipts and cash payments are presented and classified in the statements of cash flows.  ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.  The Company implemented ASU 2016-15 during the quarter ended March 31, 2018 with application of the retrospective method and cumulative earnings approach for equity method investments. The adoption of ASU 2016-15 did not have a material impact on the consolidated financial statements.

Effective January 2018, the Company adopted ASU 2017-09, Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting (ASU 2017-09).  ASU 2017-09 clarifies when changes to the terms and conditions of share-based payment awards must be treated as modifications.  Specifically, the new guidance permits companies to make certain changes to awards without accounting for them as modifications.  The adoption of ASU 2017-09 did not have a material impact on the consolidated financial statements.  

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AOCI (ASU 2018-02).  ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects of the application of the TCJA.  ASU 2018-02 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  The Company early adopted and applied the provisions of ASU 2018-02 during the quarter ended March 31, 2018.  The reclassification from AOCI to retained earnings did not have a material effect on the Company’s financial statements or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about lease arrangements.  For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018.  The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures by reviewing all existing lease arrangements.  Preliminarily, the Company expects the primary impact of ASU 2016-02 will relate to its office locations, which are designated as operating leases.  The Company has future operating lease obligations for its locations of $27.7 million that are being evaluated as potential lease assets and liabilities, as defined in ASU 2016-02. The Company has formed a lease implementation team which includes members of accounting, facilities and operations to review lease contracts and the requirements of ASU 2016-02.  The implementation team has evaluated third party software solutions to assist with the implementation of ASU 2016-02.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13).  The objective of ASU 2016-13 is to provide financial statement users with decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit.  ASU 2016-13 includes provisions that require financial assets measured at amortized cost (such as loans and held to maturity (HTM) debt securities) to be presented at the net amount expected to be collected.  This will be accomplished through recognition of an estimate of all current expected credit losses.  The estimate will include forecasted information for the timeframe that an entity is able to develop reasonable and supportable forecasts.  This is a change from the current practice of recognizing incurred losses based on the probable initial recognition threshold under current GAAP.  In addition, credit losses on available for sale (AFS) debt securities will be recorded through an allowance for credit losses rather than as a write-down.  Under ASU 2016-13, an entity will be able to record reversals of credit losses in current period income when the estimate of credit losses declines, whereas current GAAP prohibits reflecting those improvements in current period earnings.

ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted for fiscal years, including interim periods, beginning after December 15, 2018.  ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date.  A prospective transition approach is required for these debt securities.  The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures.  While the effects cannot yet be quantified, the Company expects ASU 2016-13 to add complexity and costs to its current credit loss evaluation process.  In planning for the implementation of ASU 2016-13, the Company has formed a CECL implementation team that includes the CFO, Chief Credit Officer and members of credit, accounting, finance, and information technology.  The team meets on a weekly basis and is currently evaluating data requirements and loss methodologies.  In the first quarter of 2018, the implementation team finalized its recommendation of a third-party software solution.  The Company continues to evaluate the effects of ASU 2016-13 on its financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) (ASU 2017-08).  ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium.  Prior to the issuance of this guidance, premiums were amortized as an adjustment of yield over the contractual life of the instrument.  ASU 2017-08 requires premiums on purchased callable debt securities that have explicit, noncontingent call features that are callable at fixed prices to be amortized to the earliest call date.  There are no accounting changes for securities held at a discount.  This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  ASU 2017-08 will be applied through a cumulative effect adjustment through equity (modified-retrospective approach).  The Company is currently evaluating the effects of ASU 2017-08 on its financial statements and disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12).  The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities.  ASU 2017-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  ASU 2017-12 requires the modified-retrospective approach for adoption.  The Company is currently evaluating the effects of ASU 2017-12 on its financial statements and disclosures.  

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Earnings per Common Share and Dividends Declared per Common Share

6 Months Ended

Jun. 30, 2018

Earnings per Common Share and Dividends Declared per Common Share

Earnings per Common Share and Dividends Declared per Common Share

3.  Earnings per Common Share and Dividends Declared per Common Share

Earnings per common share is calculated based on the two-class method prescribed in ASC 260, Earnings per Share.  The two-class method is an allocation of undistributed earnings to common stock and securities that participate in dividends with common stock.  The Company’s restricted stock awards are considered participating securities since the recipients receive non-forfeitable dividends on unvested awards.  The impact of participating securities is included in basic earnings per common share for the three and six months ended June 30, 2018 and 2017.  Income allocated to common shares and weighted average shares outstanding used in the calculation of basic and diluted earnings per common share are as follows:

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands, except share and per share amounts)	2018		2017		2018		2017
Net income available to common shareholders	$	11,394	$	9,489	$	24,375	$	18,103
Dividends and undistributed earnings allocated to participating securities		(95)		(94)		(208)		(187)
Earnings allocated to common shares (1)	$	11,299	$	9,395	$	24,167	$	17,916
Weighted average common shares - issued		42,378,688		41,749,192		42,323,339		41,678,367
Average unvested restricted share awards		(357,246)		(412,229)		(363,035)		(428,681)
Weighted average common shares outstanding - basic		42,021,442		41,336,963		41,960,304		41,249,686
Dilutive potential common shares		60,933		375,774		62,540		399,330
Weighted average common shares outstanding - diluted		42,082,375		41,712,737		42,022,844		41,649,016
Weighted average antidilutive securities outstanding (2)		10,833		30,028		10,833		20,340
Earnings per common share:
Basic	$	0.27	$	0.23	$	0.58	$	0.43
Diluted	$	0.27	$	0.23	$	0.58	$	0.43
Dividends declared per share	$	0.100	$	0.050	$	0.155	$	0.100

(1) Earnings allocated to common shareholders for basic earnings per common share under the two-class method may differ from earnings allocated for diluted earnings per common share when use of the treasury method results in greater dilution than the two-class method.

(2) Antidilutive shares excluded from the diluted earnings per common share computation.

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Investments

6 Months Ended

Jun. 30, 2018

Investments

Investments

4.  Investments

The amortized cost and estimated fair values of investment securities are summarized as follows:

	At June 30, 2018								At December 31, 2017
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Fair		Amortized		unrealized		unrealized		Fair
(in thousands)	cost		gains		losses		value		cost		gains		losses		value
Available for sale securities (AFS):
Trust preferred securities	$	20,035	$	1,638	$	475	$	21,198	$	20,318	$	1,870	$	205	$	21,983
Corporate debt securities		217,475		1,446		2,271		216,650		140,445		1,153		103		141,495
Municipal securities		3,241		24		5		3,260		3,249		41		15		3,275
Total AFS	$	240,751	$	3,108	$	2,751	$	241,108	$	164,012	$	3,064	$	323	$	166,753
Held to maturity securities (HTM):
Mortgage-backed securities	$	344,675	$	125	$	7,381	$	337,419	$	318,128	$	118	$	3,262	$	314,984
Trust preferred securities		10,773		1,507		-		12,280		10,721		783		18		11,486
Municipal securities		33,469		433		67		33,835		33,695		73		167		33,601
Total HTM	$	388,917	$	2,065	$	7,448	$	383,534	$	362,544	$	974	$	3,447	$	360,071

The amortized cost and estimated fair value of investments in debt securities at June 30, 2018, by contractual maturity are shown below.  Expected maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Availablefor sale				Heldtomaturity
	Amortized		Fair		Amortized		Fair
(in thousands)	cost		value		cost		value
Due in one year or less	$	8,106	$	8,083	$	1,691	$	1,688
Due after one year through five years		158,235		156,927		23,389		23,557
Due after five years through ten years		48,490		48,656		-		-
Due after ten years		25,920		27,442		19,162		20,870
Mortgage-backed securities		-		-		344,675		337,419
	$	240,751	$	241,108	$	388,917	$	383,534

The Company uses investment securities to collateralize public and governmental deposits.  Investment securities with an approximate fair value of $156.9 million and $164.4 million were pledged to secure these deposits of $116.9 million and $116.5 million at June 30, 2018 and December 31, 2017, respectively. 

Changes in interest rates and market liquidity may cause adverse fluctuations in the market price of securities resulting in temporary unrealized losses.  In reviewing the realizable value of its securities in a loss position, the Company considered the following factors: (1) the length of time and extent to which the market had been less than cost; (2) the financial condition and near-term prospects of the issuer; (3) investment downgrades by rating agencies; and (4) whether it is more likely than not that the Company will have to sell the security before a recovery in value.  When it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the security, and the fair value of the investment security is less than its amortized cost, an other-than-temporary impairment is recognized in earnings. 

For debt securities that are considered other-than-temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, an OTTI is recognized.  OTTI is separated into the amount that is credit-related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between a security’s amortized cost basis and the discounted present value of expected future cash flows.  The amount due to all other factors is recognized in other comprehensive income.The Company did not have any credit impaired securities at June 30, 2018 and December 31, 2017.

There were 218 and 181 securities in the tables below at June 30, 2018 and December 31, 2017, respectively, in an unrealized loss position.

	June 30, 2018
	Lessthan12 months				12months or greater				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	value		loss		value		loss		value		loss
AFS
Trust preferred securities	$	-	$	-	$	7,449	$	475	$	7,449	$	475
Corporate debt securities		153,058		2,262		971		9		154,029		2,271
Municipal securities		793		5		-		-		793		5
Total AFS	$	153,851	$	2,267	$	8,420	$	484	$	162,271	$	2,751
HTM
Mortgage-backed securities	$	195,392	$	4,305	$	117,651	$	3,076	$	313,043	$	7,381
Municipal securities		11,998		65		679		2		12,677		67
Total HTM	$	207,390	$	4,370	$	118,330	$	3,078	$	325,720	$	7,448

	December 31, 2017
	Lessthan 12 months				12months or greater				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	value		loss		value		loss		value		loss
AFS
Trust preferred securities	$	700	$	43	$	7,020	$	162	$	7,720	$	205
Corporate debt securities		40,068		94		1,216		9		41,284		103
Municipal securities		1,252		15		-		-		1,252		15
Total AFS	$	42,020	$	152	$	8,236	$	171	$	50,256	$	323
HTM
Mortgage-backed securities	$	182,974	$	1,457	$	104,464	$	1,805	$	287,438	$	3,262
Trust preferred securities		-		-		864		18		864		18
Municipal securities		20,445		163		684		4		21,129		167
Total HTM	$	203,419	$	1,620	$	106,012	$	1,827	$	309,431	$	3,447

Other investments at June 30, 2018 and December 31, 2017, consisted of the following:

	June 30,		December 31,
(in thousands)	2018		2017
Bank stocks — at cost	$	14,447	$	7,945
Investment in statutory trusts — equity method		2,176		2,174
Total	$	16,623	$	10,119

Bank stocks consist primarily of stock in the FHLB, which is part of the Federal Home Loan Bank System.  The purpose of the FHLB investment relates to maintenance of a borrowing base with the FHLB.  FHLB stock holdings are largely dependent upon the Company’s liquidity position.  To the extent the need for wholesale funding increases or decreases, the Company may purchase additional or sell excess FHLB stock, respectively.  The Company evaluates impairment in these investments based on the ultimate recoverability of the par value.  At June 30, 2018, the Company did not consider these investments to be other-than-temporarily impaired.

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Loans

6 Months Ended

Jun. 30, 2018

Loans

Loans

5.  Loans

The following disclosure reports the Company’s loan portfolio segments and classes.  Segments are groupings of similar loans at a level which the Company has adopted systematic methods of documentation for determining its ALLL. Classes are a disaggregation of the portfolio segments.  The Company’s loan portfolio segments are:

· Commercial loans – Commercial loans consist of loans to small and medium-sized businesses in a wide variety of industries.  The Bank’s areas of emphasis in commercial lending include, but are not limited to, loans to wholesalers, manufacturers, municipalities, construction and business services companies.  Commercial loans are generally collateralized by inventory, accounts receivable, equipment, real estate and other commercial assets, and may be supported by other credit enhancements such as personal guarantees.  Risk arises primarily due to a difference between expected and actual cash flows of the borrowers.  However, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans.  The fair value of the collateral securing these loans may fluctuate as market conditions change.  In the case of loans secured by accounts receivable, the recovery of the Company’s investment is dependent upon the borrowers’ ability to collect amounts due from its customers.

· Real estate - mortgage loans – Real estate mortgage loans include various types of loans for which the Company holds real property as collateral.  Commercial real estate lending activity is typically restricted to owner-occupied properties or to investor properties that are owned by customers with a current banking relationship.  The primary risks of real estate mortgage loans include the borrower’s inability to pay, material decreases in the value of the real estate that is being held as collateral and significant increases in interest rates, which may make the real estate mortgage loan unprofitable.  Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.  

· Construction and land loans – The Company originates loans to finance construction projects including one- to four-family residences, multifamily residences, commercial office, senior housing, and industrial projects.  Residential construction loans are due upon the sale of the completed project and are generally collateralized by first liens on the real estate and have floating interest rates.  Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans.  Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project.  Additionally, the fair value of the underlying collateral may fluctuate as market conditions change.  The Company also originates loans for the acquisition and future development of land for residential building projects, as well as finished lots prepared to enter the construction phase.  The primary risks include the borrower’s inability to pay and the inability of the Company to recover its investment due to a decline in the fair value of the underlying collateral.

· Consumer loans–The Company provides a broad range of consumer loans to customers, including personal lines of credit, home equity loans, mortgage loans and automobile loans.  Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral.

· Other loans–Other loans include lending products, such as taxable and tax exempt leasing, not defined as commercial, real estate, acquisition and development, construction, or consumer loans.

The loan portfolio segments at June 30, 2018 and December 31, 2017 were as follows:

(in thousands)	At June 30, 2018		At December 31, 2017
Commercial	$	1,222,036	$	1,250,356
Real estate - mortgage		1,234,414		1,250,423
Construction & land		244,444		266,081
Consumer		273,900		282,101
Other		93,267		98,916
Loans held for investment		3,068,061		3,147,877
Allowance for loan losses		(35,834)		(37,941)
Unearned net loan fees		(1,807)		(2,314)
Total net loans	$	3,030,420	$	3,107,622

The Company routinely acquires participating interests in loans originated by other banks which are subsequently included in the loan portfolio.

At June 30, 2018 and December 31, 2017, overdraft demand deposits totaling $0.4 million and $0.2 million, respectively, were reclassified from deposits to loans. 

The Company maintains a loan review program independent of the lending function that is designed to reduce and control risk in lending. It includes the continuous monitoring of lending activities with respect to underwriting and processing new loans, preventing insider abuse and timely follow-up and corrective action for loans showing signs of deterioration in quality.  The Company also has a systematic process to evaluate individual loans and pools of loans within our loan portfolio. The Company maintains a loan grading system whereby each loan is assigned a grade between 1 and 8, with 1 representing the highest quality credit, 7 representing a nonaccrual loan where collection or liquidation in full is highly questionable and improbable, and 8 representing a loss that has been or will be charged-off.  Grades are assigned based upon the degree of risk associated with repayment of a loan in the normal course of business pursuant to the original terms.  Loans that are graded 5 or lower are categorized as non-classified credits while loans graded 6 and higher are categorized as classified credits.  Loan grade changes are evaluated on a monthly basis.  Loans above a certain dollar amount that are adversely graded are reported to the Special Assets Group Manager and the Chief Credit Officer along with current financial information, a collateral analysis and an action plan.

The loan portfolio showing total non-classified and classified balances by loan class at June 30, 2018 and December 31, 2017 is summarized below:

	At June 30, 2018
(in thousands)	Non-classified		Classified		Total
Commercial
Manufacturing	$	72,323	$	6,509	$	78,832
Finance and insurance		53,978		117		54,095
Healthcare		158,643		1,766		160,409
Real estate services		115,451		2,507		117,958
Construction		72,111		3,702		75,813
Public administration		249,606		534		250,140
Other		447,490		37,299		484,789
		1,169,602		52,434		1,222,036
Real estate - mortgage
Residential & commercial owner-occupied		508,871		16,467		525,338
Residential & commercial investor		706,067		3,009		709,076
		1,214,938		19,476		1,234,414
Construction & land		239,632		4,812		244,444
Consumer		270,200		3,700		273,900
Other		91,961		1,306		93,267
Total loans held for investment	$	2,986,333	$	81,728	$	3,068,061
Unearned net loan fees						(1,807)
Net loans held for investment					$	3,066,254

	At December 31, 2017
(in thousands)	Non-classified		Classified		Total
Commercial
Manufacturing	$	82,275	$	2,912	$	85,187
Finance and insurance		40,796		1,722		42,518
Healthcare		161,162		2,623		163,785
Real estate services		124,861		3,986		128,847
Construction		67,232		758		67,990
Public administration		239,230		847		240,077
Other		468,562		53,390		521,952
		1,184,118		66,238		1,250,356
Real estate - mortgage
Residential & commercial owner-occupied		481,061		3,574		484,635
Residential & commercial investor		765,210		578		765,788
		1,246,271		4,152		1,250,423
Construction & land		266,081		-		266,081
Consumer		279,191		2,910		282,101
Other		97,542		1,374		98,916
Total loans held for investment	$	3,073,203	$	74,674	$	3,147,877
Unearned net loan fees						(2,314)
Net loans held for investment					$	3,145,563

Transactions in the ALLL by segment for the three and six months ended June 30, 2018 and 2017 are summarized below:

	Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017
Allowance for loan losses, beginning of period
Commercial	$	16,523	$	15,900	$	16,837	$	15,398
Real estate - mortgage		12,892		11,797		12,690		11,475
Construction & land		3,250		2,277		4,034		1,997
Consumer		2,597		2,448		2,617		2,803
Other		842		916		826		945
Unallocated		692		873		937		675
Total		36,796		34,211		37,941		33,293
Provision
Commercial	$	(1,212)	$	(22)	$	(689)	$	392
Real estate - mortgage		40		848		239		1,165
Construction & land		366		(507)		(435)		(521)
Consumer		85		116		68		(163)
Other		(28)		105		(12)		76
Unallocated		(152)		133		(397)		331
Total		(901)		673		(1,226)		1,280
Charge-offs
Commercial	$	(255)	$	(196)	$	(1,361)	$	(222)
Consumer		(49)		(6)		(58)		(86)
Other		(29)		-		(29)		-
Total		(333)		(202)		(1,448)		(308)
Recoveries
Commercial	$	163	$	67	$	432	$	181
Real estate - mortgage		8		159		11		164
Construction & land		84		714		101		1,008
Consumer		14		3		20		7
Other		3		-		3		-
Total		272		943		567		1,360
Allowance for loan losses, end of period
Commercial	$	15,219	$	15,749	$	15,219	$	15,749
Real estate - mortgage		12,940		12,804		12,940		12,804
Construction & land		3,700		2,484		3,700		2,484
Consumer		2,647		2,561		2,647		2,561
Other		788		1,021		788		1,021
Unallocated		540		1,006		540		1,006
Total	$	35,834	$	35,625	$	35,834	$	35,625

The Company estimates the ALLL in accordance with ASC 310 for purposes of evaluating loan impairment on a loan-by-loan basis and ASC 450 for purposes of collectively evaluating loan impairment by grouping loans with common risk characteristics (i.e. risk classification, past-due status, type of loan, and collateral).  The ALLL is comprised of the following components:

· Specific Reserves – The Company continuously evaluates its reserve for loan losses to maintain an adequate level to absorb loan losses incurred in the loan portfolio. Reserves on loans identified as impaired, including troubled debt restructurings, are based on discounted expected cash flows using the loan’s initial effective interest rate, the observable market value of the loan or the fair value of the collateral for certain collateral-dependent loans. The fair value of the collateral is determined in accordance with ASC 820. Loans are considered to be impaired in accordance with the provisions of ASC 310 when it is probable that all amounts due in accordance with the contractual terms will not be collected. Factors contributing to the determination of specific reserves include the financial condition of the borrower, changes in the value of pledged collateral and general economic conditions.  Troubled debt restructurings meet the definition of an impaired loan under ASC 310 and therefore, troubled debt restructurings are subject to impairment evaluation on a loan-by-loan basis.

For collateral dependent loans that have been specifically identified as impaired, the Company measures fair value based on third-party appraisals, adjusted for estimated costs to sell the property.  Upon impairment, the Company will obtain a new appraisal if one had not been previously obtained in the last 12 months.  For credits over $2.0 million, the Company typically engages an additional third-party appraiser to review the appraisal.  For credits under $2.0 million, the Company’s internal appraisal department reviews the appraisal.  All appraisals are reviewed for adherence to regulations and mathematical accuracy and reasonableness based on recent sales transactions that may have occurred subsequent to or at the time of the appraisal.  Based on this analysis, the appraised value may be adjusted downward if there is evidence that the appraised value may not be indicative of fair value.  Each appraisal is updated on an annual basis, either through a new appraisal or through the Company’s comprehensive internal review process.

Values are reviewed and monitored internally and fair value is re-assessed at least quarterly or more frequently when events or circumstances occur that indicate a change in fair value. 

· General Reserves – General reserves are considered part of the allocated portion of the ALLL. The Company uses a comprehensive loan grading process for our loan portfolios. Based on this process, a loss factor is assigned to each pool of graded loans.  A combination of loss experience and external loss data is used in determining the appropriate loss factor.  This estimate represents the probable incurred losses within the portfolio. In evaluating the adequacy of the ALLL, management considers historical losses (Migration), as well as other factors including changes in:

· Lending policies and procedures

· National and local economic and business conditions and developments

· Nature and volume of portfolio

· Trends of the volume and severity of past-due and classified loans

· Trends in the volume of nonaccrual loans, troubled debt restructurings, and other loan modifications

· Credit concentrations

Troubled debt restructurings have a direct impact on the ALLL to the extent a loss has been recognized in relation to the loan modified.  This is consistent with the Company’s consideration of Migration in determining general reserves.

The aforementioned factors enable management to recognize environmental conditions contributing to incurred losses in the portfolio, which have not yet manifested in Migration.  Management believes Migration history adequately captures a substantial percentage of probable incurred losses within the portfolio.

In addition to the allocated reserve for graded loans, a portion of the ALLL is determined by segmenting the portfolio into product groupings with similar risk characteristics.  Part of the segmentation involves assigning increased reserve factors to those lending activities deemed higher-risk, such as leverage-financings, unsecured loans, certain loans lacking personal guarantees, senior housing, speculative residential construction and multifamily loans.   

· Unallocated Reserves – The unallocated reserve, which is judgmentally determined, is maintained to recognize the imprecision in estimating and measuring loss when evaluating reserves for individual loans or pools of loans.  The unallocated reserve consists of a missed grade component that is intended to capture the inherent risk that certain loans may be assigned an incorrect loan grade.

In assessing the reasonableness of management’s assumptions, consideration is given to select peer ratios, industry standards and directional consistency of the ALLL.  Ratio analysis highlights divergent trends in the relationship of the ALLL to nonaccrual loans, to total loans and to historical charge-offs.  Although these comparisons can be helpful as a supplement to assess reasonableness of management assumptions, they are not, by themselves, sufficient basis for determining the adequacy of the ALLL.  While management utilizes its best judgment and information available, the ultimate adequacy of the ALLL is dependent upon a variety of factors beyond the Company’s control, including the performance of the loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

The following table summarizes loans held for investment and the ALLL on the basis of the impairment method:

	At June 30, 2018								At December 31, 2017
	Individually evaluated for impairment				Collectively evaluated for impairment				Individually evaluated for impairment				Collectively evaluated for impairment
(in thousands)	Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses
Commercial	$	46,102	$	4,838	$	1,176,678	$	10,381	$	56,566	$	5,862	$	1,194,005	$	10,975
Real estate - mortgage		4,041		382		1,229,509		12,558		1,331		109		1,248,166		12,581
Construction & land		1,019		71		241,634		3,629		1,071		91		263,330		3,943
Consumer		231		109		273,755		2,538		1,366		148		280,783		2,469
Other		22		22		93,263		766		-		-		98,945		826
Unallocated		-		-		-		540		-		-		-		937
Total	$	51,415	$	5,422	$	3,014,839	$	30,412	$	60,334	$	6,210	$	3,085,229	$	31,731

Information on impaired loans at June 30, 2018 and December 31, 2017 is reported in the following tables:

	At June 30, 2018
					Recorded		Recorded
			Recorded		investment		investment
	Unpaid		investment		with a		with no
	principal		in impaired		related		related		Related
(in thousands)	balance		loans		allowance		allowance		allowance
Commercial
Manufacturing	$	3,991	$	3,991	$	3,991	$	-	$	1,132
Finance and insurance		210		117		14		103		14
Healthcare		652		652		490		162		98
Real estate services		4,992		4,992		4,992		-		262
Construction		2,324		2,324		2,119		205		98
Other		34,252		34,026		32,269		1,757		3,234
		46,421		46,102		43,875		2,227		4,838
Real estate - mortgage
Residential & commercial owner-occupied		3,295		3,295		2,962		333		370
Residential & commercial investor		746		746		169		577		12
		4,041		4,041		3,131		910		382
Construction & land		1,019		1,019		1,019		-		71
Consumer		231		231		167		64		109
Other		22		22		22		-		22
Total	$	51,734	$	51,415	$	48,214	$	3,201	$	5,422

	At December 31, 2017
					Recorded		Recorded
			Recorded		investment		investment
	Unpaid		investment		with a		with no
	principal		in impaired		related		related		Related
(in thousands)	balance		loans		allowance		allowance		allowance
Commercial
Manufacturing	$	3,302	$	3,302	$	3,302	$	-	$	238
Finance and insurance		473		473		17		456		17
Healthcare		718		718		459		259		207
Real estate services		7,982		7,982		7,982		-		544
Construction		1,689		1,457		977		480		71
Public administration		313		313		313		-		27
Other		42,660		42,321		41,030		1,291		4,758
		57,137		56,566		54,080		2,486		5,862
Real estate - mortgage
Residential & commercial owner-occupied		1,159		1,159		1,102		57		94
Residential & commercial investor		172		172		172		-		15
		1,331		1,331		1,274		57		109
Construction & land		1,071		1,071		1,071		-		91
Consumer		1,366		1,366		212		1,154		148
Total	$	60,905	$	60,334	$	56,637	$	3,697	$	6,210

	Impairedloans
	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
(in thousands)	Average recorded		Interest income		Average recorded		Interest income		Average recorded		Interest income		Average recorded		Interest income
Commercial
Manufacturing	$	5,052	$	84	$	2,028	$	30	$	4,469	$	171	$	2,037	$	59
Finance and insurance		295		6		513		10		354		13		286		10
Healthcare		627		10		550		8		657		20		398		14
Real estate services		5,014		-		5,717		52		6,003		-		5,981		102
Construction		1,959		37		1,663		20		1,791		72		1,625		40
Public administration		-		-		-		-		104		-		-		-
Other		36,526		548		19,665		223		38,457		1,069		14,635		402
		49,473		685		30,136		343		51,835		1,345		24,962		627
Real estate - mortgage
Residential & commercial owner-occupied		3,450		65		1,223		9		2,686		131		1,275		18
Residential & commercial investor		747		10		2,332		20		555		19		2,366		40
		4,197		75		3,555		29		3,241		150		3,641		58
Construction & land		1,032		8		1,850		15		1,045		17		1,871		31
Consumer		719		4		253		1		887		7		246		2
Other		90		-		-		-		107		1		-		-
Total	$	55,511	$	772	$	35,794	$	388	$	57,115	$	1,520	$	30,720	$	718

Interest income recognized on impaired loans presented in the table above primarily represents interest earned on troubled debt restructurings that meet the definition of an impaired loan and are subject to disclosure.  Interest income that would have been recorded if nonaccrual loans performed in accordance with their contractual terms was immaterial in the periods presented.

The table below summarizes transactions related to troubled debt restructurings during the six months ended June 30, 2018.

(in thousands)	Performing		Nonperforming		Total
Beginning balance at December 31, 2017	$	52,817	$	3,682	$	56,499
New restructurings		6,893		173		7,066
Change in accrual status		(11,934)		11,934		-
Net paydowns		(13,102)		(877)		(13,979)
Charge-offs		-		(1,091)		(1,091)
Ending balance at June 30, 2018	$	34,674	$	13,821	$	48,495

The tables below provides information regarding troubled debt restructurings that occurred during the three and six months ended June 30, 2018 and 2017.  Pre-modification outstanding recorded investment reflects the Company’s recorded investment immediately before the modification.  Post-modification outstanding recorded investment represents the Company’s recorded investment at the end of the reporting period.  The tables below do not include loans restructured and paid off during the periods presented.

	Three months ended June 30, 2018						Three months ended June 30, 2017
			Pre-modification		Post-modification				Pre-modification		Post-modification
			outstanding		outstanding				outstanding		outstanding
	Number of		recorded		recorded		Number of		recorded		recorded
($ in thousands)	contracts		investment		investment		contracts		investment		investment
Commercial
Manufacturing		2	$	610	$	210		-	$	-	$	-
Finance and insurance		-		-		-		1		456		456
Healthcare		2		225		200		1		167		90
Construction		1		600		600		-		-		-
Other		3		1,450		1,424		8		4,031		3,427
Total commercial		8		2,885		2,434		10		4,654		3,973
Consumer		1		10		10		-		-		-
Total		9	$	2,895	$	2,444		10	$	4,654	$	3,973

	Six months ended June 30, 2018						Six months ended June 30, 2017
			Pre-modification		Post-modification				Pre-modification		Post-modification
			outstanding		outstanding				outstanding		outstanding
	Number of		recorded		recorded		Number of		recorded		recorded
($ in thousands)	contracts		investment		investment		contracts		investment		investment
Commercial
Manufacturing		3	$	460	$	439		-	$	-	$	-
Finance and insurance		-		-		-		1		456		456
Healthcare		2		225		200		3		465		362
Construction		3		1,546		1,455		-		-		-
Other		6		1,883		1,869		9		11,978		11,439
Total commercial		14		4,114		3,963		13		12,899		12,257
Real estate - mortgage
Residential and commercial owner-occupied		2		2,109		2,048		-		-		-
Residential & commercial investor		1		578		578		-		-		-
Total real estate - mortgage		3		2,687		2,626		-		-		-
Consumer		1		10		10		1		83		79
Total		18	$	6,811	$	6,599		14	$	12,982	$	12,336

Troubled debt restructurings during the three and six months ended June 30, 2018 and 2017 resulted primarily from the extension of repayment terms and interest rate concessions.  The Company had no charge-offs in conjunction with loans restructured during the three and six months ended June 30, 2018 and 2017.

At June 30, 2018 and December 31, 2017, there were $2.7 million and $4.0 million in outstanding commitments on restructured loans, respectively.

The table below presents troubled loans restructured within the past 12 months that had a payment default during six months ended June 30, 2018 and 2017.

	Six months ended June 30,
	2018			2017
Troubled debt restructurings that subsequently defaulted ($ in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Commercial
Finance and insurance	1	$	1,366	-	$	-
Construction	-		-	1		48
Other	2		10,557	-		-
Total	3	$	11,923	1	$	48

The Company’s nonaccrual loans by class at June 30, 2018 and December 31, 2017 are reported in the following table:

(in thousands)	At June 30, 2018		At December 31, 2017
Commercial
Manufacturing	$	1,846	$	-
Finance and insurance		117		473
Healthcare		452		718
Construction		205		681
Other		13,618		4,313
Total commercial		16,238		6,185
Real estate-mortgage
Residential & commercial owner-occupied		333		57
Total real estate - mortgage		333		57
Consumer		148		1,275
Other		22		-
Total nonaccrual loans	$	16,741	$	7,517

The tables below summarize the aging of the Company’s loan portfolio at June 30, 2018 and December 31, 2017.

	At June 30, 2018
	30 - 59		60 - 89										90 days or more
	Days		Days		90+ Days		Total						past due and
(in thousands)	past due		past due		past due		past due		Current		Total loans		accruing
Commercial
Manufacturing	$	-	$	-	$	1,846	$	1,846	$	76,986	$	78,832	$	-
Finance and insurance		-		4,000		-		4,000		50,095		54,095		-
Healthcare		4		-		-		4		160,405		160,409		-
Real estate services		-		-		-		-		117,958		117,958		-
Construction		1,001		-		75		1,076		74,737		75,813		-
Public administration		-		-		-		-		250,140		250,140		-
Other		2,216		626		11,503		14,345		470,444		484,789		-
		3,221		4,626		13,424		21,271		1,200,765		1,222,036		-
Real estate - mortgage
Residential & commercial owner-occupied		-		2,048		295		2,343		522,995		525,338		-
Residential & commercial investor		-		577		-		577		708,499		709,076		-
		-		2,625		295		2,920		1,231,494		1,234,414		-
Construction & land		202		-		-		202		244,242		244,444		-
Consumer		1,488		-		24		1,512		272,388		273,900		-
Other		-		-		-		-		93,267		93,267		-
Total loans held for investment	$	4,911	$	7,251	$	13,743	$	25,905	$	3,042,156	$	3,068,061	$	-
Unearned net loan fees												(1,807)
Net loans held for investment											$	3,066,254

	At December 31, 2017
													Recorded
													investment
													in loans
	30 - 59		60 - 89										90 days or more
	Days		Days		90+ Days		Total						past due and
(in thousands)	past due		past due		past due		past due		Current		Total loans		accruing
Commercial
Manufacturing	$	-	$	-	$	-	$	-	$	85,187	$	85,187	$	-
Finance and insurance		-		456		213		669		41,849		42,518		213
Healthcare		370		-		113		483		163,302		163,785		-
Real estate services		1,503		-		135		1,638		127,209		128,847		135
Construction		721		600		681		2,002		65,988		67,990		-
Public administration		-		-		-		-		240,077		240,077		-
Other		3,463		459		2,302		6,224		515,728		521,952		-
		6,057		1,515		3,444		11,016		1,239,340		1,250,356		348
Real estate - mortgage
Residential & commercial owner-occupied		426		689		-		1,115		483,520		484,635		-
Residential & commercial investor		875		299		-		1,174		764,614		765,788		-
		1,301		988		-		2,289		1,248,134		1,250,423		-
Construction & land		730		-		-		730		265,351		266,081		-
Consumer		1,423		15		1,107		2,545		279,556		282,101		-
Other		-		2		-		2		98,914		98,916		-
Total loans held for investment	$	9,511	$	2,520	$	4,551	$	16,582	$	3,131,295	$	3,147,877	$	348
Unearned net loan fees												(2,314)
Net loans held for investment											$	3,145,563

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2018

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

6.  Accumulated Other Comprehensive Income

The following table provides information on reclassifications out of AOCI.

	Three months ended				Six months ended
	June 30,				June 30,
AOCI component (in thousands)	2018		2017		2018		2017		Line item in Condensed Consolidated Statements of Income
Available for sale securities:
Realized gain (loss)	$	4	$	-	$	4	$	(3)	Net (gain) loss on securities, other assets and OREO
Taxes		(1)		-		(1)		1	Provision for income taxes
Subtotal		3		-		3		(2)
Held to maturity securities:
Amortization of net unrealized gain on HTM securities		288		390		596		844	Interest on taxable / nontaxable securities
Taxes		(70)		(146)		(145)		(319)	Provision for income taxes
Subtotal		218		244		451		525
Cash flow hedges:
Loans		(126)		217		(142)		466	Interest and fees on loans
Debt		(145)		(339)		(386)		(697)	Interest on subordinated debentures and notes payable
Realized loss		(271)		(122)		(528)		(231)
Taxes		65		45		128		87	Provision for income taxes
Subtotal		(206)		(77)		(400)		(144)
Total reclassifications out of AOCI	$	15	$	167	$	54	$	379

The following table provides the beginning and ending balances of AOCI and changes during the six months ended June 30, 2018.

Accumulated other comprehensive income (in thousands)	AFS		HTM		Cash flow hedges		Total
Balance at December 31, 2017	$	1,700	$	2,125	$	(3,966)	$	(141)
Other comprehensive loss, net of tax		(1,800)		(451)		(275)		(2,526)
Reclassification to retained earnings		369		448		(847)		(30)
Balance at June 30, 2018	$	269	$	2,122	$	(5,088)	$	(2,697)

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Derivatives

6 Months Ended

Jun. 30, 2018

Derivatives

Derivatives

7. Derivatives

ASC 815 contains the authoritative guidance on accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities.  As required by ASC 815, the Company records all derivatives on the consolidated balance sheets at fair value.

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments.  Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and unknown cash amounts, the value of which are determined by interest rates.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain variable-rate loan assets and variable-rate borrowings.  The Company also enters into derivative financial instruments to protect against adverse changes in fair value on fixed-rate loans. 

The Company’s objective in using derivatives is to minimize the impact of interest rate fluctuations on the Company’s NII. To accomplish this objective, the Company uses interest rate swaps as part of its cash flow hedging strategy. The Company also offers an interest rate hedge program that includes various derivative products, including swaps, to assist its customers in managing their interest rate risk profile. In order to eliminate the interest rate risk associated with offering these products, the Company enters into derivative contracts with third parties to offset the customer contracts.  These customer accommodation interest rate swap contracts are not designated as hedging instruments.

The Company has also expanded its product offering by adding international banking products, which exposes the Company to foreign exchange risk.  The Company utilizes foreign exchange forward contracts to manage the risk associated with fluctuation in foreign exchange rates.

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.  Also, the Company has agreements with certain of its derivative counterparties that contain a provision where if the Bank fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

At June 30, 2018, the fair value of derivatives in a net liability position, excluding accrued interest and any adjustment for nonperformance risk, related to these agreements was $2.8 million. The Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $2.8 million against its obligations under these agreements.  At June 30, 2018, the Company was not in default under any of its debt or capitalization covenants.

The table below presents the fair value of the Company’s derivative financial instruments as well as the classification within the Condensed Consolidated Balance Sheets.

	Asset derivatives					Liability derivatives
		Fair value at					Fair value at
	Balance sheet	June 30,		December 31,		Balance sheet	June 30,		December 31,
(in thousands)	classification	2018		2017		classification	2018		2017
Derivatives designated as hedging instruments under ASC 815:
Cash flow hedge - interest rate swap	Other assets	$	569	$	113	Accrued interest and other liabilities	$	7,410	$	6,732
Fair value hedge - interest rate swap	Other assets	$	2,114	$	628	Accrued interest and other liabilities	$	45	$	633
Derivatives not designated as hedging instruments under ASC 815:
Interest rate swap	Other assets	$	4,196	$	2,081	Accrued interest and other liabilities	$	4,195	$	2,176
Foreign exchange forward contracts	Other assets	$	52	$	28	Accrued interest and other liabilities	$	12	$	44

The tables below include information about financial instruments that are eligible for offset. 

	At June 30, 2018
	Assets						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(1)	$	2,683	$	-	$	2,683	$	(2,099)	$	-	$	584
Derivatives not designated as hedges(1)		4,248		-		4,248		(2,963)		-		1,285
Total	$	6,931	$	-	$	6,931	$	(5,062)	$	-	$	1,869

	At June 30, 2018
	Liabilities						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(2)	$	(7,455)	$	-	$	(7,455)	$	5,010	$	2,445	$	-
Derivatives not designated as hedges(2)		(4,207)		-		(4,207)		52		348		(3,807)
Securities sold under agreements to repurchase(3)		(38,994)		-		(38,994)		-		38,994		-
Total	$	(50,656)	$	-	$	(50,656)	$	5,062	$	41,787	$	(3,807)

	At December 31, 2017
	Assets						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(1)	$	741	$	-	$	741	$	(741)	$	-	$	-
Derivatives not designated as hedges(1)		2,109		-		2,109		(1,222)		-		887
Total	$	2,850	$	-	$	2,850	$	(1,963)	$	-	$	887

	At December 31, 2017
	Liabilities							Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(2)	$	(7,365)	$	-	$	(7,365)	$	741	$	6,624	$	-
Derivatives not designated as hedges(2)		(2,220)		-		(2,220)		1,222		968		(30)
Securities sold under agreements to repurchase(3)		(52,959)		-		(52,959)		-		52,959		-
Total	$	(62,544)	$	-	$	(62,544)	$	1,963	$	60,551	$	(30)

(1) Included in other assets.

(2) Included in accrued interest and other liabilities.

(3) Separately stated in the Condensed Consolidated Balance Sheets.

Cash Flow Hedges of Interest Rate Risk — For hedges of the Company’s variable-rate loan assets, interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

In October 2016, the Company entered into two interest rate swaps to hedge the risk of changes in cash flow on its LIBOR-based loan portfolio.  The interest rate swaps have a weighted average term of approximately five years and have a combined notional value of $100.0 million.  The Company pays a variable rate based on 1-month LIBOR and receives a weighted average fixed-rate of 1.20%.

For hedges of the Company’s variable-rate borrowings, interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments.  The Company has executed a series of interest rate swap transactions in order to fix the effective interest rate for payments due on its junior subordinated debentures with the objective of reducing the Company’s exposure to adverse changes in cash flows relating to payments on its LIBOR-based floating rate debt.  Select critical terms of the cash flow hedges are as follows:

(in thousands)	Notional		Fixedrate		Terminationdate
Hedged item - Junior subordinated debentures issued by:
CoBiz Statutory Trust I	$	20,000	4.99	%	March 17, 2022
CoBiz Capital Trust II	$	30,000	5.99	%	April 23, 2020
CoBiz Capital Trust III	$	20,000	5.02	%	March 30, 2024

Based on the Company’s ongoing assessments (including at inception of the hedging relationship), it is probable that there will be sufficient variable interest payments through the maturity date of the swaps.  The Company also monitors the risk of counterparty default on an ongoing basis.  The Company uses a regression analysis and the “Hypothetical Derivative” method described in ASC 815, for both prospective and retrospective assessments of hedge effectiveness on a quarterly basis.  The Company also uses the Hypothetical Derivative methodology to measure hedge ineffectiveness each period.  The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.The Company’s derivatives did not have any hedge ineffectiveness recognized in earnings during the three and six months ended June 30, 2018 and 2017.

Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received/paid on the Company’s variable-rate assets.  Payments received/paid on variable-rate liabilities will be reclassified to interest expense.  During the next 12 months, the Company estimates that $1.6 million will be reclassified as an increase to interest expense and $0.2 million will be reclassified as an increase to interest income.

Fair Value Hedges of Fixed-Rate Assets – The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates based on LIBOR.  The Company uses interest rate swaps to manage its exposure to changes in fair value on certain fixed-rate loans.  Interest rate swaps designated as fair value hedges involve the receipt of variable-rate payments from a counterparty in exchange for the Company’s fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.  Certain interest rate swaps met the criteria to qualify for the shortcut method of accounting.  Under the shortcut method of accounting, no ineffectiveness is assumed.  For interest rate swaps not accounted for under the shortcut method, the Company performs ongoing retrospective and prospective effectiveness assessments (including at inception) using a regression analysis to compare periodic changes in fair value of the swaps to periodic changes in fair value of the fixed-rate loans attributable to changes in the benchmark interest rate.  At June 30, 2018, the Company had interest rate swaps with a notional amount of $58.0 million used to hedge the change in the fair value of 11 commercial loans.  For derivatives that are designated and qualify as fair value hedges that are not accounted for under the shortcut method, the gain or loss on the derivative as well as the gain or loss on the hedged item attributable to the hedged risk are recognized in earnings.  The net amount representing hedge ineffectiveness that was recognized in “Other income” in the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2018 was immaterial.

Non-designated Hedges — Derivatives not designated as hedges are not speculative and primarily result from a service the Company provides to its customers.  The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions.  As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.   At June 30, 2018, the Company had 102 interest rate swaps with an aggregate notional amount of $325.1 million related to this program.  During the three and six months ended June 30, 2018 and 2017, gains and losses arising from changes in the fair value of these swaps, which are included in “Other income,” in the Condensed Consolidated Statements of Income, were immaterial.

The Company’s product offerings also include international banking products that create foreign currency exchange-rate risk exposure.  In order to economically reduce the risk associated with the fluctuation of foreign exchange rates, the Company utilizes short-term foreign exchange forward contracts to lock in exchange rates so the gain or loss on the forward contracts approximately offsets the transaction gain or loss.  These contracts are not designated as hedging instruments.  Ineffectiveness in the economic hedging relationship may occur as the foreign currency holdings are revalued based upon changes in the currency’s spot rate, while the forward contracts are revalued using the currency’s forward rates.  Forward contracts in gain positions are recorded at fair value in “Other assets” and, forward contracts in loss positions are recorded in “Accrued interest and other liabilities” in the Condensed Consolidated Balance Sheets.  Net changes in the fair value of the forward contracts are recognized through earnings, disclosed as ‘other’ noninterest income in the Condensed Consolidated Statements of Income.  At June 30, 2018, the Company had forward contracts with a notional amount of $5.9 million that mature in less than one year.  Net gains from forward contracts recognized and included in “Other income” in the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2018 and 2017 were immaterial.

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Borrowed Funds

6 Months Ended

Jun. 30, 2018

Borrowed Funds

Borrowed Funds

8. Borrowed Funds

A summary of borrowed funds (excluding long-term debt) at June 30, 2018 and December 31, 2017 is included below.

	June 30,		December 31,
(in thousands)	2018		2017
Securities sold under agreements to repurchase (secured by pledge of mortgage-backed securities with an estimated fair value of $39,773 and $54,018, respectively)	$	38,994	$	52,959
Other short-term borrowings		190,000		77,640

The Company enters into sales of securities under agreements to repurchase. The amounts received under these agreements represent short-term borrowings and are reflected as a liability in the Condensed Consolidated Balance Sheets. The securities underlying these agreements are included in investment securities in the Condensed Consolidated Balance Sheets. At June 30, 2018, all securities sold under agreements to repurchase had a maturity date of less than three months.  The Company has no control over the market value of the securities, which fluctuates due to market conditions.  However, the Company is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price.  The Company manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

Securities sold under agreements to repurchase averaged $44.9 million in the first half of 2018 and $59.6 million in the year ended December 31, 2017.  The maximum amount outstanding at any month-end during the first half of 2018 was $48.5 million.  The maximum amount outstanding at any month-end during 2017 was $69.9 million.  At June 30, 2018 and December 31, 2017, the weighted average interest rate was 0.10%and 0.06%, respectively.  The assets underlying the securities sold under agreements to repurchase are GNMA, FNMA and FHLMC mortgage-backed securities.  All securities sold under agreements to repurchase had a maturity date of less than three months.

The Company has a line of credit with the FHLB with a rolling one-year term that matures every July with automatic renewals unless canceled.  The average FHLB line of credit balance was $116.6 million in the first six months of 2018 and $107.3 million in the year ended December 31, 2017.  The line of credit is collateralized by either qualifying loans or investment securities not otherwise pledged as collateral.  The Company pledged loans of $851.5 million and $877.9 million with a lending value of $583.9 million and $605.4 million at June 30, 2018 and December 31, 2017, respectively, as collateral for the FHLB line of credit.  The variable rate on the line of credit was 2.11% and 1.47% at June 30, 2018 and December 31, 2017, respectively.  The Company has also pledged $833.9 million of loans at June 30, 2018 to the Federal Reserve Bank of Kansas City as collateral for borrowing through the discount window lending program.  At June 30, 2018 and December 31, 2017, there was no amount outstanding with the discount window.

The Company had a revolving Line of Credit (LOC) agreement with an aggregate principal sum of up to $20.0 million bearing interest at 1-month LIBOR plus 225 basis points (2.25%).  The Company paid a quarterly commitment fee of 0.35% per annum on the unused portion of the LOC.  The LOC matured in May 2018 and was not renewed. 

The Company has approved federal funds purchase lines with eight banks with an aggregate credit line of $180.0 million.  At June 30, 2018 there were no outstanding amounts on the federal funds purchase lines, and $4.6 million was outstanding at December 31, 2017.  The average balance of federal funds purchased was $2.2 million in the first six months of 2018 and $1.5 million during the year ended December 31, 2017.

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Segments

6 Months Ended

Jun. 30, 2018

Segments

Segments

9. Segments

The Company’s operating segments consist of Commercial Banking, Fee-Based Lines and Corporate Support and Other.

The financial information for the Commercial Banking and Fee-Based Lines segments reflect activities which are specifically identifiable or which are allocated based on an internal allocation method.  The Corporate Support and Other segment includes activities that are not directly attributable to the other reportable segments including centralized bank operations and the activities of the Parent. The following tables report the results of operations for the three and six months ended June 30, 2018 and 2017 by segment.

	Three months ended June 30, 2018
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	39,090	$	-	$	87	$	39,177
Total interest expense		2,183		-		1,845		4,028
Provision for loan losses		(893)		-		(8)		(901)
Noninterest income		3,318		4,816		75		8,209
Noninterest expense		6,216		4,545		19,593		30,354
Management fees and allocations, net of tax		13,344		515		(13,859)		-
Provision (benefit) for income taxes		7,070		31		(4,590)		2,511
Net income (loss)	$	14,488	$	(275)	$	(2,819)	$	11,394

	Six months ended June 30, 2018
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	76,778	$	-	$	176	$	76,954
Total interest expense		3,524		-		3,672		7,196
Provision for loan losses		(1,209)		-		(17)		(1,226)
Noninterest income		7,064		9,930		176		17,170
Noninterest expense		12,261		8,891		37,772		58,924
Management fees and allocations, net of tax		26,907		990		(27,897)		-
Provision (benefit) for income taxes		14,383		245		(9,773)		4,855
Net income (loss)	$	27,976	$	(196)	$	(3,405)	$	24,375

	Three months ended June 30, 2017
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	35,320	$	1	$	85	$	35,406
Total interest expense		1,567		1		1,833		3,401
Provision for loan losses		682		-		(9)		673
Noninterest income		3,266		4,927		118		8,311
Noninterest expense		8,016		4,262		14,377		26,655
Management fees and allocations, net of tax		8,345		317		(8,662)		-
Provision (benefit) for income taxes		9,179		224		(5,904)		3,499
Net income (loss)	$	10,797	$	124	$	(1,432)	$	9,489

	Six months ended June 30, 2017
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	68,314	$	1	$	172	$	68,487
Total interest expense		2,758		14		3,632		6,404
Provision for loan losses		1,374		-		(94)		1,280
Noninterest income		6,670		9,580		389		16,639
Noninterest expense		17,564		8,766		27,439		53,769
Management fees and allocations, net of tax		16,049		592		(16,641)		-
Provision (benefit) for income taxes		16,762		272		(11,464)		5,570
Net income (loss)	$	20,477	$	(63)	$	(2,311)	$	18,103

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Measurements

Fair Value Measurements

10. Fair Value Measurements

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability.  As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

· Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

· Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals.

· Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.  The Company evaluates fair value measurement inputs on an ongoing basis in order to determine if there is a change of sufficient significance to warrant a transfer between levels.  For example, changes in market activity or the addition of new unobservable inputs could, in the Company’s judgment, cause a transfer to either a higher or lower level. 

Assets and liabilities measured on a recurring basis

A description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Available for sale securities – At June 30, 2018, the Company held, as part of its investment portfolio, available for sale securities reported at fair value consisting of municipal securities, corporate debt securities, and TPS.  The fair value of the majority of municipal securities is determined using widely accepted valuation techniques including matrix pricing and broker-quote based applications.  Inputs include benchmark yields, reported trades, issuer spreads, and other relevant items.  As a result, the Company has determined that these valuations fall within Level 2 of the fair value hierarchy.  The Company also holds TPS that are recorded at fair value based on unadjusted quoted market prices for identical securities in an active market.  The majority of the TPS are actively traded in the market and as a result, the Company has determined that the valuation of these securities falls within Level 1 of the fair value hierarchy.  The Company also holds certain TPS and corporate debt securities for which unadjusted market prices are not available or the markets are not active and are therefore classified as Level 2 or Level 3.  The Company uses broker-dealer quotes, valuations based on similar but not identical securities, or the most recent market trade (which may not be current) to price these securities.  Total net unrealized gain recognized in AOCI at June 30, 2018 on TPS Level 3 securities was immaterial.

Derivative financial instruments – The Company uses interest rate swaps as part of its cash flow strategy to manage its interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques as discussed further below.  The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

Pursuant to guidance in ASC 820, credit valuation adjustments are incorporated into the valuation to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings and thresholds.

The Company uses Level 2 and Level 3 inputs to determine the valuation of its derivatives portfolio.  The valuation of derivative instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs (Level 2 inputs), including interest rate curves and implied volatilities. The estimates of fair value are made using a standardized methodology that nets the discounted expected future cash receipts and cash payments (based on observable market inputs). Level 3 inputs include the credit valuation adjustments which use estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.  At June 30, 2018 and December 31, 2017, the Company assessed the impact of the Level 3 inputs on the overall derivative valuations in terms of the significance of the credit valuation adjustments in basis points and as a percentage of the overall derivative portfolio valuation and the overall notional value.  The Company’s assessment determined that credit valuation adjustments were not significant to the overall valuation of the portfolio.  In addition, the significance of the credit value adjustments and overall derivative portfolio to the Company’s financial statements was considered.  As a result of the insignificance of the credit value adjustments to the derivative portfolio valuations and the Company’s financial statements, the Company classified the derivative valuations in their entirety in Level 2.

The Company uses foreign exchange forward contracts to mitigate exchange-rate risk arising from the Company’s foreign currency holdings to support its international banking product offering.  Fair value measurements of these assets or liabilities are priced based on spot and forward foreign currency rates and the credit worthiness of the contract counterparty.  These contracts are classified in Level 2.  Forward contracts in gain positions and in loss positions are classified in the Condensed Consolidated Balance Sheets as “Other assets” and “Accrued interest and other liabilities”, respectively.

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
	Balance at		identical assets		inputs		inputs
(in thousands)	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Assets
Available for sale securities:
Trust preferred securities	$	21,198	$	-	$	12,078	$	9,120
Corporate debt securities		216,650		-		216,650		-
Municipal securities		3,260		-		3,260		-
Total available for sale securities	$	241,108	$	-	$	231,988	$	9,120
Derivatives:
Cash flow hedges	$	569	$	-	$	569	$	-
Fair value hedges		2,114		-		2,114		-
Non-designated hedges		4,196		-		4,196		-
Foreign exchange forward contracts		52		-		52		-
Total derivative assets	$	6,931	$	-	$	6,931	$	-
Liabilities
Derivatives:
Cash flow hedges	$	7,410	$	-	$	7,410	$	-
Fair value hedges		45		-		45		-
Non-designated hedges		4,195		-		4,195		-
Foreign exchange forward contracts		12		-		12		-
Total derivative liabilities	$	11,662	$	-	$	11,662	$	-

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
	Balance at		identical assets		inputs		inputs
(in thousands)	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets
Available for sale securities:
Trust preferred securities	$	21,983	$	363	$	12,521	$	9,099
Corporate debt securities		141,495		-		141,495		-
Municipal securities		3,275		-		3,275		-
Total available for sale securities	$	166,753	$	363	$	157,291	$	9,099
Derivatives:
Cash flow hedges	$	113	$	-	$	113	$	-
Fair value hedges		628		-		628		-
Non-designated hedges		2,081		-		2,081		-
Foreign exchange forward contracts		28		-		28		-
Total derivative assets	$	2,850	$	-	$	2,850	$	-
Liabilities
Derivatives:
Cash flow hedges	$	6,732	$	-	$	6,732	$	-
Fair value hedge		633		-		633		-
Non-designated hedges		2,176		-		2,176		-
Foreign exchange forward contracts		44		-		44		-
Total derivative liabilities	$	9,585	$	-	$	9,585	$	-

A reconciliation of the beginning and ending balances of assets measured at fair value, on a recurring basis, using Level 3 inputs follows:

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Beginning balance	$	9,128	$	10,017	$	9,099	$	9,448
Transfers and purchases		-		-		-		-
Net accretion		31		30		61		59
Sales / calls / maturities		-		-		-		-
Unrealized gain (loss) included in comprehensive income		(39)		151		(40)		691
Ending balance	$	9,120	$	10,198	$	9,120	$	10,198

Assets and liabilities measured on a nonrecurring basis

Fair value is used on a nonrecurring basis to evaluate certain financial assets and financial liabilities in specific circumstances.  Similarly, fair value is used on a nonrecurring basis for nonfinancial assets and nonfinancial liabilities such as foreclosed assets, other real estate owned, intangible assets, nonfinancial assets and liabilities evaluated in a goodwill impairment analysis and other nonfinancial assets measured at fair value for purposes of assessing impairment.  A description of the valuation methodologies used for financial and nonfinancial assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy, is set forth below.

Impaired loans – Certain collateral-dependent impaired loans are reported at the fair value of the underlying collateral.  Impairment is measured based on the fair value of the collateral, which is typically derived from appraisals that take into consideration prices in observed transactions involving similar assets and similar locations.  Each appraisal is updated on an annual basis, either through a new appraisal, a new evaluation or through the Company’s comprehensive internal review process. Appraised values are reviewed and monitored internally and fair value is assessed at least quarterly or more frequently when circumstances occur that indicate a change in fair value has occurred.  The Company classified impaired loans as Level 3.

Other real estate owned (OREO) – OREO represents real property taken by the Company either through foreclosure or through a deed in lieu thereof from the borrower.  The fair value of OREO is based on property appraisals adjusted at management’s discretion to reflect a further decline in the fair value of properties since the time the appraisal analysis was performed.  Therefore, the inputs used to determine the fair value of OREO fall within Level 3. The Company may include within OREO other repossessed assets received as partial satisfaction of a loan.  Other repossessed assets are not material and do not typically have readily determinable market values and are considered Level 3 inputs.

The following table presents the Company’s assets measured at fair value on a nonrecurring basis at the dates specified in the following table, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
			identical assets		inputs		inputs
(in thousands)		Total	(Level 1)		(Level 2)		(Level 3)
At June 30, 2018
Impaired loans	$	14,423	$	-	$	-	$	14,423
OREO	$	5,245	$	-	$	-	$	5,245
At December 31, 2017
Impaired loans	$	3,792	$	-	$	-	$	3,792
OREO	$	5,351	$	-	$	-	$	5,351

Gains and losses, which include the provision for losses on impaired loans, recorded in relation to assets and liabilities measured on a nonrecurring basis are presented below:

	Gain for the three months ended				Gain (loss) for the six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Impaired loans	$	479	$	567	$	(807)	$	971

In accordance with ASC 310, the fair value of OREO recorded as an asset is reduced by estimated selling costs.  The following table is a reconciliation of the fair value measurement of OREO disclosed pursuant to ASC 820 to the amount recorded on the Condensed Consolidated Balance Sheets:

	At		At
(in thousands)	June 30, 2018		December 31, 2017
OREO recorded at fair value	$	5,245	$	5,351
Estimated selling costs		(266)		(272)
OREO	$	4,979	$	5,079

The following tables provide information describing the valuation techniques used to determine recurring and nonrecurring fair value measurements categorized within Level 3 of the fair value hierarchy at June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Fair value				Weighted
Category	(in thousands)		Valuation technique	Unobservable input	average		Range
Trust preferred securities	$	9,120	Market approach	Discount to carrying value using broker quotes or observable prices on similar securities	7	%	4% - 19%
Impaired loans:
Commercial	$	13,449	Sales comparison(1)	Management discount for asset type	81	%	0% -  86%
Real estate - mortgage		910	Sales comparison(2)	Sales comparison adjustments	(2)	%	(4)% - 0%
Consumer		64	Sales comparison(2)	Sales comparison adjustments	(11)	%	(12)% - (7)%
Total impaired loans	$	14,423
OREO:
Commercial	$	190	Property appraisals(2)	Management discount for property type	0	%	NA
Construction & land		5,055	Property appraisals(2)	Management discount for property type	50	%	NA
Total OREO	$	5,245

	At December 31, 2017
	Fair value				Weighted
Category	(in thousands)		Valuation technique	Unobservable input	average		Range
Trust preferred securities	$	9,099	Market approach	Discount to carrying value using broker quotes or observable prices on similar securities	7	%	5% - 15%
Impaired loans:
Commercial	$	2,581	Sales comparison(1)	Management discount for asset type	59	%	0% - 98%
Real estate - mortgage		57	Sales comparison(2)	Sales comparison adjustments	(4)	%	NA
Consumer		1,154	Sales comparison(2)	Sales comparison adjustments	(11)	%	(20)% - (7)%
Total impaired loans	$	3,792
OREO:
Commercial	$	190	Property appraisals(2)	Management discount for property type	0	%	NA
Construction & land		5,161	Property appraisals(2)	Management discount for property type	17	%	NA
Total OREO	$	5,351

(1) Discount represents management’s discounts applied to market valuation of various business asset types including accounts receivable and other commercial assets. 

(2) The fair value of OREO and collateral-dependent impaired loans is based on third-party property appraisals. The majority of the appraisals utilize at least two valuation approaches or a combination of approaches including a market approach, where prices and other relevant information generated by market transactions involving similar or comparable properties are used to determine fair value. Appraisals may include an ‘as is’ and ‘upon completion’ valuation approach. Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Also, prospective values are based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal. Positive adjustments disclosed in these tables represent increases and negative adjustments represent decreases in fair value.

The following table includes the estimated fair value of the Company’s financial instruments.  The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and nonrecurring basis are discussed above.  The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies and are based on the exit price notion set forth by ASU 2016-01 effective January 1, 2018 and applied to this disclosure on a prospective basis. Estimated fair value of assets and liabilities carried at cost at December 31, 2017 were based on an entry price notion.  Considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts at June 30, 2018 and December 31, 2017.

	Fair Value	June 30, 2018				December 31, 2017
	Classification	Carrying		Estimated		Carrying		Estimated
(in thousands)	level	value		fair value		value		fair value
Financial assets:
Cash and cash equivalents	2	$	84,858	$	84,858	$	80,180	$	80,180
Investment securities available for sale(1)			241,108		241,108		166,753		166,753
Investment securities held to maturity(1)			388,917		383,534		362,544		360,071
Other investments	2		2,176		2,176		2,174		2,174
Loans — net	3		3,030,421		2,989,891		3,107,622		3,080,935
Accrued interest receivable(2)			14,087		14,087		14,150		14,150
Derivatives	2		6,931		6,931		2,850		2,850
Financial liabilities:
Deposits	2	$	3,144,541	$	3,143,432	$	3,225,220	$	3,224,417
Securities sold under agreements  to repurchase	2		38,994		31,240		52,959		49,436
Short-term borrowings	2		190,000		190,000		77,640		77,640
Accrued interest payable(2)			998		998		1,077		1,077
Subordinated notes payable	3		59,239		56,635		59,195		58,451
Junior subordinated debentures	2		72,166		72,166		72,166		72,166
Derivatives	2		11,662		11,662		9,585		9,585

(1) AFS and HTM securities are primarily classified as Level 2 and Level 3 of the fair value hierarchy.

(2) Accrued interest receivable/payables are classified in the same level hierarchy as the underlying assets and liabilities.

The fair value estimates presented herein are based on pertinent information available to management at June 30, 2018 and December 31, 2017.  Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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Regulatory Matters

6 Months Ended

Jun. 30, 2018

Regulatory Matters

Regulatory Matters

11.  Regulatory Matters

The following table presents the regulatory capital ratios of the Bank and Holding Company, including regulatory thresholds, at June 30, 2018.  The minimum CCB for 2018 increased to 1.875% from 1.25% in 2017. The CCB increases 0.625% annually through 2019 to 2.5% and is designed to establish a capital range for banking organizations above minimum requirements to insulate banks from periods of stress and impose constraints on dividends, share repurchases and discretionary bonus payments when capital levels fall below prescribed levels.

	At June 30, 2018				Capitalized Ratio
	Bank		Company				Minimum ratio
(in thousands)	Ratios		Ratios		Well(1)		plus fully phased-in CCB
Common equity tier 1 capital	11.1	%	10.6	%	6.5	%	7.0	%
Tier 1 capital	11.1	%	12.4	%	8.0	%	8.5	%
Total capital	14.0	%	15.2	%	10.0	%	10.5	%
Tier 1 leverage	9.6	%	10.7	%	5.0	%	4.0	%

(1) The ratios for the well-capitalized requirement are only applicable to the Bank.  However, the Company manages its capital position as if the requirement applies to the consolidated entity and has presented the ratios as if they also applied to the Company.

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Revenue and Expense

6 Months Ended

Jun. 30, 2018

Revenue and Expense

Revenue and Expense

12.  Revenue and Expense

Revenue from Contracts with Customers and Supplemental Financial Data

On January 1, 2018 the Company adopted ASC Topic 606, as revised under ASUs 2014-09, 2014-08 and 2016-20, using the modified retrospective method.  Other income disclosures for periods beginning after January 1, 2018 are presented under revised ASC Topic 606, which have not materially changed from the prior year amounts.  Consistent with Topic 606, noninterest income covered by this guidance is recognized as services are transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services. See Note 9 for disclosure of noninterest income by operating segment.

Deposit Service Charges — Deposit service charges primarily consist of fees earned from our treasury management services.  These services include account reconciliation, bill pay, ACH, positive pay, lockbox, remote deposit, online banking and cash vault, among others.  Customers are given the option to pay for these services in cash or by offsetting the fees for these services against an earnings credit that is given for maintaining noninterest-bearing deposits.  The Company’s performance obligations on its treasury services are satisfied either at the time of the transaction or over the course of a month.  Most customers pay deposit charges on a monthly basis.  

Investment Advisory Income — Investment advisory income consists of fees earned from providing investment supervisory and financial planning services.  The Company’s obligation to provide investment management services to customers are a series of distinct services that form a single performance obligation that is provided on a continuous basis over the course of each quarter.  Fees earned are based upon a percentage of AUM that is assessed for each calendar quarter during any part of which a client agreement is in effect. The fee is paid quarterly, normally in arrears, based on the market value of the AUM on the last day of the quarter.

Insurance Income — Insurance income is comprised of three primary sources: Employee Benefits brokerage, P&C brokerage and Bonus income.  Under most of our insurance contracts, the Company acts a broker between the client and the insurance carrier with the carrier billing the insured party. The Company’s involvement in a direct billing arrangement is limited to commissions paid to the Company by the insurance carrier. Additionally, for certain policies the Company enters into an agency billing arrangement and directly bills and collects payment from the insured and remits funds to the insurance carrier in accordance with the agreement.  Commission expense paid to production staff is variable and recorded in the same period in which the performance obligation is satisfied.  

· Employee Benefits (EB) brokerage — The EB division assists companies in designing and managing comprehensive employee benefit programs. The services provided by the Company are collectively benefit management services which are considered a bundle of services that are highly interrelated. Each of the underlying services are activities to fulfill the benefit management service and are not distinct and separate performance obligations. Revenue is recognized over the contract term as services are rendered on a monthly basis.  Customer payments are usually received on a monthly basis.

· P&C brokerage — P&C insurance includes the brokerage of both personal and commercial coverages. The placement of the policy constitutes the completion of the performance obligation for a P&C contract and revenue is recognized at that time.  Customers can elect to pay premiums at the time of placement or on an installment basis over the term of the policy, which is predominantly an annual period.  The Company’s commission is based on a percentage of the premium.

· Bonus income — The Company earns supplemental compensation based on volume metrics and loss ratios. Bonus income variables differ by contract but generally include metrics used to stimulate performance improvement and sales growth.  The Company calculates reasonable estimates of minimum variable consideration for which it is probable that a significant reversal of cumulative revenue will not occur as the underlying policies are placed.

Merchant and Bankcard Fees — The Company earns various types of network transaction fees from third party payment network providers which consist of (i) interchange fees earned from the payment network as a debit card issuer, (ii) referral fee income in the form of a percentage of interchange income earned on credit cards, and (iii) ongoing merchant fees earned by the Company for referring our clients to the payment processing provider which allows our clients to accept credit cards as a form of payment. The Company is an issuer of debit cards only as it relates to merchant and bankcard fees.  Interchange income, which is settled on a daily basis, is recognized as settlement occurs. Chargebacks have not historically been, nor are they expected to be significant to the overall fee revenue and will be recognized upon occurrence.  Referral and merchant fees are recognized when the transaction occurs.

Contract Costs — Costs associated with revenue from contracts with customers predominantly relate to contracts that have a period of one year or less.  The Company has elected to expense the applicable costs as incurred.

At June 30, 2018 and December 31, 2017, the Company had receivables from customers of $3.3 million and $3.7 million, respectively.

The following table presents our noninterest income disaggregated by revenue source.

	Three months ended				Six months ended
Noninterest income	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Depository service charges	$	1,577		1,714	$	3,232	$	3,459
Investment advisory income		1,678		1,500		3,333		3,031
Property and casualty		988		1,114		2,220		2,243
Employee benefits		2,001		2,114		4,076		3,753
Bonus income and merchant and bankcard fees		560		663		1,189		1,483
Revenue from contracts with customers		6,804		7,105		14,050		13,969
Loan fees		526		347		1,269		863
Other customer service fees		340		259		579		492
Bank-owned life insurance		355		310		753		659
Other investments		124		372		299		747
Derivative valuation		45		(80)		201		(137)
Other		15		(2)		19		46
Other noninterest income		1,405		1,206		3,120		2,670
Total noninterest income	$	8,209		8,311	$	17,170	$	16,639

The following table provides supplemental information on the detail of other noninterest expense.

	Three months ended				Six months ended
Other noninterest expense	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Marketing and business development	$	679	$	682	$	1,380	$	1,388
Service contracts		1,414		1,428		2,759		2,721
Professional fees		2,375		794		3,907		1,698
Office supplies and delivery		251		278		502		581
Other		861		829		1,713		1,868
Total	$	5,580	$	4,011	$	10,261	$	8,256

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Nature of Operations and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Nature of Operations and Significant Accounting Policies

Basis of Presentation

Basis of Presentation — The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information,  the instructions to Form 10-Q and, where applicable, prevailing practices within the financial services industry.  The December 31, 2017 Condensed Consolidated balance sheet has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

In the opinion of management, all adjustments (consisting only of normally recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.  In preparing the consolidated financial statements, the Company is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.

These Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with, and are qualified in their entirety by, the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC.

The Condensed Consolidated Financial Statements include entities in which the Parent has a controlling financial interest.  These entities include: the Bank; CoBiz Insurance, Inc.; and CoBiz IM. Intercompany balances and transactions are eliminated in consolidation.  The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a VIE.

The voting interest model is used when the equity investment is sufficient to absorb the expected losses and the equity investment has all of the characteristics of a controlling financial interest. Under the voting interest model, the party with the controlling voting interest consolidates the legal entity.  The VIE model is used when any of the following conditions exist: the equity investment at risk is not sufficient to finance the entity’s activities without additional subordinated financial support; the holders of the equity investment do not have a controlling voting interest; or the holders of the equity investment are not obligated to absorb the expected losses or residual returns of the legal entity. An enterprise is considered to have a controlling financial interest of a VIE if it has both the power to direct the activities that most significantly impact economic performance and the obligation to absorb losses, or receive benefits, that are significant to the VIE. An enterprise that has a controlling financial interest is considered the primary beneficiary and must consolidate the VIE.  The Company was not the primary beneficiary of a VIE at June 30, 2018 or December 31, 2017.

Certain reclassifications have been made to prior years’ Condensed Consolidated Financial Statements and related notes to conform to the current year presentation.

Cash and Cash Equivalents

Cash and Cash Equivalents — The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include amounts that the Company is required to maintain at the Federal Reserve Bank of Kansas City to meet certain regulatory reserve balance requirements.  The following table shows supplemental disclosures of certain cash and noncash items:

	Six months ended
	June 30,
(in thousands)	2018		2017
Cash paid during the period for:
Interest	$	7,275	$	6,489
Income taxes		1,397		2,750

Investments

Investments — The Company classifies its investment securities as held to maturity, available for sale or trading, according to management’s intent.  Investments in debt securities are recorded on a trade date basis.  At June 30, 2018 and December 31, 2017, the Company had no trading securities.

Available for sale securities consist of bonds, notes and debentures (including corporate debt and TPS) not classified as held to maturity securities and are reported at fair value as determined by quoted market prices. Unrealized holding gains and losses, net of tax, are reported as a net amount in AOCI until realized.

Investment securities held to maturity consist of residential MBS, bonds, notes and debentures for which the Company has the positive intent and ability to hold to maturity and are reported at cost, adjusted for amortization or accretion of premiums and discounts.

Premiums and discounts, adjusted for prepayments as applicable, are recognized in interest income.  Other than temporary declines in the fair value of individual investment securities held to maturity and available for sale are charged against earnings. Gains and losses on disposal of investment securities are determined using the specific-identification method.

OTTI on debt securities is separated between the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between a security’s amortized cost basis and the discounted present value of expected future cash flows. The amount due to all other factors is recognized in OCI.

Bank Stocks

Bank Stocks — FHLB, Federal Reserve and other correspondent bank stocks are accounted for under the cost method.

Loans Held for Investment

Loans Held for Investment— Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, deferred fees and costs on originated loans, and unamortized premiums or discounts on purchased loans. Interest is accrued and credited to income daily based on the principal balance outstanding. Loans that are 30 days or more past due based on payments received and applied to the loan are considered delinquent, excluding loans that are cash-secured.  The accrual of interest income is generally discontinued when a loan becomes 90 days past due as to principal and interest. When a loan is designated as nonaccrual, the current period’s accrued interest receivable is charged against current earnings while any portions relating to prior periods are charged against the ALLL. Interest payments received on nonaccrual loans are generally applied to the principal balance of the loan. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured and there has been demonstrated performance in accordance with contractual terms.  The Company may elect to continue the accrual of interest when the loan is in the process of collection and the realizable value of collateral is sufficient to cover the principal balance and accrued interest.

Impaired Loans

Impaired Loans — Impaired loans, with the exception of groups of smaller-balance homogenous loans that are collectively evaluated for impairment, are defined as loans for which, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays of less than 90 days and monthly payment shortfalls of less than 10% of the contractual payment on a consumer loan generally are not classified as impaired if the Company ultimately expects to recover its full investment. The Company determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Loans that are deemed to be impaired are evaluated in accordance with ASC Topic 310-10-35, Receivables – Subsequent Measurement (ASC 310) and ASC Topic 450-20, Loss Contingencies (ASC 450).

Included in impaired loans are troubled debt restructurings.  A troubled debt restructuring is a formal restructure of a loan where the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including but not limited to reduction in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date.  Troubled debt restructurings are evaluated in accordance with ASC Topic 310-40, Troubled Debt Restructurings by Creditors. Interest payments on impaired loans are typically applied to principal unless collectability of principal is reasonably assured. Loans that have been modified in a formal restructuring are typically returned to accrual status when there has been a sustained period of performance (generally six months) under the modified terms, the borrower has shown the ability and willingness to repay and the Company expects to collect all amounts due under the modified terms.

Loan Origination Fees and Costs

Loan Origination Fees and Costs — Loan fees and certain costs of originating loans are deferred and the net amount is amortized over the contractual life of the related loans in accordance with ASC Topic 310-20, Nonrefundable Fees and Other Costs.

Allowance for Loan and Lease Losses

Allowance for Loan and Lease Losses — The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged against earnings. Loan losses are charged against the ALLL when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the ALLL.

The ALLL is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as new information becomes available.

Allowance for Credit Losses

Allowance for Credit Losses — The allowance for credit losses is established as losses are estimated to have occurred through a provision for credit losses charged to earnings. The allowance for credit losses represents management’s recognition of a separate reserve for off-balance sheet loan commitments and letters of credit. While the ALLL is recorded as a contra-asset to the loan portfolio on the Condensed Consolidated Balance Sheets, the allowance for credit losses is recorded under the caption “Accrued interest and other liabilities”. Although the allowances are presented separately on the balance sheets, any losses incurred from credit losses would be reported as a charge-off in the ALLL, as any loss would be recorded after the off-balance sheet commitment had been funded.

BOLI

BOLI – The Bank has invested in BOLI policies to fund certain future employee benefit costs.  The policies are recorded at net realizable value.  Changes in the amount that could be realized, including death benefits in excess of the carrying amount, are recorded in the Condensed Consolidated Statements of Income as “Other income”.

Derivative Instruments

Derivative Instruments — Derivative financial instruments are accounted for at fair value. The Company utilizes interest rate swaps to hedge a portion of its exposure to interest rate changes. These instruments are accounted for as cash flow hedges, as defined by ASC Topic 815, Derivatives and Hedging (ASC 815). The Company also uses interest rate swaps to hedge against adverse changes in fair value on fixed-rate loans.  These instruments are accounted for as fair value hedges in accordance with ASC 815.  The net cash flows from the cash flow and fair value hedges are classified in operating activities within the Condensed Consolidated Statements of Cash Flows with the hedged items.  The Company also offers an interest-rate hedge program that includes various derivative products, including swaps, to customers of the Bank. The fair value amounts recognized for derivative instruments and the fair value amounts recognized for the right to reclaim or obligation to return cash collateral are not offset when represented under a master netting arrangement.  The Company also uses foreign currency forward contracts (FX forwards) giving it the right to sell underlying currencies at specified future dates and predetermined prices in order to mitigate foreign exchange risk associated with long positions.  FX forwards are carried at fair value with changes in value recognized in current earnings as the contracts are not designated as hedging instruments. 

Fair Value Measurements

Fair Value Measurements — The Company measures financial assets, financial liabilities, nonfinancial assets and nonfinancial liabilities pursuant to ASC Topic 820, Fair Value Measurement and Disclosures (ASC 820).  ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9 (ASU 2014-09), Revenue from Contracts with Customers. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 to fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08 which clarified the revenue recognition implementation guidance on principal versus agent considerations and is effective during the same period as ASU 2014-09. In April 2016, the FASB issued ASU 2016-10 which clarified the revenue recognition guidance regarding the identification of performance obligations and the licensing implementation and is effective during the same period as ASU 2014-09. In May 2016, the FASB issued ASU 2016-12 which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. ASU 2016-12 is effective during the same period as ASU 2014-09. Effective January 2018, the Company adopted the aforementioned ASUs using the modified retrospective method.  In evaluating the effects of these ASUs on its financial statements and disclosures, the Company has determined the following:

· The primary revenue lines subject to these ASUs are deposit service charges, investment advisory income and insurance income, which represented 16% of total operating revenue in 2017.

· The adoption of these ASUs did not have a material impact on the Company’s financial statements.  However, the Company has expanded disclosures on the nature, amount and timing of revenue from the impacted revenue lines.  See Note 12 for additional information.

Effective January 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):  Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01).  The main objective of ASU 2016-01 is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Some of the amendments in ASU 2016-01 include the following:  1)  Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2)  Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3)  Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4)  Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value.  For public business entities, the amendments of ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The adoption of ASU 2016-01, through application of a cumulative effect adjustment to retained earnings, did not have a material impact on the consolidated financial statements. See Note 10 for fair value measurement disclosures.

Effective January 2018, the Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), regarding how certain cash receipts and cash payments are presented and classified in the statements of cash flows.  ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.  The Company implemented ASU 2016-15 during the quarter ended March 31, 2018 with application of the retrospective method and cumulative earnings approach for equity method investments. The adoption of ASU 2016-15 did not have a material impact on the consolidated financial statements.

Effective January 2018, the Company adopted ASU 2017-09, Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting (ASU 2017-09).  ASU 2017-09 clarifies when changes to the terms and conditions of share-based payment awards must be treated as modifications.  Specifically, the new guidance permits companies to make certain changes to awards without accounting for them as modifications.  The adoption of ASU 2017-09 did not have a material impact on the consolidated financial statements.  

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AOCI (ASU 2018-02).  ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects of the application of the TCJA.  ASU 2018-02 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  The Company early adopted and applied the provisions of ASU 2018-02 during the quarter ended March 31, 2018.  The reclassification from AOCI to retained earnings did not have a material effect on the Company’s financial statements or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about lease arrangements.  For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018.  The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures by reviewing all existing lease arrangements.  Preliminarily, the Company expects the primary impact of ASU 2016-02 will relate to its office locations, which are designated as operating leases.  The Company has future operating lease obligations for its locations of $27.7 million that are being evaluated as potential lease assets and liabilities, as defined in ASU 2016-02. The Company has formed a lease implementation team which includes members of accounting, facilities and operations to review lease contracts and the requirements of ASU 2016-02.  The implementation team has evaluated third party software solutions to assist with the implementation of ASU 2016-02.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13).  The objective of ASU 2016-13 is to provide financial statement users with decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit.  ASU 2016-13 includes provisions that require financial assets measured at amortized cost (such as loans and held to maturity (HTM) debt securities) to be presented at the net amount expected to be collected.  This will be accomplished through recognition of an estimate of all current expected credit losses.  The estimate will include forecasted information for the timeframe that an entity is able to develop reasonable and supportable forecasts.  This is a change from the current practice of recognizing incurred losses based on the probable initial recognition threshold under current GAAP.  In addition, credit losses on available for sale (AFS) debt securities will be recorded through an allowance for credit losses rather than as a write-down.  Under ASU 2016-13, an entity will be able to record reversals of credit losses in current period income when the estimate of credit losses declines, whereas current GAAP prohibits reflecting those improvements in current period earnings.

ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted for fiscal years, including interim periods, beginning after December 15, 2018.  ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date.  A prospective transition approach is required for these debt securities.  The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures.  While the effects cannot yet be quantified, the Company expects ASU 2016-13 to add complexity and costs to its current credit loss evaluation process.  In planning for the implementation of ASU 2016-13, the Company has formed a CECL implementation team that includes the CFO, Chief Credit Officer and members of credit, accounting, finance, and information technology.  The team meets on a weekly basis and is currently evaluating data requirements and loss methodologies.  In the first quarter of 2018, the implementation team finalized its recommendation of a third-party software solution.  The Company continues to evaluate the effects of ASU 2016-13 on its financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) (ASU 2017-08).  ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium.  Prior to the issuance of this guidance, premiums were amortized as an adjustment of yield over the contractual life of the instrument.  ASU 2017-08 requires premiums on purchased callable debt securities that have explicit, noncontingent call features that are callable at fixed prices to be amortized to the earliest call date.  There are no accounting changes for securities held at a discount.  This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  ASU 2017-08 will be applied through a cumulative effect adjustment through equity (modified-retrospective approach).  The Company is currently evaluating the effects of ASU 2017-08 on its financial statements and disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12).  The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities.  ASU 2017-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted.  ASU 2017-12 requires the modified-retrospective approach for adoption.  The Company is currently evaluating the effects of ASU 2017-12 on its financial statements and disclosures.

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Nature of Operations and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Nature of Operations and Significant Accounting Policies

Schedule of Cash Flow, Supplemental Disclosures

	Six months ended
	June 30,
(in thousands)	2018		2017
Cash paid during the period for:
Interest	$	7,275	$	6,489
Income taxes		1,397		2,750

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Earnings per Common Share and Dividends Declared per Common Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings per Common Share and Dividends Declared per Common Share

Schedule Of Weighted Average Shares Outstanding Used In Calculation Of Basic And Diluted Earnings Per Share

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands, except share and per share amounts)	2018		2017		2018		2017
Net income available to common shareholders	$	11,394	$	9,489	$	24,375	$	18,103
Dividends and undistributed earnings allocated to participating securities		(95)		(94)		(208)		(187)
Earnings allocated to common shares (1)	$	11,299	$	9,395	$	24,167	$	17,916
Weighted average common shares - issued		42,378,688		41,749,192		42,323,339		41,678,367
Average unvested restricted share awards		(357,246)		(412,229)		(363,035)		(428,681)
Weighted average common shares outstanding - basic		42,021,442		41,336,963		41,960,304		41,249,686
Dilutive potential common shares		60,933		375,774		62,540		399,330
Weighted average common shares outstanding - diluted		42,082,375		41,712,737		42,022,844		41,649,016
Weighted average antidilutive securities outstanding (2)		10,833		30,028		10,833		20,340
Earnings per common share:
Basic	$	0.27	$	0.23	$	0.58	$	0.43
Diluted	$	0.27	$	0.23	$	0.58	$	0.43
Dividends declared per share	$	0.100	$	0.050	$	0.155	$	0.100

(1) Earnings allocated to common shareholders for basic earnings per common share under the two-class method may differ from earnings allocated for diluted earnings per common share when use of the treasury method results in greater dilution than the two-class method.

(2) Antidilutive shares excluded from the diluted earnings per common share computation.

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Investments (Tables)

6 Months Ended

Jun. 30, 2018

Investments

Summary of amortized cost and estimated fair values of investment securities

	At June 30, 2018								At December 31, 2017
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Fair		Amortized		unrealized		unrealized		Fair
(in thousands)	cost		gains		losses		value		cost		gains		losses		value
Available for sale securities (AFS):
Trust preferred securities	$	20,035	$	1,638	$	475	$	21,198	$	20,318	$	1,870	$	205	$	21,983
Corporate debt securities		217,475		1,446		2,271		216,650		140,445		1,153		103		141,495
Municipal securities		3,241		24		5		3,260		3,249		41		15		3,275
Total AFS	$	240,751	$	3,108	$	2,751	$	241,108	$	164,012	$	3,064	$	323	$	166,753
Held to maturity securities (HTM):
Mortgage-backed securities	$	344,675	$	125	$	7,381	$	337,419	$	318,128	$	118	$	3,262	$	314,984
Trust preferred securities		10,773		1,507		-		12,280		10,721		783		18		11,486
Municipal securities		33,469		433		67		33,835		33,695		73		167		33,601
Total HTM	$	388,917	$	2,065	$	7,448	$	383,534	$	362,544	$	974	$	3,447	$	360,071

Investments Classified By Contractual Maturity Date

	Availablefor sale				Heldtomaturity
	Amortized		Fair		Amortized		Fair
(in thousands)	cost		value		cost		value
Due in one year or less	$	8,106	$	8,083	$	1,691	$	1,688
Due after one year through five years		158,235		156,927		23,389		23,557
Due after five years through ten years		48,490		48,656		-		-
Due after ten years		25,920		27,442		19,162		20,870
Mortgage-backed securities		-		-		344,675		337,419
	$	240,751	$	241,108	$	388,917	$	383,534

Schedule of Securities in an Unrealized Loss Position

	June 30, 2018
	Lessthan12 months				12months or greater				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	value		loss		value		loss		value		loss
AFS
Trust preferred securities	$	-	$	-	$	7,449	$	475	$	7,449	$	475
Corporate debt securities		153,058		2,262		971		9		154,029		2,271
Municipal securities		793		5		-		-		793		5
Total AFS	$	153,851	$	2,267	$	8,420	$	484	$	162,271	$	2,751
HTM
Mortgage-backed securities	$	195,392	$	4,305	$	117,651	$	3,076	$	313,043	$	7,381
Municipal securities		11,998		65		679		2		12,677		67
Total HTM	$	207,390	$	4,370	$	118,330	$	3,078	$	325,720	$	7,448

	December 31, 2017
	Lessthan 12 months				12months or greater				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	value		loss		value		loss		value		loss
AFS
Trust preferred securities	$	700	$	43	$	7,020	$	162	$	7,720	$	205
Corporate debt securities		40,068		94		1,216		9		41,284		103
Municipal securities		1,252		15		-		-		1,252		15
Total AFS	$	42,020	$	152	$	8,236	$	171	$	50,256	$	323
HTM
Mortgage-backed securities	$	182,974	$	1,457	$	104,464	$	1,805	$	287,438	$	3,262
Trust preferred securities		-		-		864		18		864		18
Municipal securities		20,445		163		684		4		21,129		167
Total HTM	$	203,419	$	1,620	$	106,012	$	1,827	$	309,431	$	3,447

Schedule Of Other Investments

	June 30,		December 31,
(in thousands)	2018		2017
Bank stocks — at cost	$	14,447	$	7,945
Investment in statutory trusts — equity method		2,176		2,174
Total	$	16,623	$	10,119

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Loans (Tables)

6 Months Ended

Jun. 30, 2018

Loans

Schedule Of Loan Portfolio Segments

(in thousands)	At June 30, 2018		At December 31, 2017
Commercial	$	1,222,036	$	1,250,356
Real estate - mortgage		1,234,414		1,250,423
Construction & land		244,444		266,081
Consumer		273,900		282,101
Other		93,267		98,916
Loans held for investment		3,068,061		3,147,877
Allowance for loan losses		(35,834)		(37,941)
Unearned net loan fees		(1,807)		(2,314)
Total net loans	$	3,030,420	$	3,107,622

Schedule Of Major Portfolio Segment And Non Classified And Classified Loan Class

	At June 30, 2018
(in thousands)	Non-classified		Classified		Total
Commercial
Manufacturing	$	72,323	$	6,509	$	78,832
Finance and insurance		53,978		117		54,095
Healthcare		158,643		1,766		160,409
Real estate services		115,451		2,507		117,958
Construction		72,111		3,702		75,813
Public administration		249,606		534		250,140
Other		447,490		37,299		484,789
		1,169,602		52,434		1,222,036
Real estate - mortgage
Residential & commercial owner-occupied		508,871		16,467		525,338
Residential & commercial investor		706,067		3,009		709,076
		1,214,938		19,476		1,234,414
Construction & land		239,632		4,812		244,444
Consumer		270,200		3,700		273,900
Other		91,961		1,306		93,267
Total loans held for investment	$	2,986,333	$	81,728	$	3,068,061
Unearned net loan fees						(1,807)
Net loans held for investment					$	3,066,254

	At December 31, 2017
(in thousands)	Non-classified		Classified		Total
Commercial
Manufacturing	$	82,275	$	2,912	$	85,187
Finance and insurance		40,796		1,722		42,518
Healthcare		161,162		2,623		163,785
Real estate services		124,861		3,986		128,847
Construction		67,232		758		67,990
Public administration		239,230		847		240,077
Other		468,562		53,390		521,952
		1,184,118		66,238		1,250,356
Real estate - mortgage
Residential & commercial owner-occupied		481,061		3,574		484,635
Residential & commercial investor		765,210		578		765,788
		1,246,271		4,152		1,250,423
Construction & land		266,081		-		266,081
Consumer		279,191		2,910		282,101
Other		97,542		1,374		98,916
Total loans held for investment	$	3,073,203	$	74,674	$	3,147,877
Unearned net loan fees						(2,314)
Net loans held for investment					$	3,145,563

Schedule Of Allowance For Loan Losses

	Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017
Allowance for loan losses, beginning of period
Commercial	$	16,523	$	15,900	$	16,837	$	15,398
Real estate - mortgage		12,892		11,797		12,690		11,475
Construction & land		3,250		2,277		4,034		1,997
Consumer		2,597		2,448		2,617		2,803
Other		842		916		826		945
Unallocated		692		873		937		675
Total		36,796		34,211		37,941		33,293
Provision
Commercial	$	(1,212)	$	(22)	$	(689)	$	392
Real estate - mortgage		40		848		239		1,165
Construction & land		366		(507)		(435)		(521)
Consumer		85		116		68		(163)
Other		(28)		105		(12)		76
Unallocated		(152)		133		(397)		331
Total		(901)		673		(1,226)		1,280
Charge-offs
Commercial	$	(255)	$	(196)	$	(1,361)	$	(222)
Consumer		(49)		(6)		(58)		(86)
Other		(29)		-		(29)		-
Total		(333)		(202)		(1,448)		(308)
Recoveries
Commercial	$	163	$	67	$	432	$	181
Real estate - mortgage		8		159		11		164
Construction & land		84		714		101		1,008
Consumer		14		3		20		7
Other		3		-		3		-
Total		272		943		567		1,360
Allowance for loan losses, end of period
Commercial	$	15,219	$	15,749	$	15,219	$	15,749
Real estate - mortgage		12,940		12,804		12,940		12,804
Construction & land		3,700		2,484		3,700		2,484
Consumer		2,647		2,561		2,647		2,561
Other		788		1,021		788		1,021
Unallocated		540		1,006		540		1,006
Total	$	35,834	$	35,625	$	35,834	$	35,625

Schedule Of Loans Held For Investment And ALLL On The Basis Of Impairment Method

	At June 30, 2018								At December 31, 2017
	Individually evaluated for impairment				Collectively evaluated for impairment				Individually evaluated for impairment				Collectively evaluated for impairment
(in thousands)	Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses		Loans held for investment		Allowance for loan losses
Commercial	$	46,102	$	4,838	$	1,176,678	$	10,381	$	56,566	$	5,862	$	1,194,005	$	10,975
Real estate - mortgage		4,041		382		1,229,509		12,558		1,331		109		1,248,166		12,581
Construction & land		1,019		71		241,634		3,629		1,071		91		263,330		3,943
Consumer		231		109		273,755		2,538		1,366		148		280,783		2,469
Other		22		22		93,263		766		-		-		98,945		826
Unallocated		-		-		-		540		-		-		-		937
Total	$	51,415	$	5,422	$	3,014,839	$	30,412	$	60,334	$	6,210	$	3,085,229	$	31,731

Schedule Of Impaired Loans

	At June 30, 2018
					Recorded		Recorded
			Recorded		investment		investment
	Unpaid		investment		with a		with no
	principal		in impaired		related		related		Related
(in thousands)	balance		loans		allowance		allowance		allowance
Commercial
Manufacturing	$	3,991	$	3,991	$	3,991	$	-	$	1,132
Finance and insurance		210		117		14		103		14
Healthcare		652		652		490		162		98
Real estate services		4,992		4,992		4,992		-		262
Construction		2,324		2,324		2,119		205		98
Other		34,252		34,026		32,269		1,757		3,234
		46,421		46,102		43,875		2,227		4,838
Real estate - mortgage
Residential & commercial owner-occupied		3,295		3,295		2,962		333		370
Residential & commercial investor		746		746		169		577		12
		4,041		4,041		3,131		910		382
Construction & land		1,019		1,019		1,019		-		71
Consumer		231		231		167		64		109
Other		22		22		22		-		22
Total	$	51,734	$	51,415	$	48,214	$	3,201	$	5,422

	At December 31, 2017
					Recorded		Recorded
			Recorded		investment		investment
	Unpaid		investment		with a		with no
	principal		in impaired		related		related		Related
(in thousands)	balance		loans		allowance		allowance		allowance
Commercial
Manufacturing	$	3,302	$	3,302	$	3,302	$	-	$	238
Finance and insurance		473		473		17		456		17
Healthcare		718		718		459		259		207
Real estate services		7,982		7,982		7,982		-		544
Construction		1,689		1,457		977		480		71
Public administration		313		313		313		-		27
Other		42,660		42,321		41,030		1,291		4,758
		57,137		56,566		54,080		2,486		5,862
Real estate - mortgage
Residential & commercial owner-occupied		1,159		1,159		1,102		57		94
Residential & commercial investor		172		172		172		-		15
		1,331		1,331		1,274		57		109
Construction & land		1,071		1,071		1,071		-		91
Consumer		1,366		1,366		212		1,154		148
Total	$	60,905	$	60,334	$	56,637	$	3,697	$	6,210

	Impairedloans
	Three months ended June 30,								Six months ended June 30,
	2018				2017				2018				2017
(in thousands)	Average recorded		Interest income		Average recorded		Interest income		Average recorded		Interest income		Average recorded		Interest income
Commercial
Manufacturing	$	5,052	$	84	$	2,028	$	30	$	4,469	$	171	$	2,037	$	59
Finance and insurance		295		6		513		10		354		13		286		10
Healthcare		627		10		550		8		657		20		398		14
Real estate services		5,014		-		5,717		52		6,003		-		5,981		102
Construction		1,959		37		1,663		20		1,791		72		1,625		40
Public administration		-		-		-		-		104		-		-		-
Other		36,526		548		19,665		223		38,457		1,069		14,635		402
		49,473		685		30,136		343		51,835		1,345		24,962		627
Real estate - mortgage
Residential & commercial owner-occupied		3,450		65		1,223		9		2,686		131		1,275		18
Residential & commercial investor		747		10		2,332		20		555		19		2,366		40
		4,197		75		3,555		29		3,241		150		3,641		58
Construction & land		1,032		8		1,850		15		1,045		17		1,871		31
Consumer		719		4		253		1		887		7		246		2
Other		90		-		-		-		107		1		-		-
Total	$	55,511	$	772	$	35,794	$	388	$	57,115	$	1,520	$	30,720	$	718

Schedule Of Transactions Related To Troubled Debt Restructurings

(in thousands)	Performing		Nonperforming		Total
Beginning balance at December 31, 2017	$	52,817	$	3,682	$	56,499
New restructurings		6,893		173		7,066
Change in accrual status		(11,934)		11,934		-
Net paydowns		(13,102)		(877)		(13,979)
Charge-offs		-		(1,091)		(1,091)
Ending balance at June 30, 2018	$	34,674	$	13,821	$	48,495

Schedule Of Troubled Debt Restructurings

	Three months ended June 30, 2018						Three months ended June 30, 2017
			Pre-modification		Post-modification				Pre-modification		Post-modification
			outstanding		outstanding				outstanding		outstanding
	Number of		recorded		recorded		Number of		recorded		recorded
($ in thousands)	contracts		investment		investment		contracts		investment		investment
Commercial
Manufacturing		2	$	610	$	210		-	$	-	$	-
Finance and insurance		-		-		-		1		456		456
Healthcare		2		225		200		1		167		90
Construction		1		600		600		-		-		-
Other		3		1,450		1,424		8		4,031		3,427
Total commercial		8		2,885		2,434		10		4,654		3,973
Consumer		1		10		10		-		-		-
Total		9	$	2,895	$	2,444		10	$	4,654	$	3,973

	Six months ended June 30, 2018						Six months ended June 30, 2017
			Pre-modification		Post-modification				Pre-modification		Post-modification
			outstanding		outstanding				outstanding		outstanding
	Number of		recorded		recorded		Number of		recorded		recorded
($ in thousands)	contracts		investment		investment		contracts		investment		investment
Commercial
Manufacturing		3	$	460	$	439		-	$	-	$	-
Finance and insurance		-		-		-		1		456		456
Healthcare		2		225		200		3		465		362
Construction		3		1,546		1,455		-		-		-
Other		6		1,883		1,869		9		11,978		11,439
Total commercial		14		4,114		3,963		13		12,899		12,257
Real estate - mortgage
Residential and commercial owner-occupied		2		2,109		2,048		-		-		-
Residential & commercial investor		1		578		578		-		-		-
Total real estate - mortgage		3		2,687		2,626		-		-		-
Consumer		1		10		10		1		83		79
Total		18	$	6,811	$	6,599		14	$	12,982	$	12,336

Schedule Of Troubled Debt Restructurings That Subsequently Defaulted

	Six months ended June 30,
	2018			2017
Troubled debt restructurings that subsequently defaulted ($ in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Commercial
Finance and insurance	1	$	1,366	-	$	-
Construction	-		-	1		48
Other	2		10,557	-		-
Total	3	$	11,923	1	$	48

Schedule Of Nonaccrual Loans

(in thousands)	At June 30, 2018		At December 31, 2017
Commercial
Manufacturing	$	1,846	$	-
Finance and insurance		117		473
Healthcare		452		718
Construction		205		681
Other		13,618		4,313
Total commercial		16,238		6,185
Real estate-mortgage
Residential & commercial owner-occupied		333		57
Total real estate - mortgage		333		57
Consumer		148		1,275
Other		22		-
Total nonaccrual loans	$	16,741	$	7,517

Schedule Of Aging Of The Company's Loan Portfolio

	At June 30, 2018
	30 - 59		60 - 89										90 days or more
	Days		Days		90+ Days		Total						past due and
(in thousands)	past due		past due		past due		past due		Current		Total loans		accruing
Commercial
Manufacturing	$	-	$	-	$	1,846	$	1,846	$	76,986	$	78,832	$	-
Finance and insurance		-		4,000		-		4,000		50,095		54,095		-
Healthcare		4		-		-		4		160,405		160,409		-
Real estate services		-		-		-		-		117,958		117,958		-
Construction		1,001		-		75		1,076		74,737		75,813		-
Public administration		-		-		-		-		250,140		250,140		-
Other		2,216		626		11,503		14,345		470,444		484,789		-
		3,221		4,626		13,424		21,271		1,200,765		1,222,036		-
Real estate - mortgage
Residential & commercial owner-occupied		-		2,048		295		2,343		522,995		525,338		-
Residential & commercial investor		-		577		-		577		708,499		709,076		-
		-		2,625		295		2,920		1,231,494		1,234,414		-
Construction & land		202		-		-		202		244,242		244,444		-
Consumer		1,488		-		24		1,512		272,388		273,900		-
Other		-		-		-		-		93,267		93,267		-
Total loans held for investment	$	4,911	$	7,251	$	13,743	$	25,905	$	3,042,156	$	3,068,061	$	-
Unearned net loan fees												(1,807)
Net loans held for investment											$	3,066,254

	At December 31, 2017
													Recorded
													investment
													in loans
	30 - 59		60 - 89										90 days or more
	Days		Days		90+ Days		Total						past due and
(in thousands)	past due		past due		past due		past due		Current		Total loans		accruing
Commercial
Manufacturing	$	-	$	-	$	-	$	-	$	85,187	$	85,187	$	-
Finance and insurance		-		456		213		669		41,849		42,518		213
Healthcare		370		-		113		483		163,302		163,785		-
Real estate services		1,503		-		135		1,638		127,209		128,847		135
Construction		721		600		681		2,002		65,988		67,990		-
Public administration		-		-		-		-		240,077		240,077		-
Other		3,463		459		2,302		6,224		515,728		521,952		-
		6,057		1,515		3,444		11,016		1,239,340		1,250,356		348
Real estate - mortgage
Residential & commercial owner-occupied		426		689		-		1,115		483,520		484,635		-
Residential & commercial investor		875		299		-		1,174		764,614		765,788		-
		1,301		988		-		2,289		1,248,134		1,250,423		-
Construction & land		730		-		-		730		265,351		266,081		-
Consumer		1,423		15		1,107		2,545		279,556		282,101		-
Other		-		2		-		2		98,914		98,916		-
Total loans held for investment	$	9,511	$	2,520	$	4,551	$	16,582	$	3,131,295	$	3,147,877	$	348
Unearned net loan fees												(2,314)
Net loans held for investment											$	3,145,563

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2018

Accumulated Other Comprehensive Income

Schedule of reclassifications out of accumulated comprehensive income

	Three months ended				Six months ended
	June 30,				June 30,
AOCI component (in thousands)	2018		2017		2018		2017		Line item in Condensed Consolidated Statements of Income
Available for sale securities:
Realized gain (loss)	$	4	$	-	$	4	$	(3)	Net (gain) loss on securities, other assets and OREO
Taxes		(1)		-		(1)		1	Provision for income taxes
Subtotal		3		-		3		(2)
Held to maturity securities:
Amortization of net unrealized gain on HTM securities		288		390		596		844	Interest on taxable / nontaxable securities
Taxes		(70)		(146)		(145)		(319)	Provision for income taxes
Subtotal		218		244		451		525
Cash flow hedges:
Loans		(126)		217		(142)		466	Interest and fees on loans
Debt		(145)		(339)		(386)		(697)	Interest on subordinated debentures and notes payable
Realized loss		(271)		(122)		(528)		(231)
Taxes		65		45		128		87	Provision for income taxes
Subtotal		(206)		(77)		(400)		(144)
Total reclassifications out of AOCI	$	15	$	167	$	54	$	379

Schedule of beginning and ending balances of AOCI and changes during the period

Accumulated other comprehensive income (in thousands)	AFS		HTM		Cash flow hedges		Total
Balance at December 31, 2017	$	1,700	$	2,125	$	(3,966)	$	(141)
Other comprehensive loss, net of tax		(1,800)		(451)		(275)		(2,526)
Reclassification to retained earnings		369		448		(847)		(30)
Balance at June 30, 2018	$	269	$	2,122	$	(5,088)	$	(2,697)

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2018

Derivatives

Schedule Of Derivative Instruments In The Statements Of Financial Position

	Asset derivatives					Liability derivatives
		Fair value at					Fair value at
	Balance sheet	June 30,		December 31,		Balance sheet	June 30,		December 31,
(in thousands)	classification	2018		2017		classification	2018		2017
Derivatives designated as hedging instruments under ASC 815:
Cash flow hedge - interest rate swap	Other assets	$	569	$	113	Accrued interest and other liabilities	$	7,410	$	6,732
Fair value hedge - interest rate swap	Other assets	$	2,114	$	628	Accrued interest and other liabilities	$	45	$	633
Derivatives not designated as hedging instruments under ASC 815:
Interest rate swap	Other assets	$	4,196	$	2,081	Accrued interest and other liabilities	$	4,195	$	2,176
Foreign exchange forward contracts	Other assets	$	52	$	28	Accrued interest and other liabilities	$	12	$	44

Schedule Of Fair Value Of Derivative Financial Instruments And Their Classification On Condensed Consolidated Balance Sheets

	At June 30, 2018
	Assets						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(1)	$	2,683	$	-	$	2,683	$	(2,099)	$	-	$	584
Derivatives not designated as hedges(1)		4,248		-		4,248		(2,963)		-		1,285
Total	$	6,931	$	-	$	6,931	$	(5,062)	$	-	$	1,869

	At June 30, 2018
	Liabilities						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(2)	$	(7,455)	$	-	$	(7,455)	$	5,010	$	2,445	$	-
Derivatives not designated as hedges(2)		(4,207)		-		(4,207)		52		348		(3,807)
Securities sold under agreements to repurchase(3)		(38,994)		-		(38,994)		-		38,994		-
Total	$	(50,656)	$	-	$	(50,656)	$	5,062	$	41,787	$	(3,807)

	At December 31, 2017
	Assets						Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(1)	$	741	$	-	$	741	$	(741)	$	-	$	-
Derivatives not designated as hedges(1)		2,109		-		2,109		(1,222)		-		887
Total	$	2,850	$	-	$	2,850	$	(1,963)	$	-	$	887

	At December 31, 2017
	Liabilities							Gross amounts not offset
	Gross		Gross				Financial				Net
(in thousands)	amounts		amounts offset		Net amounts		Instruments		Collateral		Amount
Derivatives designated as hedges(2)	$	(7,365)	$	-	$	(7,365)	$	741	$	6,624	$	-
Derivatives not designated as hedges(2)		(2,220)		-		(2,220)		1,222		968		(30)
Securities sold under agreements to repurchase(3)		(52,959)		-		(52,959)		-		52,959		-
Total	$	(62,544)	$	-	$	(62,544)	$	1,963	$	60,551	$	(30)

(1) Included in other assets.

(2) Included in accrued interest and other liabilities.

(3) Separately stated in the Condensed Consolidated Balance Sheets.

Schedule Of Notional Amounts Of Outstanding Derivative Positions

(in thousands)	Notional		Fixedrate		Terminationdate
Hedged item - Junior subordinated debentures issued by:
CoBiz Statutory Trust I	$	20,000	4.99	%	March 17, 2022
CoBiz Capital Trust II	$	30,000	5.99	%	April 23, 2020
CoBiz Capital Trust III	$	20,000	5.02	%	March 30, 2024

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Borrowed Funds (Tables)

6 Months Ended

Jun. 30, 2018

Borrowed Funds

Schedule of short-term borrowings

	June 30,		December 31,
(in thousands)	2018		2017
Securities sold under agreements to repurchase (secured by pledge of mortgage-backed securities with an estimated fair value of $39,773 and $54,018, respectively)	$	38,994	$	52,959
Other short-term borrowings		190,000		77,640

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Segments (Tables)

6 Months Ended

Jun. 30, 2018

Segments

Summary Of Results Of Operations By Operating Segment

	Three months ended June 30, 2018
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	39,090	$	-	$	87	$	39,177
Total interest expense		2,183		-		1,845		4,028
Provision for loan losses		(893)		-		(8)		(901)
Noninterest income		3,318		4,816		75		8,209
Noninterest expense		6,216		4,545		19,593		30,354
Management fees and allocations, net of tax		13,344		515		(13,859)		-
Provision (benefit) for income taxes		7,070		31		(4,590)		2,511
Net income (loss)	$	14,488	$	(275)	$	(2,819)	$	11,394

	Six months ended June 30, 2018
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	76,778	$	-	$	176	$	76,954
Total interest expense		3,524		-		3,672		7,196
Provision for loan losses		(1,209)		-		(17)		(1,226)
Noninterest income		7,064		9,930		176		17,170
Noninterest expense		12,261		8,891		37,772		58,924
Management fees and allocations, net of tax		26,907		990		(27,897)		-
Provision (benefit) for income taxes		14,383		245		(9,773)		4,855
Net income (loss)	$	27,976	$	(196)	$	(3,405)	$	24,375

	Three months ended June 30, 2017
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	35,320	$	1	$	85	$	35,406
Total interest expense		1,567		1		1,833		3,401
Provision for loan losses		682		-		(9)		673
Noninterest income		3,266		4,927		118		8,311
Noninterest expense		8,016		4,262		14,377		26,655
Management fees and allocations, net of tax		8,345		317		(8,662)		-
Provision (benefit) for income taxes		9,179		224		(5,904)		3,499
Net income (loss)	$	10,797	$	124	$	(1,432)	$	9,489

	Six months ended June 30, 2017
					Corporate
Income Statement	Commercial		Fee-Based		Supportand
(in thousands)	Banking		Lines		Other		Consolidated
Total interest income	$	68,314	$	1	$	172	$	68,487
Total interest expense		2,758		14		3,632		6,404
Provision for loan losses		1,374		-		(94)		1,280
Noninterest income		6,670		9,580		389		16,639
Noninterest expense		17,564		8,766		27,439		53,769
Management fees and allocations, net of tax		16,049		592		(16,641)		-
Provision (benefit) for income taxes		16,762		272		(11,464)		5,570
Net income (loss)	$	20,477	$	(63)	$	(2,311)	$	18,103

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Measurements

Financial Assets And Liabilities Measured At Fair Value On Recurring Basis

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
	Balance at		identical assets		inputs		inputs
(in thousands)	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Assets
Available for sale securities:
Trust preferred securities	$	21,198	$	-	$	12,078	$	9,120
Corporate debt securities		216,650		-		216,650		-
Municipal securities		3,260		-		3,260		-
Total available for sale securities	$	241,108	$	-	$	231,988	$	9,120
Derivatives:
Cash flow hedges	$	569	$	-	$	569	$	-
Fair value hedges		2,114		-		2,114		-
Non-designated hedges		4,196		-		4,196		-
Foreign exchange forward contracts		52		-		52		-
Total derivative assets	$	6,931	$	-	$	6,931	$	-
Liabilities
Derivatives:
Cash flow hedges	$	7,410	$	-	$	7,410	$	-
Fair value hedges		45		-		45		-
Non-designated hedges		4,195		-		4,195		-
Foreign exchange forward contracts		12		-		12		-
Total derivative liabilities	$	11,662	$	-	$	11,662	$	-

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
	Balance at		identical assets		inputs		inputs
(in thousands)	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
Assets
Available for sale securities:
Trust preferred securities	$	21,983	$	363	$	12,521	$	9,099
Corporate debt securities		141,495		-		141,495		-
Municipal securities		3,275		-		3,275		-
Total available for sale securities	$	166,753	$	363	$	157,291	$	9,099
Derivatives:
Cash flow hedges	$	113	$	-	$	113	$	-
Fair value hedges		628		-		628		-
Non-designated hedges		2,081		-		2,081		-
Foreign exchange forward contracts		28		-		28		-
Total derivative assets	$	2,850	$	-	$	2,850	$	-
Liabilities
Derivatives:
Cash flow hedges	$	6,732	$	-	$	6,732	$	-
Fair value hedge		633		-		633		-
Non-designated hedges		2,176		-		2,176		-
Foreign exchange forward contracts		44		-		44		-
Total derivative liabilities	$	9,585	$	-	$	9,585	$	-

Reconciliation Of Financial Assets Measured At Fair Value On Recurring Basis Using Significant Unobservable Inputs

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Beginning balance	$	9,128	$	10,017	$	9,099	$	9,448
Transfers and purchases		-		-		-		-
Net accretion		31		30		61		59
Sales / calls / maturities		-		-		-		-
Unrealized gain (loss) included in comprehensive income		(39)		151		(40)		691
Ending balance	$	9,120	$	10,198	$	9,120	$	10,198

Schedule Of Assets Measured At Fair Value On A Nonrecurring Basis

			Fair value measurements using:
			Quoted prices in		Significant		Significant
			active markets for		observable		unobservable
			identical assets		inputs		inputs
(in thousands)		Total	(Level 1)		(Level 2)		(Level 3)
At June 30, 2018
Impaired loans	$	14,423	$	-	$	-	$	14,423
OREO	$	5,245	$	-	$	-	$	5,245
At December 31, 2017
Impaired loans	$	3,792	$	-	$	-	$	3,792
OREO	$	5,351	$	-	$	-	$	5,351

Schedule of Gains And Losses Recorded In Relation To Assets And Liabilities Measured On Nonrecurring Basis

	Gain for the three months ended				Gain (loss) for the six months ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Impaired loans	$	479	$	567	$	(807)	$	971

Reconciliation Of Other Real Estate Owned Fair Value Measurement

	At		At
(in thousands)	June 30, 2018		December 31, 2017
OREO recorded at fair value	$	5,245	$	5,351
Estimated selling costs		(266)		(272)
OREO	$	4,979	$	5,079

Fair Value Measurements, Recurring And Nonrecurring, Valuation Techniques

	At June 30, 2018
	Fair value				Weighted
Category	(in thousands)		Valuation technique	Unobservable input	average		Range
Trust preferred securities	$	9,120	Market approach	Discount to carrying value using broker quotes or observable prices on similar securities	7	%	4% - 19%
Impaired loans:
Commercial	$	13,449	Sales comparison(1)	Management discount for asset type	81	%	0% -  86%
Real estate - mortgage		910	Sales comparison(2)	Sales comparison adjustments	(2)	%	(4)% - 0%
Consumer		64	Sales comparison(2)	Sales comparison adjustments	(11)	%	(12)% - (7)%
Total impaired loans	$	14,423
OREO:
Commercial	$	190	Property appraisals(2)	Management discount for property type	0	%	NA
Construction & land		5,055	Property appraisals(2)	Management discount for property type	50	%	NA
Total OREO	$	5,245

	At December 31, 2017
	Fair value				Weighted
Category	(in thousands)		Valuation technique	Unobservable input	average		Range
Trust preferred securities	$	9,099	Market approach	Discount to carrying value using broker quotes or observable prices on similar securities	7	%	5% - 15%
Impaired loans:
Commercial	$	2,581	Sales comparison(1)	Management discount for asset type	59	%	0% - 98%
Real estate - mortgage		57	Sales comparison(2)	Sales comparison adjustments	(4)	%	NA
Consumer		1,154	Sales comparison(2)	Sales comparison adjustments	(11)	%	(20)% - (7)%
Total impaired loans	$	3,792
OREO:
Commercial	$	190	Property appraisals(2)	Management discount for property type	0	%	NA
Construction & land		5,161	Property appraisals(2)	Management discount for property type	17	%	NA
Total OREO	$	5,351

(1) Discount represents management’s discounts applied to market valuation of various business asset types including accounts receivable and other commercial assets. 

(2) The fair value of OREO and collateral-dependent impaired loans is based on third-party property appraisals. The majority of the appraisals utilize at least two valuation approaches or a combination of approaches including a market approach, where prices and other relevant information generated by market transactions involving similar or comparable properties are used to determine fair value. Appraisals may include an ‘as is’ and ‘upon completion’ valuation approach. Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Also, prospective values are based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal. Positive adjustments disclosed in these tables represent increases and negative adjustments represent decreases in fair value.

Schedule Of Estimated Fair Value Of Financial Instruments

	Fair Value	June 30, 2018				December 31, 2017
	Classification	Carrying		Estimated		Carrying		Estimated
(in thousands)	level	value		fair value		value		fair value
Financial assets:
Cash and cash equivalents	2	$	84,858	$	84,858	$	80,180	$	80,180
Investment securities available for sale(1)			241,108		241,108		166,753		166,753
Investment securities held to maturity(1)			388,917		383,534		362,544		360,071
Other investments	2		2,176		2,176		2,174		2,174
Loans — net	3		3,030,421		2,989,891		3,107,622		3,080,935
Accrued interest receivable(2)			14,087		14,087		14,150		14,150
Derivatives	2		6,931		6,931		2,850		2,850
Financial liabilities:
Deposits	2	$	3,144,541	$	3,143,432	$	3,225,220	$	3,224,417
Securities sold under agreements  to repurchase	2		38,994		31,240		52,959		49,436
Short-term borrowings	2		190,000		190,000		77,640		77,640
Accrued interest payable(2)			998		998		1,077		1,077
Subordinated notes payable	3		59,239		56,635		59,195		58,451
Junior subordinated debentures	2		72,166		72,166		72,166		72,166
Derivatives	2		11,662		11,662		9,585		9,585

(1) AFS and HTM securities are primarily classified as Level 2 and Level 3 of the fair value hierarchy.

(2) Accrued interest receivable/payables are classified in the same level hierarchy as the underlying assets and liabilities.

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Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2018

Regulatory Matters

Schedule Of Regulatory Capital Ratios Of The Company And The Bank

	At June 30, 2018				Capitalized Ratio
	Bank		Company				Minimum ratio
(in thousands)	Ratios		Ratios		Well(1)		plus fully phased-in CCB
Common equity tier 1 capital	11.1	%	10.6	%	6.5	%	7.0	%
Tier 1 capital	11.1	%	12.4	%	8.0	%	8.5	%
Total capital	14.0	%	15.2	%	10.0	%	10.5	%
Tier 1 leverage	9.6	%	10.7	%	5.0	%	4.0	%

(1) The ratios for the well-capitalized requirement are only applicable to the Bank.  However, the Company manages its capital position as if the requirement applies to the consolidated entity and has presented the ratios as if they also applied to the Company.

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Revenue and Expense - (Tables)

6 Months Ended

Jun. 30, 2018

Revenue and Expense

Schedule of noninterest income disaggregated by revenue source

	Three months ended				Six months ended
Noninterest income	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Depository service charges	$	1,577		1,714	$	3,232	$	3,459
Investment advisory income		1,678		1,500		3,333		3,031
Property and casualty		988		1,114		2,220		2,243
Employee benefits		2,001		2,114		4,076		3,753
Bonus income and merchant and bankcard fees		560		663		1,189		1,483
Revenue from contracts with customers		6,804		7,105		14,050		13,969
Loan fees		526		347		1,269		863
Other customer service fees		340		259		579		492
Bank-owned life insurance		355		310		753		659
Other investments		124		372		299		747
Derivative valuation		45		(80)		201		(137)
Other		15		(2)		19		46
Other noninterest income		1,405		1,206		3,120		2,670
Total noninterest income	$	8,209		8,311	$	17,170	$	16,639

Schedule Of Other Income And Other Expense

	Three months ended				Six months ended
Other noninterest expense	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Marketing and business development	$	679	$	682	$	1,380	$	1,388
Service contracts		1,414		1,428		2,759		2,721
Professional fees		2,375		794		3,907		1,698
Office supplies and delivery		251		278		502		581
Other		861		829		1,713		1,868
Total	$	5,580	$	4,011	$	10,261	$	8,256

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Nature of Operations and Significant Accounting Policies - Organization (Details)		6 Months Ended
	Jun. 18, 2018 $ / shares shares	Jun. 30, 2018 location
BOK | CoBiz Financial Inc.
Organization
Right to receive shares of acquirer common stock | shares	0.17
Right to receive cash per share of common stock | $ / shares	$ 5.70
Denver, Colorado
Organization
Number of branches		7
Boulder, Colorado
Organization
Number of branches		1
Vail, Colorado
Organization
Number of branches		1
Colorado Springs, Colorado
Organization
Number of branches		1
Fort Collins, Colorado
Organization
Number of branches		1
Phoenix, Arizona
Organization
Number of branches		4

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Nature of Operations and Significant Accounting Policies - Cash and Cash Equivalents to Impaired Loans (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Supplemental disclosure of certain cash and cash equivalents
Interest	$ 7,275	$ 6,489
Income taxes	1,397	$ 2,750
Investments
Trading Securities	$ 0		$ 0
Impaired loans
Impaired Loans, Threshold for payment shortfall to be considered for impairment, percentage of contractual payment	10.00%

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Recent Accounting Pronouncements (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Accounting Standards Update 2014-09
Recent Accounting Pronouncements
Percentage of total operating revenue		16.00%
Accounting Standards Update 2016-02 | Forecast
Recent Accounting Pronouncements
Future operating lease obligations	$ 27.7

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Earnings per Common Share - Schedule of Weighted Average Shares Outstanding Used in Calculation of Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Earnings per Common Share and Dividends Declared per Common Share
Net income available to common shareholders	$ 11,394	$ 9,489	$ 24,375	$ 18,103
Dividends and undistributed earnings allocated to participating securities	(95)	(94)	(208)	(187)
Earnings allocated to common shares	$ 11,299	$ 9,395	$ 24,167	$ 17,916
Weighted average common shares - issued	42,378,688	41,749,192	42,323,339	41,678,367
Average unvested restricted share awards	(357,246)	(412,229)	(363,035)	(428,681)
Weighted average common shares outstanding - basic	42,021,442	41,336,963	41,960,304	41,249,686
Dilutive potential common shares	60,933	375,774	62,540	399,330
Weighted average common shares outstanding - diluted	42,082,375	41,712,737	42,022,844	41,649,016
Weighted average antidilutive securities outstanding	10,833	30,028	10,833	20,340
Basic earnings per common share	$ 0.27	$ 0.23	$ 0.58	$ 0.43
Diluted earnings per common share	0.27	0.23	0.58	0.43
Common Stock, Dividends, Per Share, Declared	$ 0.100	$ 0.050	$ 0.155	$ 0.100

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Investments - Reconciliation from Amortized Cost to Fair Value of Investment Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Available for sale securities (AFS):
Available for sale securities, Amortized cost, Amortized cost	$ 240,751	$ 164,012
Gross unrealized gains	3,108	3,064
Gross unrealized losses	2,751	323
Fair value	241,108	166,753
Held to maturity securities (HTM):
Amortized cost	388,917	362,544
Gross unrealized gains	2,065	974
Gross unrealized losses	7,448	3,447
Fair value	383,534	360,071
Mortgage-backed securities
Held to maturity securities (HTM):
Amortized cost	344,675	318,128
Gross unrealized gains	125	118
Gross unrealized losses	7,381	3,262
Fair value	337,419	314,984
Trust preferred securities
Available for sale securities (AFS):
Available for sale securities, Amortized cost, Amortized cost	20,035	20,318
Gross unrealized gains	1,638	1,870
Gross unrealized losses	475	205
Fair value	21,198	21,983
Held to maturity securities (HTM):
Amortized cost	10,773	10,721
Gross unrealized gains	1,507	783
Gross unrealized losses		18
Fair value	12,280	11,486
Corporate debt securities
Available for sale securities (AFS):
Available for sale securities, Amortized cost, Amortized cost	217,475	140,445
Gross unrealized gains	1,446	1,153
Gross unrealized losses	2,271	103
Fair value	216,650	141,495
Municipal securities
Available for sale securities (AFS):
Available for sale securities, Amortized cost, Amortized cost	3,241	3,249
Gross unrealized gains	24	41
Gross unrealized losses	5	15
Fair value	3,260	3,275
Held to maturity securities (HTM):
Amortized cost	33,469	33,695
Gross unrealized gains	433	73
Gross unrealized losses	67	167
Fair value	$ 33,835	$ 33,601

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Investments - Schedule of Amortized Cost and Estimated Fair Value of Investment Securities by Contractual Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Available-for-sale, Amortized cost
Available for sale securities, Amortized cost, Due in one year or less	$ 8,106
Available for sale securities, Amortized cost, Due after one year through five years	158,235
Available for sale securities, Amortized cost, Due after five years through ten years	48,490
Available for sale securities, Amortized cost, Due after ten years	25,920
Available for sale securities, Amortized cost, Amortized cost	240,751	$ 164,012
Available-for-sale, Fair value
Available for sale securities, Estimated fair value, Due in one year or less	8,083
Available for sale securities, Estimated fair value, Due after one year through five years	156,927
Available for sale securities, Estimated fair value, Due after five years through ten years	48,656
Available for sale securities, Estimated fair value, Due after ten years	27,442
Fair value	241,108	166,753
Held-to-maturity, Amortized cost
Held to maturity securities, Amortized cost, Due in one year or less	1,691
Held to maturity securities, Amortized cost, Due after one year through five years	23,389
Held to maturity securities, Amortized cost, Due after ten years	19,162
Held to maturity securities, Amortized cost, Mortgage-backed securities	344,675
Held-to-maturity Securities, Total	388,917	362,544
Held-to-maturity, Fair value
Held to maturity securities, Estimated fair value, Due in one year or less	1,688
Held to maturity securities, Estimated fair value, Due after one year through five years	23,557
Held to maturity securities, Estimated fair value, Due after ten years	20,870
Held to maturity securities, Estimated fair value, Mortgage-backed securities	337,419
Fair value	$ 383,534	$ 360,071

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Investments - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Investment securities
Public and governmental deposits	$ 116.9	$ 116.5
Collateral Pledged
Investment securities
Investment securities pledged to secure public and governmental deposits	$ 156.9	$ 164.4

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Investments - Schedule of Securities Related to Unrecognized OTTI (Details) $ in Thousands	Jun. 30, 2018 USD ($) security	Dec. 31, 2017 USD ($) security
Securities in Continuous Unrealized Loss Positions
Number of credit-impaired securities | security	0	0
Securities in unrealized loss position | security	218	181
Available for sale securities in continuous unrealized loss position, Fair Value, Less than 12 months	$ 153,851	$ 42,020
Available for sale securities in continuous unrealized loss position, Fair Value, 12 months or greater	8,420	8,236
Available for sale securities in continuous unrealized loss position, Fair Value	162,271	50,256
Available for sale securities in continuous unrealized loss position, Unrealized loss, Less than 12 months	2,267	152
Available for sale securities in continuous unrealized loss position, Unrealized loss, 12 months or greater	484	171
Available for sale securities in continuous unrealized loss position, Unrealized loss	2,751	323
HTM securities in continuous unrealized loss position, Fair Value, Less than 12 months	207,390	203,419
HTM securities in continuous unrealized loss position, Fair value, 12 months or greater	118,330	106,012
HTM securities in continuous unrealized loss position, Fair Value, Total	325,720	309,431
HTM securities in continuous unrealized loss position, Unrealized loss, Less than 12 months	4,370	1,620
HTM securities in continuous unrealized loss position, Unrealized loss, 12 months or greater	3,078	1,827
HTM securities in continuous unrealized loss position, Unrealized loss, Total	7,448	3,447
Mortgage-backed securities
Securities in Continuous Unrealized Loss Positions
HTM securities in continuous unrealized loss position, Fair Value, Less than 12 months	195,392	182,974
HTM securities in continuous unrealized loss position, Fair value, 12 months or greater	117,651	104,464
HTM securities in continuous unrealized loss position, Fair Value, Total	313,043	287,438
HTM securities in continuous unrealized loss position, Unrealized loss, Less than 12 months	4,305	1,457
HTM securities in continuous unrealized loss position, Unrealized loss, 12 months or greater	3,076	1,805
HTM securities in continuous unrealized loss position, Unrealized loss, Total	7,381	3,262
Trust preferred securities
Securities in Continuous Unrealized Loss Positions
Available for sale securities in continuous unrealized loss position, Fair Value, Less than 12 months		700
Available for sale securities in continuous unrealized loss position, Fair Value, 12 months or greater	7,449	7,020
Available for sale securities in continuous unrealized loss position, Fair Value	7,449	7,720
Available for sale securities in continuous unrealized loss position, Unrealized loss, Less than 12 months		43
Available for sale securities in continuous unrealized loss position, Unrealized loss, 12 months or greater	475	162
Available for sale securities in continuous unrealized loss position, Unrealized loss	475	205
HTM securities in continuous unrealized loss position, Fair value, 12 months or greater		864
HTM securities in continuous unrealized loss position, Fair Value, Total		864
HTM securities in continuous unrealized loss position, Unrealized loss, 12 months or greater		18
HTM securities in continuous unrealized loss position, Unrealized loss, Total		18
Corporate debt securities
Securities in Continuous Unrealized Loss Positions
Available for sale securities in continuous unrealized loss position, Fair Value, Less than 12 months	153,058	40,068
Available for sale securities in continuous unrealized loss position, Fair Value, 12 months or greater	971	1,216
Available for sale securities in continuous unrealized loss position, Fair Value	154,029	41,284
Available for sale securities in continuous unrealized loss position, Unrealized loss, Less than 12 months	2,262	94
Available for sale securities in continuous unrealized loss position, Unrealized loss, 12 months or greater	9	9
Available for sale securities in continuous unrealized loss position, Unrealized loss	2,271	103
Municipal securities
Securities in Continuous Unrealized Loss Positions
Available for sale securities in continuous unrealized loss position, Fair Value, Less than 12 months	793	1,252
Available for sale securities in continuous unrealized loss position, Fair Value	793	1,252
Available for sale securities in continuous unrealized loss position, Unrealized loss, Less than 12 months	5	15
Available for sale securities in continuous unrealized loss position, Unrealized loss	5	15
HTM securities in continuous unrealized loss position, Fair Value, Less than 12 months	11,998	20,445
HTM securities in continuous unrealized loss position, Fair value, 12 months or greater	679	684
HTM securities in continuous unrealized loss position, Fair Value, Total	12,677	21,129
HTM securities in continuous unrealized loss position, Unrealized loss, Less than 12 months	65	163
HTM securities in continuous unrealized loss position, Unrealized loss, 12 months or greater	2	4
HTM securities in continuous unrealized loss position, Unrealized loss, Total	$ 67	$ 167

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Investments - Schedule of Other Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Investments
Bank stocks - at cost	$ 14,447	$ 7,945
Investment in statutory trusts - equity method	2,176	2,174
Total	$ 16,623	$ 10,119

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Loans - Schedule of Loan Portfolio Segments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Loan portfolio segments
Loans held for investment	$ 3,068,061		$ 3,147,877
Allowance for loan losses	(35,834)	$ (36,796)	(37,941)	$ (35,625)	$ (34,211)	$ (33,293)
Unearned net loan fees	(1,807)		(2,314)
Total net loans	3,030,420		3,107,622
Commercial
Loan portfolio segments
Loans held for investment	1,222,036		1,250,356
Allowance for loan losses	(15,219)	(16,523)	(16,837)	(15,749)	(15,900)	(15,398)
Real estate - mortgage
Loan portfolio segments
Loans held for investment	1,234,414		1,250,423
Allowance for loan losses	(12,940)	(12,892)	(12,690)	(12,804)	(11,797)	(11,475)
Construction and land
Loan portfolio segments
Loans held for investment	244,444		266,081
Allowance for loan losses	(3,700)	(3,250)	(4,034)	(2,484)	(2,277)	(1,997)
Consumer
Loan portfolio segments
Loans held for investment	273,900		282,101
Allowance for loan losses	(2,647)	(2,597)	(2,617)	(2,561)	(2,448)	(2,803)
Other
Loan portfolio segments
Loans held for investment	93,267		98,916
Allowance for loan losses	$ (788)	$ (842)	$ (826)	$ (1,021)	$ (916)	$ (945)

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Loans - Acquired loans and reclassifications (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Loans
Overdraft demand deposits reclassified from deposits to loans	$ 0.4	$ 0.2

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Loans - Schedule of Major Portfolio Segment and Non-Classified and Classified Loan Class (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loan portfolio segments
Loans held for investment	$ 3,068,061	$ 3,147,877
Unearned net loan fees	(1,807)	(2,314)
Total loans	3,066,254	3,145,563
Non-classified
Loan portfolio segments
Loans held for investment	2,986,333	3,073,203
Classified
Loan portfolio segments
Loans held for investment	81,728	74,674
Commercial
Loan portfolio segments
Loans held for investment	1,222,036	1,250,356
Commercial | Non-classified
Loan portfolio segments
Loans held for investment	1,169,602	1,184,118
Commercial | Classified
Loan portfolio segments
Loans held for investment	52,434	66,238
Commercial | Manufacturing
Loan portfolio segments
Loans held for investment	78,832	85,187
Commercial | Manufacturing | Non-classified
Loan portfolio segments
Loans held for investment	72,323	82,275
Commercial | Manufacturing | Classified
Loan portfolio segments
Loans held for investment	6,509	2,912
Commercial | Finance and insurance
Loan portfolio segments
Loans held for investment	54,095	42,518
Commercial | Finance and insurance | Non-classified
Loan portfolio segments
Loans held for investment	53,978	40,796
Commercial | Finance and insurance | Classified
Loan portfolio segments
Loans held for investment	117	1,722
Commercial | Health care
Loan portfolio segments
Loans held for investment	160,409	163,785
Commercial | Health care | Non-classified
Loan portfolio segments
Loans held for investment	158,643	161,162
Commercial | Health care | Classified
Loan portfolio segments
Loans held for investment	1,766	2,623
Commercial | Real estate services
Loan portfolio segments
Loans held for investment	117,958	128,847
Commercial | Real estate services | Non-classified
Loan portfolio segments
Loans held for investment	115,451	124,861
Commercial | Real estate services | Classified
Loan portfolio segments
Loans held for investment	2,507	3,986
Commercial | Construction
Loan portfolio segments
Loans held for investment	75,813	67,990
Commercial | Construction | Non-classified
Loan portfolio segments
Loans held for investment	72,111	67,232
Commercial | Construction | Classified
Loan portfolio segments
Loans held for investment	3,702	758
Commercial | Public administration
Loan portfolio segments
Loans held for investment	250,140	240,077
Commercial | Public administration | Non-classified
Loan portfolio segments
Loans held for investment	249,606	239,230
Commercial | Public administration | Classified
Loan portfolio segments
Loans held for investment	534	847
Commercial | Commercial - Other
Loan portfolio segments
Loans held for investment	484,789	521,952
Commercial | Commercial - Other | Non-classified
Loan portfolio segments
Loans held for investment	447,490	468,562
Commercial | Commercial - Other | Classified
Loan portfolio segments
Loans held for investment	37,299	53,390
Real estate - mortgage
Loan portfolio segments
Loans held for investment	1,234,414	1,250,423
Real estate - mortgage | Residential and commercial owner-occupied
Loan portfolio segments
Loans held for investment	525,338	484,635
Real estate - mortgage | Residential and commercial investor
Loan portfolio segments
Loans held for investment	709,076	765,788
Real estate - mortgage | Non-classified
Loan portfolio segments
Loans held for investment	1,214,938	1,246,271
Real estate - mortgage | Non-classified | Residential and commercial owner-occupied
Loan portfolio segments
Loans held for investment	508,871	481,061
Real estate - mortgage | Non-classified | Residential and commercial investor
Loan portfolio segments
Loans held for investment	706,067	765,210
Real estate - mortgage | Classified
Loan portfolio segments
Loans held for investment	19,476	4,152
Real estate - mortgage | Classified | Residential and commercial owner-occupied
Loan portfolio segments
Loans held for investment	16,467	3,574
Real estate - mortgage | Classified | Residential and commercial investor
Loan portfolio segments
Loans held for investment	3,009	578
Construction and land
Loan portfolio segments
Loans held for investment	244,444	266,081
Construction and land | Non-classified
Loan portfolio segments
Loans held for investment	239,632	266,081
Construction and land | Classified
Loan portfolio segments
Loans held for investment	4,812
Consumer
Loan portfolio segments
Loans held for investment	273,900	282,101
Consumer | Non-classified
Loan portfolio segments
Loans held for investment	270,200	279,191
Consumer | Classified
Loan portfolio segments
Loans held for investment	3,700	2,910
Other
Loan portfolio segments
Loans held for investment	93,267	98,916
Other | Non-classified
Loan portfolio segments
Loans held for investment	91,961	97,542
Other | Classified
Loan portfolio segments
Loans held for investment	$ 1,306	$ 1,374

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Loans - Schedule of Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Allowance for loan losses
Allowance for loan losses, beginning of period	$ 36,796	$ 34,211	$ 37,941	$ 33,293
Provision	(901)	673	(1,226)	1,280
Charge-offs	(333)	(202)	(1,448)	(308)
Net recoveries of impaired loans	272	943	567	1,360
Allowance for loan losses, end of period	35,834	35,625	35,834	35,625
Commercial
Allowance for loan losses
Allowance for loan losses, beginning of period	16,523	15,900	16,837	15,398
Provision	(1,212)	(22)	(689)	392
Charge-offs	(255)	(196)	(1,361)	(222)
Net recoveries of impaired loans	163	67	432	181
Allowance for loan losses, end of period	15,219	15,749	15,219	15,749
Real estate - mortgage
Allowance for loan losses
Allowance for loan losses, beginning of period	12,892	11,797	12,690	11,475
Provision	40	848	239	1,165
Net recoveries of impaired loans	8	159	11	164
Allowance for loan losses, end of period	12,940	12,804	12,940	12,804
Construction and land
Allowance for loan losses
Allowance for loan losses, beginning of period	3,250	2,277	4,034	1,997
Provision	366	(507)	(435)	(521)
Net recoveries of impaired loans	84	714	101	1,008
Allowance for loan losses, end of period	3,700	2,484	3,700	2,484
Consumer
Allowance for loan losses
Allowance for loan losses, beginning of period	2,597	2,448	2,617	2,803
Provision	85	116	68	(163)
Charge-offs	(49)	(6)	(58)	(86)
Net recoveries of impaired loans	14	3	20	7
Allowance for loan losses, end of period	2,647	2,561	2,647	2,561
Other
Allowance for loan losses
Allowance for loan losses, beginning of period	842	916	826	945
Provision	(28)	105	(12)	76
Charge-offs	(29)		(29)
Net recoveries of impaired loans	3		3
Allowance for loan losses, end of period	788	1,021	788	1,021
Unallocated
Allowance for loan losses
Allowance for loan losses, beginning of period	692	873	937	675
Provision	(152)	133	(397)	331
Allowance for loan losses, end of period	$ 540	$ 1,006	$ 540	$ 1,006

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Loans - Schedule of Loans Held for Investment and ALL on the basis of Impairment Method (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Allowance for loan losses
Loans held for investment, Individually evaluated for impairment	$ 51,415	$ 60,334
Allowance for loan losses, Individually evaluated for impairment	5,422	6,210
Loans held for investment, Collectively evaluated for impairment	3,014,839	3,085,229
Allowance for loan losses, Collectively evaluated for impairment	30,412	31,731
Commercial
Allowance for loan losses
Loans held for investment, Individually evaluated for impairment	46,102	56,566
Allowance for loan losses, Individually evaluated for impairment	4,838	5,862
Loans held for investment, Collectively evaluated for impairment	1,176,678	1,194,005
Allowance for loan losses, Collectively evaluated for impairment	10,381	10,975
Real estate - mortgage
Allowance for loan losses
Loans held for investment, Individually evaluated for impairment	4,041	1,331
Allowance for loan losses, Individually evaluated for impairment	382	109
Loans held for investment, Collectively evaluated for impairment	1,229,509	1,248,166
Allowance for loan losses, Collectively evaluated for impairment	12,558	12,581
Construction and land
Allowance for loan losses
Loans held for investment, Individually evaluated for impairment	1,019	1,071
Allowance for loan losses, Individually evaluated for impairment	71	91
Loans held for investment, Collectively evaluated for impairment	241,634	263,330
Allowance for loan losses, Collectively evaluated for impairment	3,629	3,943
Consumer
Allowance for loan losses
Loans held for investment, Individually evaluated for impairment	231	1,366
Allowance for loan losses, Individually evaluated for impairment	109	148
Loans held for investment, Collectively evaluated for impairment	273,755	280,783
Allowance for loan losses, Collectively evaluated for impairment	2,538	2,469
Other
Allowance for loan losses
Loans held for investment, Individually evaluated for impairment	22
Allowance for loan losses, Individually evaluated for impairment	22
Loans held for investment, Collectively evaluated for impairment	93,263	98,945
Allowance for loan losses, Collectively evaluated for impairment	766	826
Unallocated
Allowance for loan losses
Allowance for loan losses, Collectively evaluated for impairment	$ 540	$ 937

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Loans - Schedule of Impaired Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Impaired receivables with and without related allowance
Unpaid principal balance	$ 51,734	$ 60,905
Recorded investment on impaired loans	51,415	60,334
Recorded investment with a related allowance	48,214	56,637
Recorded investment with no related allowance	3,201	3,697
Related allowance	5,422	6,210
Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	46,421	57,137
Recorded investment on impaired loans	46,102	56,566
Recorded investment with a related allowance	43,875	54,080
Recorded investment with no related allowance	2,227	2,486
Related allowance	4,838	5,862
Real estate - mortgage
Impaired receivables with and without related allowance
Unpaid principal balance	4,041	1,331
Recorded investment on impaired loans	4,041	1,331
Recorded investment with a related allowance	3,131	1,274
Recorded investment with no related allowance	910	57
Related allowance	382	109
Construction and land
Impaired receivables with and without related allowance
Unpaid principal balance	1,019	1,071
Recorded investment on impaired loans	1,019	1,071
Recorded investment with a related allowance	1,019	1,071
Related allowance	71	91
Consumer
Impaired receivables with and without related allowance
Unpaid principal balance	231	1,366
Recorded investment on impaired loans	231	1,366
Recorded investment with a related allowance	167	212
Recorded investment with no related allowance	64	1,154
Related allowance	109	148
Other
Impaired receivables with and without related allowance
Unpaid principal balance	22
Recorded investment on impaired loans	22
Recorded investment with a related allowance	22
Related allowance	22
Manufacturing | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	3,991	3,302
Recorded investment on impaired loans	3,991	3,302
Recorded investment with a related allowance	3,991	3,302
Related allowance	1,132	238
Finance and insurance | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	210	473
Recorded investment on impaired loans	117	473
Recorded investment with a related allowance	14	17
Recorded investment with no related allowance	103	456
Related allowance	14	17
Health care | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	652	718
Recorded investment on impaired loans	652	718
Recorded investment with a related allowance	490	459
Recorded investment with no related allowance	162	259
Related allowance	98	207
Real estate services | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	4,992	7,982
Recorded investment on impaired loans	4,992	7,982
Recorded investment with a related allowance	4,992	7,982
Related allowance	262	544
Construction | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	2,324	1,689
Recorded investment on impaired loans	2,324	1,457
Recorded investment with a related allowance	2,119	977
Recorded investment with no related allowance	205	480
Related allowance	98	71
Public administration | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance		313
Recorded investment on impaired loans		313
Recorded investment with a related allowance		313
Related allowance		27
Commercial - Other | Commercial
Impaired receivables with and without related allowance
Unpaid principal balance	34,252	42,660
Recorded investment on impaired loans	34,026	42,321
Recorded investment with a related allowance	32,269	41,030
Recorded investment with no related allowance	1,757	1,291
Related allowance	3,234	4,758
Residential and commercial owner-occupied | Real estate - mortgage
Impaired receivables with and without related allowance
Unpaid principal balance	3,295	1,159
Recorded investment on impaired loans	3,295	1,159
Recorded investment with a related allowance	2,962	1,102
Recorded investment with no related allowance	333	57
Related allowance	370	94
Residential and commercial investor | Real estate - mortgage
Impaired receivables with and without related allowance
Unpaid principal balance	746	172
Recorded investment on impaired loans	746	172
Recorded investment with a related allowance	169	172
Recorded investment with no related allowance	577
Related allowance	$ 12	$ 15

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Loans - Schedule of Impaired Loans (Average Recorded Investment in Impaired Loans and Interest Income Recognized) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	$ 55,511	$ 35,794	$ 57,115	$ 30,720
Interest income recognized	772	388	1,520	718
Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	49,473	30,136	51,835	24,962
Interest income recognized	685	343	1,345	627
Real estate - mortgage
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	4,197	3,555	3,241	3,641
Interest income recognized	75	29	150	58
Construction and land
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	1,032	1,850	1,045	1,871
Interest income recognized	8	15	17	31
Consumer
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	719	253	887	246
Interest income recognized	4	1	7	2
Other
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	90		107
Interest income recognized			1
Manufacturing | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	5,052	2,028	4,469	2,037
Interest income recognized	84	30	171	59
Finance and insurance | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	295	513	354	286
Interest income recognized	6	10	13	10
Health care | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	627	550	657	398
Interest income recognized	10	8	20	14
Real estate services | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	5,014	5,717	6,003	5,981
Interest income recognized		52		102
Construction | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	1,959	1,663	1,791	1,625
Interest income recognized	37	20	72	40
Public administration | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans			104
Commercial - Other | Commercial
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	36,526	19,665	38,457	14,635
Interest income recognized	548	223	1,069	402
Residential and commercial owner-occupied | Real estate - mortgage
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	3,450	1,223	2,686	1,275
Interest income recognized	65	9	131	18
Residential and commercial investor | Real estate - mortgage
Impaired Loans: Average recorded investment and interest income
Average recorded investment in impaired loans	747	2,332	555	2,366
Interest income recognized	$ 10	$ 20	$ 19	$ 40

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Loans - Schedule of Transactions Related to Troubled Debt Restructurings (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Troubled debt restructurings
Balance	$ 56,499
New restructurings	7,066
Net paydowns	(13,979)
Charge-offs	(1,091)
Balance	48,495
Performing
Troubled debt restructurings
Balance	52,817
New restructurings	6,893
Change in accrual status	(11,934)
Net paydowns	(13,102)
Balance	34,674
Nonperforming
Troubled debt restructurings
Balance	3,682
New restructurings	173
Change in accrual status	11,934
Net paydowns	(877)
Charge-offs	(1,091)
Balance	$ 13,821

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Loans - Schedule of Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) contract	Jun. 30, 2017 USD ($) contract	Jun. 30, 2018 USD ($) contract	Jun. 30, 2017 USD ($) contract
Troubled debt restructurings
Number of contracts | contract	9	10	18	14
Pre-modification outstanding recorded investment	$ 2,895	$ 4,654	$ 6,811	$ 12,982
Post-modification outstanding recorded investment	2,444	3,973	6,599	12,336
Charge-offs	$ 0	$ 0	$ 0	$ 0
Commercial
Troubled debt restructurings
Number of contracts | contract	8	10	14	13
Pre-modification outstanding recorded investment	$ 2,885	$ 4,654	$ 4,114	$ 12,899
Post-modification outstanding recorded investment	$ 2,434	$ 3,973	$ 3,963	$ 12,257
Real estate - mortgage
Troubled debt restructurings
Number of contracts | contract			3
Pre-modification outstanding recorded investment			$ 2,687
Post-modification outstanding recorded investment			$ 2,626
Manufacturing | Commercial
Troubled debt restructurings
Number of contracts | contract	2		3
Pre-modification outstanding recorded investment	$ 610		$ 460
Post-modification outstanding recorded investment	$ 210		$ 439
Finance and insurance | Commercial
Troubled debt restructurings
Number of contracts | contract		1		1
Pre-modification outstanding recorded investment		$ 456		$ 456
Post-modification outstanding recorded investment		$ 456		$ 456
Health care | Commercial
Troubled debt restructurings
Number of contracts | contract	2	1	2	3
Pre-modification outstanding recorded investment	$ 225	$ 167	$ 225	$ 465
Post-modification outstanding recorded investment	$ 200	$ 90	$ 200	$ 362
Construction | Commercial
Troubled debt restructurings
Number of contracts | contract	1		3
Pre-modification outstanding recorded investment	$ 600		$ 1,546
Post-modification outstanding recorded investment	$ 600		$ 1,455
Construction | Consumer
Troubled debt restructurings
Number of contracts | contract	1		1	1
Pre-modification outstanding recorded investment	$ 10		$ 10	$ 83
Post-modification outstanding recorded investment	$ 10		$ 10	$ 79
Commercial - Other | Commercial
Troubled debt restructurings
Number of contracts | contract	3	8	6	9
Pre-modification outstanding recorded investment	$ 1,450	$ 4,031	$ 1,883	$ 11,978
Post-modification outstanding recorded investment	$ 1,424	$ 3,427	$ 1,869	$ 11,439
Residential and commercial owner-occupied | Real estate - mortgage
Troubled debt restructurings
Number of contracts | contract			2
Pre-modification outstanding recorded investment			$ 2,109
Post-modification outstanding recorded investment			$ 2,048
Residential and commercial investor | Real estate - mortgage
Troubled debt restructurings
Number of contracts | contract			1
Pre-modification outstanding recorded investment			$ 578
Post-modification outstanding recorded investment			$ 578

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Loans - Schedule of Troubled Debt Restructurings that Subsequently Defaulted (Details) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($) contract	Jun. 30, 2017 USD ($) contract	Dec. 31, 2017 USD ($)
Troubled debt restructurings that subsequently defaulted
Outstanding commitments on restructured loans	$ 2,700		$ 4,000
Commercial
Troubled debt restructurings that subsequently defaulted
Number of contracts | contract	3	1
Recorded investment	$ 11,923	$ 48
Construction | Commercial
Troubled debt restructurings that subsequently defaulted
Number of contracts | contract		1
Recorded investment		$ 48
Commercial - Other | Commercial
Troubled debt restructurings that subsequently defaulted
Number of contracts | contract	2
Recorded investment	$ 10,557
Finance and insurance | Commercial
Troubled debt restructurings that subsequently defaulted
Number of contracts | contract	1
Recorded investment	$ 1,366

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Loans - Schedule of Nonaccrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Nonaccrual loans
Total nonaccrual loans	$ 16,741	$ 7,517
Commercial
Nonaccrual loans
Total nonaccrual loans	16,238	6,185
Real estate - mortgage
Nonaccrual loans
Total nonaccrual loans	333	57
Consumer
Nonaccrual loans
Total nonaccrual loans	148	1,275
Other
Nonaccrual loans
Total nonaccrual loans	22
Manufacturing | Commercial
Nonaccrual loans
Total nonaccrual loans	1,846
Finance and insurance | Commercial
Nonaccrual loans
Total nonaccrual loans	117	473
Health care | Commercial
Nonaccrual loans
Total nonaccrual loans	452	718
Construction | Commercial
Nonaccrual loans
Total nonaccrual loans	205	681
Commercial - Other | Commercial
Nonaccrual loans
Total nonaccrual loans	13,618	4,313
Residential and commercial owner-occupied | Real estate - mortgage
Nonaccrual loans
Total nonaccrual loans	$ 333	$ 57

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Loans - Schedule of Aging of Company's Loan Portfolio (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Nonaccrual loans
Total past due	$ 25,905	$ 16,582
Current	3,042,156	3,131,295
Total loans, excluding fees and costs	3,068,061	3,147,877
Unearned net loan fees	(1,807)	(2,314)
Total loans	3,066,254	3,145,563
Recorded investment in loans 90 days or more past due and accruing		348
30 - 59 Days past due
Nonaccrual loans
Total past due	4,911	9,511
60 - 89 Days past due
Nonaccrual loans
Total past due	7,251	2,520
90+ Days past due
Nonaccrual loans
Total past due	13,743	4,551
Commercial
Nonaccrual loans
Total past due	21,271	11,016
Current	1,200,765	1,239,340
Total loans, excluding fees and costs	1,222,036	1,250,356
Recorded investment in loans 90 days or more past due and accruing		348
Commercial | 30 - 59 Days past due
Nonaccrual loans
Total past due	3,221	6,057
Commercial | 60 - 89 Days past due
Nonaccrual loans
Total past due	4,626	1,515
Commercial | 90+ Days past due
Nonaccrual loans
Total past due	13,424	3,444
Real estate - mortgage
Nonaccrual loans
Total past due	2,920	2,289
Current	1,231,494	1,248,134
Total loans, excluding fees and costs	1,234,414	1,250,423
Real estate - mortgage | 30 - 59 Days past due
Nonaccrual loans
Total past due		1,301
Real estate - mortgage | 60 - 89 Days past due
Nonaccrual loans
Total past due	2,625	988
Real estate - mortgage | 90+ Days past due
Nonaccrual loans
Total past due	295
Construction and land
Nonaccrual loans
Total past due	202	730
Current	244,242	265,351
Total loans, excluding fees and costs	244,444	266,081
Construction and land | 30 - 59 Days past due
Nonaccrual loans
Total past due	202	730
Consumer
Nonaccrual loans
Total past due	1,512	2,545
Current	272,388	279,556
Total loans, excluding fees and costs	273,900	282,101
Consumer | 30 - 59 Days past due
Nonaccrual loans
Total past due	1,488	1,423
Consumer | 60 - 89 Days past due
Nonaccrual loans
Total past due		15
Consumer | 90+ Days past due
Nonaccrual loans
Total past due	24	1,107
Other
Nonaccrual loans
Total past due		2
Current	93,267	98,914
Total loans, excluding fees and costs	93,267	98,916
Other | 60 - 89 Days past due
Nonaccrual loans
Total past due		2
Manufacturing | Commercial
Nonaccrual loans
Total past due	1,846
Current	76,986	85,187
Total loans, excluding fees and costs	78,832	85,187
Manufacturing | Commercial | 90+ Days past due
Nonaccrual loans
Total past due	1,846
Finance and insurance | Commercial
Nonaccrual loans
Total past due	4,000	669
Current	50,095	41,849
Total loans, excluding fees and costs	54,095	42,518
Recorded investment in loans 90 days or more past due and accruing		213
Finance and insurance | Commercial | 60 - 89 Days past due
Nonaccrual loans
Total past due	4,000	456
Finance and insurance | Commercial | 90+ Days past due
Nonaccrual loans
Total past due		213
Health care | Commercial
Nonaccrual loans
Total past due	4	483
Current	160,405	163,302
Total loans, excluding fees and costs	160,409	163,785
Health care | Commercial | 30 - 59 Days past due
Nonaccrual loans
Total past due	4	370
Health care | Commercial | 90+ Days past due
Nonaccrual loans
Total past due		113
Real estate services | Commercial
Nonaccrual loans
Total past due		1,638
Current	117,958	127,209
Total loans, excluding fees and costs	117,958	128,847
Recorded investment in loans 90 days or more past due and accruing		135
Real estate services | Commercial | 30 - 59 Days past due
Nonaccrual loans
Total past due		1,503
Real estate services | Commercial | 90+ Days past due
Nonaccrual loans
Total past due		135
Construction | Commercial
Nonaccrual loans
Total past due	1,076	2,002
Current	74,737	65,988
Total loans, excluding fees and costs	75,813	67,990
Construction | Commercial | 30 - 59 Days past due
Nonaccrual loans
Total past due	1,001	721
Construction | Commercial | 60 - 89 Days past due
Nonaccrual loans
Total past due		600
Construction | Commercial | 90+ Days past due
Nonaccrual loans
Total past due	75	681
Public administration | Commercial
Nonaccrual loans
Current	250,140	240,077
Total loans, excluding fees and costs	250,140	240,077
Commercial - Other | Commercial
Nonaccrual loans
Total past due	14,345	6,224
Current	470,444	515,728
Total loans, excluding fees and costs	484,789	521,952
Commercial - Other | Commercial | 30 - 59 Days past due
Nonaccrual loans
Total past due	2,216	3,463
Commercial - Other | Commercial | 60 - 89 Days past due
Nonaccrual loans
Total past due	626	459
Commercial - Other | Commercial | 90+ Days past due
Nonaccrual loans
Total past due	11,503	2,302
Residential and commercial owner-occupied | Real estate - mortgage
Nonaccrual loans
Total past due	2,343	1,115
Current	522,995	483,520
Total loans, excluding fees and costs	525,338	484,635
Residential and commercial owner-occupied | Real estate - mortgage | 30 - 59 Days past due
Nonaccrual loans
Total past due		426
Residential and commercial owner-occupied | Real estate - mortgage | 60 - 89 Days past due
Nonaccrual loans
Total past due	2,048	689
Residential and commercial owner-occupied | Real estate - mortgage | 90+ Days past due
Nonaccrual loans
Total past due	295
Residential and commercial investor | Real estate - mortgage
Nonaccrual loans
Total past due	577	1,174
Current	708,499	764,614
Total loans, excluding fees and costs	709,076	765,788
Residential and commercial investor | Real estate - mortgage | 30 - 59 Days past due
Nonaccrual loans
Total past due		875
Residential and commercial investor | Real estate - mortgage | 60 - 89 Days past due
Nonaccrual loans
Total past due	$ 577	$ 299

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Accumulated Other Comprehensive Income - Reclassifications (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Reclassifications from AOCI
Net (gain) loss on securities, other assets and other real estate owned	$ 4	$ (32)	$ 124	$ 313
Interest Income	39,177	35,406	76,954	68,487
Interest and fees on loans	34,612	31,405	68,385	60,796
Interest on subordinated debentures and notes payable	(1,853)	(1,844)	(3,687)	(3,676)
Realized loss	13,905	12,988	29,230	23,673
Provision for income taxes	(2,511)	(3,499)	(4,855)	(5,570)
Total reclassifications out of AOCI	11,394	9,489	24,375	18,103
Reclassification out of AOCI
Reclassifications from AOCI
Total reclassifications out of AOCI	15	167	54	379
Reclassification out of AOCI | Cash flow hedges | Unrealized (gain) loss on derivatives
Reclassifications from AOCI
Interest and fees on loans	(126)	217	(142)	466
Interest on subordinated debentures and notes payable	(145)	(339)	(386)	(697)
Realized loss	(271)	(122)	(528)	(231)
Provision for income taxes	65	45	128	87
Total reclassifications out of AOCI	(206)	(77)	(400)	(144)
Reclassification out of AOCI | Available for sale securities | Unrealized (gain) loss on securities
Reclassifications from AOCI
Net (gain) loss on securities, other assets and other real estate owned	(4)		(4)	3
Provision for income taxes	(1)		(1)	1
Total reclassifications out of AOCI	3		3	(2)
Reclassification out of AOCI | Held to maturity securities | Unrealized (gain) loss on securities
Reclassifications from AOCI
Interest Income	288	390	596	844
Provision for income taxes	(70)	(146)	(145)	(319)
Total reclassifications out of AOCI	$ 218	$ 244	$ 451	$ 525

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Accumulated Other Comprehensive Income - AOCI rollforward (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Changes in AOCI
BALANCE - beginning of period	$ 329,284
BALANCE - end of period	346,104
Accumulated Comprehensive Income
Changes in AOCI
BALANCE - beginning of period	(141)
Other comprehensive loss, net of tax	(2,526)
Reclassification to retained earnings	(30)
BALANCE - end of period	(2,697)
Unrealized (gain) loss on securities | Available for sale securities
Changes in AOCI
BALANCE - beginning of period	1,700
Other comprehensive loss, net of tax	(1,800)
Reclassification to retained earnings	369
BALANCE - end of period	269
Unrealized (gain) loss on securities | Held to maturity securities
Changes in AOCI
BALANCE - beginning of period	2,125
Other comprehensive loss, net of tax	(451)
Reclassification to retained earnings	448
BALANCE - end of period	2,122
Cash flow hedges | Unrealized (gain) loss on derivatives
Changes in AOCI
BALANCE - beginning of period	(3,966)
Other comprehensive loss, net of tax	(275)
Reclassification to retained earnings	(847)
BALANCE - end of period	$ (5,088)

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Derivatives - Narrative (Details) $ in Millions	1 Months Ended
	Oct. 31, 2016 USD ($) contract	Jun. 30, 2018 USD ($) derivative
Cash flow, Fair value, and non-designated hedges
Fair value of derivatives in a net liability position		$ 2.8
Collateral already posted		2.8
Interest Income
Cash flow, Fair value, and non-designated hedges
Estimated gains (losses) to be reclassified as earnings in next 12 months		0.2
Interest Expense
Cash flow, Fair value, and non-designated hedges
Estimated gains (losses) to be reclassified as earnings in next 12 months		1.6
Derivatives designated as hedging instruments | Interest rate swap | Cash flow hedges | Variable rate loan assets
Cash flow, Fair value, and non-designated hedges
Notional amount of derivative instrument	$ 100.0
Number of derivative contracts entered | contract	2
Weighted average term	5 years
Fixed rate	1.20%
Derivatives designated as hedging instruments | Interest rate swap | Fair value hedges
Cash flow, Fair value, and non-designated hedges
Notional amount of derivative instrument		$ 58.0
Number of interest-rate swaps held | derivative		11
Derivatives not designated as hedging instruments
Cash flow, Fair value, and non-designated hedges
Notional amount of derivative instrument		$ 325.1
Number of interest-rate swaps held | derivative		102
Derivatives not designated as hedging instruments | Foreign exchange forward contracts
Cash flow, Fair value, and non-designated hedges
Notional amount of derivative instrument		$ 5.9

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Derivatives - Schedule of Derivatives Instruments in Statements of Financial Position (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Other assets | Cash flow hedges
Derivatives at fair value
Asset derivatives, designated as hedging at Fair value	$ 569	$ 113
Other assets | Fair value hedges
Derivatives at fair value
Asset derivatives, designated as hedging at Fair value	2,114	628
Accrued interest and other liabilities | Cash flow hedges
Derivatives at fair value
Liability derivatives, designated as hedging at Fair value	7,410	6,732
Accrued interest and other liabilities | Fair value hedges
Derivatives at fair value
Liability derivatives, designated as hedging at Fair value	45	633
Interest rate swap | Other assets
Derivatives at fair value
Asset derivatives, designated as hedging at Fair value	4,196	2,081
Interest rate swap | Accrued interest and other liabilities
Derivatives at fair value
Liability derivatives, designated as hedging at Fair value	4,195	2,176
Foreign exchange forward contracts | Other assets
Derivatives at fair value
Asset derivatives, not designated as hedging at Fair value	52	28
Foreign exchange forward contracts | Accrued interest and other liabilities
Derivatives at fair value
Liability derivatives, not designated as hedging at Fair value	$ 12	$ 44

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Derivatives - Schedule of Fair Value of Derivative Financial Instruments and Classification on Condensed Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Derivative assets, net
Gross amounts of recognized assets	$ 6,931	$ 2,850
Net amounts included in other assets in the Condensed Consolidated Balance Sheets	6,931	2,850
Gross amounts not offset - Financial instruments	(5,062)	(1,963)
Gross amounts not offset - Net Amount	1,869	887
Securities sold under agreements to repurchase
Gross amounts of recognized liabilities	(38,994)	(52,959)
Net amounts included in accrued interest and other liabilities in the Consolidated Balance Sheets	(38,994)	(52,959)
Gross amounts not offset - Collateral	38,994	52,959
Total offsetting derivative liabilities and securities sold under agreements to repurchase
Gross amounts of recognized liabilities	(50,656)	(62,544)
Net amounts included in accrued interest and other liabilities in the Consolidated Balance Sheets	(50,656)	(62,544)
Gross amounts not offset - Financial instruments	5,062	1,963
Gross amounts not offset - Collateral	41,787	60,551
Gross amounts not offset - Net Amount	(3,807)	(30)
Derivatives designated as hedging instruments
Derivative assets, net
Gross amounts of recognized assets	2,683	741
Net amounts included in other assets in the Condensed Consolidated Balance Sheets	2,683	741
Gross amounts not offset - Financial instruments	(2,099)	(741)
Gross amounts not offset - Net Amount	584
Derivatives designated as hedges or not designated as hedges
Gross amounts of recognized liabilities	(7,455)	(7,365)
Net amounts included in accrued interest and other liabilities' in the condensed consolidated balance sheets	(7,455)	(7,365)
Gross amounts not offset - Financial instruments	5,010	741
Gross amounts not offset - Collateral	2,445	6,624
Derivatives not designated as hedging instruments
Derivative assets, net
Gross amounts of recognized assets	4,248	2,109
Net amounts included in other assets in the Condensed Consolidated Balance Sheets	4,248	2,109
Gross amounts not offset - Financial instruments	(2,963)	(1,222)
Gross amounts not offset - Net Amount	1,285	887
Derivatives designated as hedges or not designated as hedges
Gross amounts of recognized liabilities	(4,207)	(2,220)
Net amounts included in accrued interest and other liabilities' in the condensed consolidated balance sheets	(4,207)	(2,220)
Gross amounts not offset - Financial instruments	52	1,222
Gross amounts not offset - Collateral	348	968
Gross amounts not offset - Net Amount	$ (3,807)	$ (30)

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Derivatives - Schedule of Notional Amounts of Outstanding Derivative Positions (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
CoBiz Statutory Trust I
Derivatives, statutory trusts
Notional amount of derivative instrument	$ 20,000
Fixed rate	4.99%
Termination date	Mar. 17, 2022
CoBiz Capital Trust II
Derivatives, statutory trusts
Notional amount of derivative instrument	$ 30,000
Fixed rate	5.99%
Termination date	Apr. 23, 2020
CoBiz Capital Trust III
Derivatives, statutory trusts
Notional amount of derivative instrument	$ 20,000
Fixed rate	5.02%
Termination date	Mar. 30, 2024

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Borrowed Funds - Schedule of Securities Sold Under Agreements to Repurchase (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($) Counterparty	Dec. 31, 2017 USD ($)
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase	$ 38,994	$ 52,959
Other short-term borrowings	190,000	77,640
Fair value of securities sold under agreements to repurchase	39,773	54,018
FHLB advances, average outstanding balance during the period	$ 116,600	$ 107,300
Variable rate basis	2.11%	1.47%
Securities Sold under Agreements to Repurchase
Securities sold under agreements to repurchase
Short-term debt, average outstanding amount	$ 44,900	$ 59,600
Short-term debt, maximum amount outstanding at any month end	$ 48,500	$ 69,900
Short-term debt, weighted average interest rate	0.10%	0.06%
Other Short-Term Borrowings
Securities sold under agreements to repurchase
Fair value of securities sold under agreements to repurchase	$ 583,900	$ 605,400
Pledged loans	851,500	877,900
Revolving Line of Credit (LOC)
Securities sold under agreements to repurchase
Maximum borrowing capacity	$ 20,000
Commitment fee percentage on the unused portion of the LOC	0.35%
Amount outstanding	$ 0	0
Federal Fund Purchase Lines
Securities sold under agreements to repurchase
Short-term debt, average outstanding amount	2,200	1,500
Maximum borrowing capacity	180,000
Amount outstanding	$ 0	$ 4,600
Number of banks providing line of credit | Counterparty	8
Federal Reserve Bank of Kansas Through The Discount Window Lending Program
Securities sold under agreements to repurchase
Pledged loans	$ 833,900
1-month LIBOR | Revolving Line of Credit (LOC)
Securities sold under agreements to repurchase
Basis spread on variable rate	2.25%

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Segments - Summary of Results Of Operations by Operating Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Segments
Total interest income	$ 39,177	$ 35,406	$ 76,954	$ 68,487
Total interest expense	4,028	3,401	7,196	6,404
Provision for loan losses	(901)	673	(1,226)	1,280
Noninterest income	8,209	8,311	17,170	16,639
Noninterest expense	30,354	26,655	58,924	53,769
Provision (benefit) for income taxes	2,511	3,499	4,855	5,570
Net income (loss)	11,394	9,489	24,375	18,103
Commercial Banking
Segments
Total interest income	39,090	35,320	76,778	68,314
Total interest expense	2,183	1,567	3,524	2,758
Provision for loan losses	(893)	682	(1,209)	1,374
Noninterest income	3,318	3,266	7,064	6,670
Noninterest expense	6,216	8,016	12,261	17,564
Management fees and allocations, net of tax	13,344	8,345	26,907	16,049
Provision (benefit) for income taxes	7,070	9,179	14,383	16,762
Net income (loss)	14,488	10,797	27,976	20,477
Fee-Based Lines
Segments
Total interest income		1		1
Total interest expense		1		14
Noninterest income	4,816	4,927	9,930	9,580
Noninterest expense	4,545	4,262	8,891	8,766
Management fees and allocations, net of tax	515	317	990	592
Provision (benefit) for income taxes	31	224	245	272
Net income (loss)	(275)	124	(196)	(63)
Corporate Support and Other
Segments
Total interest income	87	85	176	172
Total interest expense	1,845	1,833	3,672	3,632
Provision for loan losses	(8)	(9)	(17)	(94)
Noninterest income	75	118	176	389
Noninterest expense	19,593	14,377	37,772	27,439
Management fees and allocations, net of tax	(13,859)	(8,662)	(27,897)	(16,641)
Provision (benefit) for income taxes	(4,590)	(5,904)	(9,773)	(11,464)
Net income (loss)	$ (2,819)	$ (1,432)	$ (3,405)	$ (2,311)

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Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets and liabilities measured at fair value
Investment securities available for sale	$ 241,108	$ 166,753
Total derivative assets	6,931	2,850
Trust preferred securities
Assets and liabilities measured at fair value
Investment securities available for sale	21,198	21,983
Corporate debt securities
Assets and liabilities measured at fair value
Investment securities available for sale	216,650	141,495
Derivatives designated as hedging instruments
Assets and liabilities measured at fair value
Total derivative assets	2,683	741
Total derivative liabilities	7,455	7,365
Derivatives not designated as hedging instruments
Assets and liabilities measured at fair value
Total derivative assets	4,248	2,109
Total derivative liabilities	4,207	2,220
Recurring
Assets and liabilities measured at fair value
Investment securities available for sale	241,108	166,753
Total derivative assets	6,931	2,850
Total derivative liabilities	11,662	9,585
Recurring | Quoted prices in active markets for identical assets (Level 1)
Assets and liabilities measured at fair value
Investment securities available for sale		363
Recurring | Significant other observable inputs (Level 2)
Assets and liabilities measured at fair value
Investment securities available for sale	231,988	157,291
Total derivative assets	6,931	2,850
Total derivative liabilities	11,662	9,585
Recurring | Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value
Investment securities available for sale	9,120	9,099
Recurring | Trust preferred securities
Assets and liabilities measured at fair value
Investment securities available for sale	21,198	21,983
Recurring | Trust preferred securities | Quoted prices in active markets for identical assets (Level 1)
Assets and liabilities measured at fair value
Investment securities available for sale		363
Recurring | Trust preferred securities | Significant other observable inputs (Level 2)
Assets and liabilities measured at fair value
Investment securities available for sale	12,078	12,521
Recurring | Trust preferred securities | Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value
Investment securities available for sale	9,120	9,099
Recurring | Corporate debt securities
Assets and liabilities measured at fair value
Investment securities available for sale	216,650	141,495
Recurring | Corporate debt securities | Significant other observable inputs (Level 2)
Assets and liabilities measured at fair value
Investment securities available for sale	216,650	141,495
Recurring | Municipal securities
Assets and liabilities measured at fair value
Investment securities available for sale	3,260	3,275
Recurring | Municipal securities | Significant other observable inputs (Level 2)
Assets and liabilities measured at fair value
Investment securities available for sale	3,260	3,275
Recurring | Foreign exchange forward contracts
Assets and liabilities measured at fair value
Total derivative assets	52	28
Total derivative liabilities	12	44
Recurring | Foreign exchange forward contracts | Significant other observable inputs (Level 2)
Assets and liabilities measured at fair value
Total derivative assets	52	28
Total derivative liabilities	12	44
Recurring | Derivatives designated as hedging instruments | Cash flow hedges
Assets and liabilities measured at fair value
Total derivative assets	569	113
Total derivative liabilities	7,410	6,732
Recurring | Derivatives designated as hedging instruments | Fair value hedges
Assets and liabilities measured at fair value
Total derivative assets	2,114	628
Total derivative liabilities	45	633
Recurring | Derivatives designated as hedging instruments | Significant other observable inputs (Level 2) | Cash flow hedges
Assets and liabilities measured at fair value
Total derivative assets	569	113
Total derivative liabilities	7,410	6,732
Recurring | Derivatives designated as hedging instruments | Significant other observable inputs (Level 2) | Fair value hedges
Assets and liabilities measured at fair value
Total derivative assets	2,114	628
Total derivative liabilities	45	633
Recurring | Derivatives not designated as hedging instruments
Assets and liabilities measured at fair value
Total derivative assets	4,196	2,081
Total derivative liabilities	4,195	2,176
Recurring | Derivatives not designated as hedging instruments | Significant other observable inputs (Level 2)
Assets and liabilities measured at fair value
Total derivative assets	4,196	2,081
Total derivative liabilities	$ 4,195	$ 2,176

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Fair Value Measurements - Reconciliation of the Beginning and Ending Balance of Financial Assets Measured At Fair Value On Recurring Basis Using Level 3 Inputs (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Reconciliation of Level 3 inputs
Beginning balance	$ 9,128	$ 10,017	$ 9,099	$ 9,448
Net accretion	31	30	61	59
Unrealized gain (loss) included in comprehensive income	(39)	151	(40)	691
Ending balance	$ 9,120	$ 10,198	$ 9,120	$ 10,198

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Fair Value Measurements - Schedule of Financial Assets Measured at Fair Value on Nonrecurring Basis (OREO and Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Assets and liabilities measured at fair value
OREO recorded at fair value	$ 5,245		$ 5,245		$ 5,351
Provision for loan losses			(1,226)	$ 1,280
OREO
Assets and liabilities measured at fair value
OREO recorded at fair value	5,245		5,245		5,351
Impaired Loans
Assets and liabilities measured at fair value
Impaired loans, net of specific reserve	14,423		14,423		3,792
Nonrecurring | OREO
Assets and liabilities measured at fair value
OREO recorded at fair value	5,245		5,245		5,351
Nonrecurring | OREO | Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value
OREO recorded at fair value	5,245		5,245		5,351
Nonrecurring | Impaired Loans
Assets and liabilities measured at fair value
Impaired loans, net of specific reserve	14,423		14,423		3,792
Provision for loan losses	479	$ 567	(807)	$ 971
Nonrecurring | Impaired Loans | Significant unobservable inputs (Level 3)
Assets and liabilities measured at fair value
Impaired loans, net of specific reserve	$ 14,423		$ 14,423		$ 3,792

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Fair Value Measurements - Schedule of Reconciliation of Fair Value Measurement of Other Real Estate Owned (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Fair Value Measurements
OREO recorded at fair value	$ 5,245	$ 5,351
Estimated selling costs	(266)	(272)
OREO	$ 4,979	$ 5,079

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Fair Value Measurements - Schedule of Valuation Process Used to Determine Fair Value Measurement within Level 3 (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Fair value valuation processes
Investment securities available for sale	$ 241,108	$ 166,753
OREO recorded at fair value	5,245	5,351
Impaired Loans
Fair value valuation processes
Impaired loans	14,423	3,792
OREO
Fair value valuation processes
OREO recorded at fair value	5,245	5,351
Market approach | Trust preferred securities
Fair value valuation processes
Investment securities available for sale	$ 9,120	$ 9,099
Valuation technique	Market approach	Market approach
Unobservable input	Discount to carrying value using broker quotes or observable prices on similar securities	Discount to carrying value using broker quotes or observable prices on similar securities
Market approach | Weighted average | Trust preferred securities
Fair value valuation processes
Discount rate	7.00%	7.00%
Market approach | Minimum | Trust preferred securities
Fair value valuation processes
Discount rate	4.00%	5.00%
Market approach | Maximum | Trust preferred securities
Fair value valuation processes
Discount rate	19.00%	15.00%
Commercial | Sales comparison | Impaired Loans
Fair value valuation processes
Impaired loans	$ 13,449	$ 2,581
Valuation technique	Sales comparison(1)	Sales comparison(1)
Unobservable input	Management discount for asset type	Management discount for asset type
Commercial | Sales comparison | Weighted average | Impaired Loans
Fair value valuation processes
Discount rate	81.00%	59.00%
Commercial | Sales comparison | Minimum | Impaired Loans
Fair value valuation processes
Discount rate	0.00%	0.00%
Commercial | Sales comparison | Maximum | Impaired Loans
Fair value valuation processes
Discount rate	86.00%	98.00%
Commercial | Property appraisals | OREO
Fair value valuation processes
OREO recorded at fair value	$ 190	$ 190
Valuation technique	Property appraisals(2)	Property appraisals(2)
Unobservable input	Management discount for property type	Management discount for property type
Commercial | Property appraisals | Weighted average | OREO
Fair value valuation processes
Discount rate	0.00%	0.00%
Real estate - mortgage | Sales comparison | Impaired Loans
Fair value valuation processes
Impaired loans	$ 910	$ 57
Valuation technique	Sales comparison(2)	Sales comparison(2)
Unobservable input	Sales comparison adjustments	Sales comparison adjustments
Real estate - mortgage | Sales comparison | Weighted average | Impaired Loans
Fair value valuation processes
Sales comparison adjustments	(2.00%)	(4.00%)
Real estate - mortgage | Sales comparison | Minimum | Impaired Loans
Fair value valuation processes
Sales comparison adjustments	(4.00%)
Real estate - mortgage | Sales comparison | Maximum | Impaired Loans
Fair value valuation processes
Sales comparison adjustments	0.00%
Construction and land | Property appraisals | OREO
Fair value valuation processes
OREO recorded at fair value	$ 5,055	$ 5,161
Valuation technique	Property appraisals(2)	Property appraisals(2)
Unobservable input	Management discount for property type	Management discount for property type
Construction and land | Property appraisals | Weighted average | OREO
Fair value valuation processes
Discount rate	50.00%	17.00%
Consumer | Sales comparison | Impaired Loans
Fair value valuation processes
Impaired loans	$ 64	$ 1,154
Valuation technique	Sales comparison(2)	Sales comparison(2)
Unobservable input	Sales comparison adjustments	Sales comparison adjustments
Consumer | Sales comparison | Weighted average | Impaired Loans
Fair value valuation processes
Sales comparison adjustments	(11.00%)	(11.00%)
Consumer | Sales comparison | Minimum | Impaired Loans
Fair value valuation processes
Sales comparison adjustments	(12.00%)	(20.00%)
Consumer | Sales comparison | Maximum | Impaired Loans
Fair value valuation processes
Sales comparison adjustments	(7.00%)	(7.00%)

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Fair Value Measurements - Schedule of Estimated Fair Value of Other Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Fair value of financial instruments
Cash and cash equivalents	$ 84,858	$ 80,180	$ 90,419	$ 96,050
Investment securities available for sale	241,108	166,753
Investment securities held to maturity	388,917	362,544
Other investments	16,623	10,119
Loans - net	3,030,420	3,107,622
Accrued interest receivable	14,087	14,150
Derivatives assets	6,931	2,850
Deposits	3,144,541	3,225,220
Securities sold under agreements to repurchase	38,994	52,959
Other short-term borrowings	190,000	77,640
Subordinated notes payable	59,239	59,195
Junior subordinated debentures	72,166	72,166
Carrying Value
Fair value of financial instruments
Investment securities available for sale	241,108	166,753
Investment securities held to maturity	388,917	362,544
Accrued interest receivable	14,087	14,150
Accrued interest payable	998	1,077
Carrying Value | Significant other observable inputs (Level 2)
Fair value of financial instruments
Cash and cash equivalents	84,858	80,180
Other investments	2,176	2,174
Derivatives assets	6,931	2,850
Deposits	3,144,541	3,225,220
Securities sold under agreements to repurchase	38,994	52,959
Other short-term borrowings	190,000	77,640
Junior subordinated debentures	72,166	72,166
Derivatives liabilities	11,662	9,585
Carrying Value | Significant unobservable inputs (Level 3)
Fair value of financial instruments
Loans - net	3,030,421	3,107,622
Subordinated notes payable	59,239	59,195
Total Fair Value
Fair value of financial instruments
Investment securities available for sale	241,108	166,753
Investment securities held to maturity	383,534	360,071
Accrued interest receivable	14,087	14,150
Accrued interest payable	998	1,077
Total Fair Value | Significant other observable inputs (Level 2)
Fair value of financial instruments
Cash and cash equivalents	84,858	80,180
Other investments	2,176	2,174
Derivatives assets	6,931	2,850
Deposits	3,143,432	3,224,417
Securities sold under agreements to repurchase	31,240	49,436
Other short-term borrowings	190,000	77,640
Junior subordinated debentures	72,166	72,166
Derivatives liabilities	11,662	9,585
Total Fair Value | Significant unobservable inputs (Level 3)
Fair value of financial instruments
Loans - net	2,989,891	3,080,935
Subordinated notes payable	$ 56,635	$ 58,451

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Regulatory Matters - Schedule of Regulatory Capital Amounts and Ratios of Company and Bank (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Regulatory matters
Minimum Capital Conservation Buffer (as percent)	1.875%	1.25%
Annual increase in minimum Capital Conservation Buffer (as percent)	0.625%
Increased Capital Conservation Buffer (as percent)	2.50%
Common Tier 1, Risk-based, Capital ratios (as a percent)	10.60%
Common Tier 1, Risk-based, Well-capitalized requirement (as a percent)	6.50%
Common Tier 1, Risk-based, Minimum capital requirement (as a percent)	7.00%
Tier I, Risk-based, Capital ratios (as a percent)	12.40%
Tier I, Risk-based, Well-capitalized requirement (as a percent)	8.00%
Tier I, Risk-based, Minimum capital requirement (as a percent)	8.50%
Total capital, Risk-based, Capital ratios (as a percent)	15.20%
Total capital, Risk-based, Well-capitalized requirement (as a percent)	10.00%
Total capital, Risk-based, Minimum capital requirement (as a percent)	10.50%
Tier I, Leverage, Capital ratios (as a percent)	10.70%
Tier I, Leverage, Well-capitalized requirement (as a percent)	5.00%
Tier I, Leverage, Minimum capital requirement (as a percent)	4.00%
Bank
Regulatory matters
Common Tier 1, Risk-based, Capital ratios (as a percent)	11.10%
Tier I, Risk-based, Capital ratios (as a percent)	11.10%
Total capital, Risk-based, Capital ratios (as a percent)	14.00%
Tier I, Leverage, Capital ratios (as a percent)	9.60%

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Revenue and Expense - (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Revenue and Expense
Receivables from customers	$ 3,300		$ 3,300		$ 3,700
Revenue from contracts with customers	6,804		14,050
Other noninterest income
Loan fees	526		1,269
Other customer service fees	340		579
Bank-owned life insurance	355		753
Other Investments	124		299
Derivative valuation	45		201
Other	15		19
Other noninterest income	1,405		3,120
Total noninterest income	8,209	$ 8,311	17,170	$ 16,639
Other noninterest expense
Marketing and business development	679	682	1,380	1,388
Service contracts	1,414	1,428	2,759	2,721
Professional fees	2,375	794	3,907	1,698
Office supplies and delivery	251	278	502	581
Other	861	829	1,713	1,868
Total	5,580	4,011	10,261	8,256
Depository service charges
Revenue and Expense
Revenue from contracts with customers	1,577		3,232
Investment advisory income
Revenue and Expense
Revenue from contracts with customers	1,678		3,333
Property and Casualty
Revenue and Expense
Revenue from contracts with customers	988		2,220
Employee Benefits
Revenue and Expense
Revenue from contracts with customers	2,001		4,076
Bonus Income and Merchant and Bankcard Fees
Revenue and Expense
Revenue from contracts with customers	$ 560		$ 1,189
Calculated under Revenue Guidance in Effect before Topic 606
Revenue and Expense
Revenue from contracts with customers		7,105		13,969
Other noninterest income
Loan fees		347		863
Other customer service fees		259		492
Bank-owned life insurance		310		659
Other Investments		372		747
Derivative valuation		(80)		(137)
Other		(2)		46
Other noninterest income		1,206		2,670
Total noninterest income		8,311		16,639
Calculated under Revenue Guidance in Effect before Topic 606 | Depository service charges
Revenue and Expense
Revenue from contracts with customers		1,714		3,459
Calculated under Revenue Guidance in Effect before Topic 606 | Investment advisory income
Revenue and Expense
Revenue from contracts with customers		1,500		3,031
Calculated under Revenue Guidance in Effect before Topic 606 | Property and Casualty
Revenue and Expense
Revenue from contracts with customers		1,114		2,243
Calculated under Revenue Guidance in Effect before Topic 606 | Employee Benefits
Revenue and Expense
Revenue from contracts with customers		2,114		3,753
Calculated under Revenue Guidance in Effect before Topic 606 | Bonus Income and Merchant and Bankcard Fees
Revenue and Expense
Revenue from contracts with customers		$ 663		$ 1,483