NOTE 3 - LOANS/LEASES RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Composition of the loan/lease portfolio

	2020		2019
	(dollars in thousands)
C&I loans*	$	1,850,110	$	1,507,825
CRE loans
Owner-occupied CRE		467,537		443,989
Commercial construction, land development, and other land		441,364		378,797
Other non owner-occupied CRE		960,261		913,610
		1,869,162		1,736,396
Direct financing leases **		79,105		87,869
Residential real estate loans ***		241,069		239,904
Installment and other consumer loans		99,150		109,352
		4,138,596		3,681,346
Plus deferred loan/lease origination costs, net of fees		1,663		8,859
		4,140,259		3,690,205
Less allowance		(60,827)		(36,001)
	$	4,079,432	$	3,654,204
** Direct financing leases:
Net minimum lease payments to be received	$	87,389	$	97,025
Estimated unguaranteed residual values of leased assets		616		547
Unearned lease/residual income		(8,900)		(9,703)
		79,105		87,869
Plus deferred lease origination costs, net of fees		1,448		1,892
		80,553		89,761
Less allowance		(1,639)		(1,464)
	$	78,914	$	88,297

*     Includes equipment financing agreements outstanding at m2, totaling $153.7 million and $142.0 million as of June 30, 2020 and December 31, 2019, respectively.

**   Management performs an evaluation of the estimated unguaranteed residual values of leased assets on an annual basis, at a minimum. The evaluation consists of discussions with reputable and current vendors, which is combined with management's expertise and understanding of the current states of particular industries to determine informal valuations of the equipment. As necessary and where available, management will utilize valuations by independent appraisers. The large majority of leases with residual values contain a lease options rider, which requires the lessee to pay the residual value directly, finance the payment of the residual value, or extend the lease term to pay the residual value. In these cases, the residual value is protected and the risk of loss is minimal.

*** Includes residential real estate loans held for sale totaling $8.3 million and $3.7 million as of June 30, 2020 and December 31, 2019, respectively.

Changes in accretable yield for acquired loans

	Three months ended June 30, 2020						Six months ended June 30, 2020
	PCI		Performing				PCI		Performing
	Loans		Loans		Total		Loans		Loans		Total
	(dollars in thousands)
Balance at the beginning of the period	$	(59)	$	(5,725)	$	(5,784)	$	(57)	$	(6,378)	$	(6,435)
Reclassification of nonaccretable discount to accretable		—		—		—		(30)		—		(30)
Accretion recognized		1		790		791		29		1,443		1,472
Balance at the end of the period	$	(58)	$	(4,935)	$	(4,993)	$	(58)	$	(4,935)	$	(4,993)

	Three months ended June 30, 2019						Six months ended June 30, 2019
	PCI		Performing				PCI		Performing
	Loans		Loans		Total		Loans		Loans		Total
	(dollars in thousands)
Balance at the beginning of the period	$	(319)	$	(9,301)	$	(9,620)	$	(667)	$	(10,127)	$	(10,794)
Reclassification of nonaccretable discount to accretable		(159)		—		(159)		(159)		—		(159)
Accretion recognized		327		812		1,139		675		1,638		2,313
Balance at the end of the period	$	(151)	$	(8,489)	$	(8,640)	$	(151)	$	(8,489)	$	(8,640)

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

	As of June 30, 2020
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total
	(dollars in thousands)
C&I	$	1,846,417		$	1,650		$	311		$	62		$	1,670		$	1,850,110
CRE
Owner-Occupied CRE		467,032			—			185			—			320			467,537
Commercial Construction, Land Development, and Other Land		441,336			28			—			—			—			441,364
Other Non Owner-Occupied CRE		950,993			1,776			—			—			7,492			960,261
Direct Financing Leases		77,637			277			151			—			1,040			79,105
Residential Real Estate		239,729			—			404			—			936			241,069
Installment and Other Consumer		98,435			11			27			37			640			99,150
	$	4,121,579		$	3,742		$	1,078		$	99		$	12,099		$	4,138,596
As a percentage of total loan/lease portfolio		99.59	%		0.09	%		0.03	%		—	%		0.29	%		100.00	%

	As of December 31, 2019
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total
	(dollars in thousands)
C&I	$	1,499,891		$	6,126		$	572		$	—		$	1,236		$	1,507,825
CRE
Owner-Occupied CRE		443,707			177			71			—			34			443,989
Commercial Construction, Land Development, and Other Land		375,940			2,857			—			—			—			378,797
Other Non Owner-Occupied CRE		909,684			73			—			—			3,853			913,610
Direct Financing Leases		85,636			463			253			—			1,517			87,869
Residential Real Estate		235,845			2,939			414			—			706			239,904
Installment and Other Consumer		108,750			3			10			33			556			109,352
	$	3,659,453		$	12,638		$	1,320		$	33		$	7,902		$	3,681,346
As a percentage of total loan/lease portfolio		99.41	%		0.34	%		0.04	%		0.00	%		0.21	%		100.00	%

NPLs by classes of loans/leases

	As of June 30, 2020
	Accruing Past
	Due 90 Days or		Nonaccrual						Percentage of
Classes of Loans/Leases	More		Loans/Leases **		Accruing TDRs		Total NPLs		Total NPLs
	(dollars in thousands)
C&I	$	62	$	1,670	$	652	$	2,384	18.17	%
CRE
Owner-Occupied CRE		—		320		—		320	2.44	%
Commercial Construction, Land Development, and Other Land		—		—		—		—	-	%
Other Non Owner-Occupied CRE		—		7,492		—		7,492	57.12	%
Direct Financing Leases		—		1,040		268		1,308	9.97	%
Residential Real Estate		—		936		—		936	7.14	%
Installment and Other Consumer		37		640		—		677	5.16	%
	$	99	$	12,099	$	920	$	13,118	100.00	%

**   Nonaccrual loans/leases included $352 thousand of TDRs, including $129 thousand in commercial and industrial loans, $138 thousand in direct financing leases, $31 thousand in residential real estate loans, and $54 thousand in installment loans.

	As of December 31, 2019
	Accruing Past
	Due 90 Days or		Nonaccrual						Percentage of
Classes of Loans/Leases	More		Loans/Leases **		Accruing TDRs		Total NPLs		Total NPLs
		(dollars in thousands)
C&I	$	—	$	1,236	$	646	$	1,882	21.12	%
CRE
Owner-Occupied CRE		—		34		—		34	0.38	%
Commercial Construction, Land Development, and Other Land		—		—		—		—	-	%
Other Non Owner-Occupied CRE		—		3,853		—		3,853	43.22	%
Direct Financing Leases		—		1,517		333		1,850	20.75	%
Residential Real Estate		—		706		—		706	7.92	%
Installment and Other Consumer		33		556		—		589	6.61	%
	$	33	$	7,902	$	979	$	8,914	100.00	%

**   Nonaccrual loans/leases included $747 thousand of TDRs, including $98 thousand in C&I loans, $269 thousand in CRE loans, $294 thousand in direct financing leases, $31 thousand in residential real estate loans, and $55 thousand in installment loans.

Allowance for credit losses on financing receivables

Changes in the allowance by portfolio segment for the three and six months ended June 30, 2020 and 2019, respectively, are presented as follows:

	Three Months Ended June 30, 2020
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)
Balance, beginning	$	18,151	$	19,269	$	1,303	$	2,313	$	1,197	$	42,233
Provisions charged to expense		7,859		10,365		887		697		107		19,915
Loans/leases charged off		(340)		(511)		(595)		—		(4)		(1,450)
Recoveries on loans/leases previously charged off		78		—		44		—		7		129
Balance, ending	$	25,748	$	29,123	$	1,639	$	3,010	$	1,307	$	60,827

	Three Months Ended June 30, 2019
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)
Balance, beginning	$	17,260	$	18,303	$	1,606	$	2,538	$	1,457	$	41,164
Provisions (credits) charged to expense		1,116		414		331		86		(6)		1,941
Loans/leases charged off		(193)		(1,369)		(497)		(73)		(20)		(2,152)
Recoveries on loans/leases previously charged off		65		15		19		31		21		151
Balance, ending	$	18,248	$	17,363	$	1,459	$	2,582	$	1,452	$	41,104

	Six Months Ended June 30, 2020
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)
Balance, beginning	$	16,072	$	15,379	$	1,464	$	1,948	$	1,138	$	36,001
Provisions charged to expense		11,556		14,181		1,281		1,033		231		28,282
Loans/leases charged off		(1,979)		(511)		(1,195)		—		(100)		(3,785)
Recoveries on loans/leases previously charged off		99		74		89		29		38		329
Balance, ending	$	25,748	$	29,123	$	1,639	$	3,010	$	1,307	$	60,827

	Six Months Ended June 30, 2019
					Direct Financing		Residential Real		Installment and
	C&I		CRE		Leases		Estate		Other Consumer		Total
	(dollars in thousands)
Balance, beginning	$	16,420	$	17,719	$	1,792	$	2,557	$	1,359	$	39,847
Provisions (credits) charged to expense		2,123		948		776		68		160		4,075
Loans/leases charged off		(527)		(1,369)		(1,149)		(73)		(94)		(3,212)
Recoveries on loans/leases previously charged off		232		65		40		30		27		394
Balance, ending	$	18,248	$	17,363	$	1,459	$	2,582	$	1,452	$	41,104

The allowance by impairment evaluation and by portfolio segment as of June 30, 2020 and December 31, 2019 is presented as follows:

	As of June 30, 2020
							Direct Financing			Residential Real			Installment and
	C&I			CRE			Leases			Estate			Other Consumer			Total
	(dollars in thousands)
Allowance for impaired loans/leases	$	341		$	1,692		$	20		$	23		$	78		$	2,154
Allowance for nonimpaired loans/leases		25,407			27,431			1,619			2,987			1,229			58,673
	$	25,748		$	29,123		$	1,639		$	3,010		$	1,307		$	60,827
Impaired loans/leases	$	2,547		$	7,815		$	1,419		$	884		$	640		$	13,305
Nonimpaired loans/leases		1,847,563			1,861,347			77,686			240,185			98,510			4,125,291
	$	1,850,110		$	1,869,162		$	79,105		$	241,069		$	99,150		$	4,138,596
Allowance as a percentage of impaired loans/leases		13.39	%		21.65	%		1.41	%		2.60	%		12.19	%		16.19	%
Allowance as a percentage of nonimpaired loans/leases		1.38	%		1.47	%		2.08	%		1.24	%		1.25	%		1.42	%
Total allowance as a percentage of total loans/leases		1.39	%		1.56	%		2.07	%		1.25	%		1.32	%		1.47	%

	As of December 31, 2019
							Direct Financing			Residential Real			Installment and
	C&I			CRE			Leases			Estate			Other Consumer			Total
	(dollars in thousands)
Allowance for impaired loans/leases	$	170		$	125		$	270		$	15		$	80		$	660
Allowance for nonimpaired loans/leases		15,902			15,254			1,194			1,933			1,058			35,341
	$	16,072		$	15,379		$	1,464		$	1,948		$	1,138		$	36,001
Impaired loans/leases	$	1,846		$	3,585		$	2,025		$	649		$	556		$	8,661
Nonimpaired loans/leases		1,505,979			1,732,811			85,844			239,255			108,796			3,672,685
	$	1,507,825		$	1,736,396		$	87,869		$	239,904		$	109,352		$	3,681,346
Allowance as a percentage of impaired loans/leases		9.21	%		3.49	%		13.33	%		2.31	%		14.41	%		7.62	%
Allowance as a percentage of nonimpaired loans/leases		1.06	%		0.88	%		1.39	%		0.81	%		0.97	%		0.96	%
Total allowance as a percentage of total loans/leases		1.07	%		0.89	%		1.67	%		0.81	%		1.04	%		0.98	%

Impaired financing receivables

Loans/leases, by classes of financing receivable, considered to be impaired as of and for the six months ended June 30, 2020 are presented as follows:

	Six Months Ended June 30, 2020
											Interest Income
							Average				Recognized for
	Recorded		Unpaid Principal		Related		Recorded		Interest Income		Cash Payments
Classes of Loans/Leases	Investment		Balance		Allowance		Investment		Recognized		Received
	(dollars in thousands)
Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	1,978	$	2,051	$	—	$	1,512	$	25	$	25
CRE
Owner-Occupied CRE		320		577		—		128		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		965		965		—		742		14		14
Direct Financing Leases		1,364		1,364		—		1,379		11		11
Residential Real Estate		624		652		—		474		—		—
Installment and Other Consumer		562		562		—		525		—		—
	$	5,813	$	6,171	$	—	$	4,760	$	50	$	50
Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	569	$	569	$	341	$	479	$	—	$	—
CRE
Owner-Occupied CRE		—		—		—		—		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		6,530		6,530		1,692		5,329		—		—
Direct Financing Leases		55		55		20		59		—		—
Residential Real Estate		260		260		23		206		—		—
Installment and Other Consumer		78		78		78		67		—		—
	$	7,492	$	7,492	$	2,154	$	6,140	$	—	$	—
Total Impaired Loans/Leases:
C&I	$	2,547	$	2,620	$	341	$	1,991	$	25	$	25
CRE
Owner-Occupied CRE		320		577		—		128		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		—		—		—
Other Non Owner-Occupied CRE		7,495		7,495		1,692		6,071		14		14
Direct Financing Leases		1,419		1,419		20		1,438		11		11
Residential Real Estate		884		912		23		680		—		—
Installment and Other Consumer		640		640		78		592		—		—
	$	13,305	$	13,663	$	2,154	$	10,900	$	50	$	50

Loans/leases, by classes of financing receivable, considered to be impaired as of and for the three months ended June 30, 2020 and 2019 are presented as follows:

	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
					Interest Income						Interest Income
	Average				Recognized for		Average				Recognized for
	Recorded		Interest Income		Cash Payments		Recorded		Interest Income		Cash Payments
Classes of Loans/Leases	Investment		Recognized		Received		Investment		Recognized		Received
	(dollars in thousands)
Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	1,742	$	13	$	13	$	1,683	$	29	$	29
CRE
Owner-Occupied CRE		174		—		—		194		7		7
Commercial Construction, Land Development, and Other Land		—		—		—		603		6		6
Other Non Owner-Occupied CRE		978		7		7		3,985		22		22
Direct Financing Leases		1,411		6		6		1,795		7		7
Residential Real Estate		524		—		—		801		—		—
Installment and Other Consumer		550		—		—		816		3		3
	$	5,379	$	26	$	26	$	9,877	$	74	$	74
Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	568	$	—	$	—	$	2,046	$	9	$	9
CRE
Owner-Occupied CRE		—		—		—		127		—		—
Commercial Construction, Land Development, and Other Land		—		—		—		143		—		—
Other Non Owner-Occupied CRE		6,560		—		—		1,980		—		—
Direct Financing Leases		57		—		—		227		—		—
Residential Real Estate		220		—		—		822		1		1
Installment and Other Consumer		70		—		—		150		—		—
	$	7,475	$	—	$	—	$	5,495	$	10	$	10
Total Impaired Loans/Leases:
C&I	$	2,310	$	13	$	13	$	3,729	$	38	$	38
CRE
Owner-Occupied CRE		174		—		—		321		7		7
Commercial Construction, Land Development, and Other Land		—		—		—		746		6		6
Other Non Owner-Occupied CRE		7,538		7		7		5,965		22		22
Direct Financing Leases		1,468		6		6		2,022		7		7
Residential Real Estate		744		—		—		1,623		1		1
Installment and Other Consumer		620		—		—		966		3		3
	$	12,854	$	26	$	26	$	15,372	$	84	$	84

Loans/leases, by classes of financing receivable, considered to be impaired as of December 31, 2019 are presented as

follows:

			Unpaid
	Recorded		Principal		Related
Classes of Loans/Leases	Investment		Balance		Allowance
	(dollars in thousands)
Impaired Loans/Leases with No Specific Allowance Recorded:
C&I	$	1,607	$	1,647	$	—
CRE
Owner-Occupied CRE		34		50		—
Commercial Construction, Land Development, and Other Land		—		—		—
Other Non Owner-Occupied CRE		684		686		—
Direct Financing Leases		1,642		1,642		—
Residential Real Estate		469		614		—
Installment and Other Consumer		476		476		—
	$	4,912	$	5,115	$	—
Impaired Loans/Leases with Specific Allowance Recorded:
C&I	$	239	$	239	$	170
CRE
Owner-Occupied CRE		—		—		—
Commercial Construction, Land Development, and Other Land		—		—		—
Other Non Owner-Occupied CRE		2,867		2,867		125
Direct Financing Leases		383		383		270
Residential Real Estate		180		180		15
Installment and Other Consumer		80		80		80
	$	3,749	$	3,749	$	660
Total Impaired Loans/Leases:
C&I	$	1,846	$	1,886	$	170
CRE
Owner-Occupied CRE		34		50		—
Commercial Construction, Land Development, and Other Land		—		—		—
Other Non Owner-Occupied CRE		3,551		3,553		125
Direct Financing Leases		2,025		2,025		270
Residential Real Estate		649		794		15
Installment and Other Consumer		556		556		80
	$	8,661	$	8,864	$	660

Financing receivable credit quality indicators

	As of June 30, 2020
			CRE
					Non-Owner Occupied
					Commercial
					Construction,
					Land
			Owner-Occupied		Development,						As a % of
Internally Assigned Risk Rating	C&I		CRE		and Other Land		Other CRE		Total		Total
	(dollars in thousands)
Pass (Ratings 1 through 5)	$	1,643,654	$	463,570	$	430,206	$	883,724	$	3,421,154	95.95	%
Special Mention (Rating 6)		29,046		857		11,158		63,547		104,608	2.93	%
Substandard (Rating 7)		23,755		3,110		—		12,990		39,855	1.12	%
Doubtful (Rating 8)		—		—		—		—		—	—	%
	$	1,696,455	$	467,537	$	441,364	$	960,261	$	3,565,617	100.00	%

	As of December 31, 2019
			CRE
					Non-Owner Occupied
					Commercial
					Construction,
					Land
			Owner-Occupied		Development,						As a % of
Internally Assigned Risk Rating	C&I		CRE		and Other Land		Other CRE		Total		Total
	(dollars in thousands)
Pass (Ratings 1 through 5)	$	1,334,446	$	439,418	$	378,572	$	896,206	$	3,048,642	98.28	%
Special Mention (Rating 6)		12,962		3,044		41		3,905		19,952	0.65	%
Substandard (Rating 7)		18,439		1,527		184		13,499		33,649	1.09	%
Doubtful (Rating 8)		—		—		—		—		—	0.01	%
	$	1,365,847	$	443,989	$	378,797	$	913,610	$	3,102,243	100.00	%

Financing receivable credit quality indicators performance status

	As of June 30, 2020
			Direct Financing		Residential Real		Installment and				As a % of
Delinquency Status *	C&I		Leases		Estate		Other Consumer		Total		Total
	(dollars in thousands)
Performing	$	151,242	$	77,797	$	240,133	$	98,472	$	567,644	99.07	%
Nonperforming		2,413		1,308		936		678		5,335	0.93	%
	$	153,655	$	79,105	$	241,069	$	99,150	$	572,979	100.00	%

	As of December 31, 2019
			Direct Financing		Residential Real		Installment and				As a % of
Delinquency Status *	C&I		Leases		Estate		Other Consumer		Total		Total
	(dollars in thousands)
Performing	$	140,992	$	86,019	$	239,198	$	108,763	$	574,972	99.29	%
Nonperforming		986		1,850		706		589		4,131	0.71	%
	$	141,978	$	87,869	$	239,904	$	109,352	$	579,103	100.00	%

Number and recorded investment of TDRs, by type of concession

	For the three months ended June 30, 2020							For the three months ended June 30, 2019
		Pre-		Post-					Pre-		Post-
		Modification		Modification					Modification		Modification
	Number of	Recorded		Recorded		Specific		Number of	Recorded		Recorded		Specific
Classes of Loans/Leases	Loans / Leases	Investment		Investment		Allowance		Loans / Leases	Investment		Investment		Allowance
	(dollars in thousands)
CONCESSION - Significant Payment Delay
C&I	—	$	—	$	—	$	—	1	$	52	$	52	$	—
Direct Financing Leases	2		78		78		—	—		—		—		—
	2	$	78	$	78	$	—	1	$	52	$	52	$	—
CONCESSION - Forgiveness of Principal
C&I	—	$	—	$	—	$	—	1	$	587	$	537	$	—
	—	$	—	$	—	$	—	1	$	587	$	537	$	—
TOTAL	2	$	78	$	78	$	—	2	$	639	$	589	$	—

	For the six months ended June 30, 2020							For the six months ended June 30, 2019
		Pre-		Post-					Pre-		Post-
		Modification		Modification					Modification		Modification
	Number of	Recorded		Recorded		Specific		Number of	Recorded		Recorded		Specific
Classes of Loans/Leases	Loans / Leases	Investment		Investment		Allowance		Loans / Leases	Investment		Investment		Allowance
	(dollars in thousands)
CONCESSION - Significant Payment Delay
C & I	2	$	111	$	111	$	—	2	$	71	$	71	$	—
Direct Financing Leases	3		145		145		—	3		103		103		5
	5	$	256	$	256	$	—	5	$	174	$	174	$	5
CONCESSION - Forgiveness of Principal
C & I	—	$	—	$	—	$	—	1		587		537		—
TOTAL	5	$	256	$	256	$	—	6	$	761	$	711	$	5