Loans and Lease Finance Receivables and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2020

Summary of Components of Loans and Lease Finance Receivables, Excluding PCI Loans

The following table provides a summary of total loans and lease finance receivables by type.


	March 31, 2020			December 31, 2019
	(Dollars in thousands)
Commercial and industrial	$	960,761		$	935,127
SBA		313,071			305,008
Real estate:
Commercial real estate		5,347,925			5,374,617
Construction		128,045			116,925
SFR mortgage		278,743			283,468
Dairy & livestock and agribusiness		272,114			383,709
Municipal lease finance receivables		51,287			53,146
Consumer and other loans		114,206			116,319

Gross loans		7,466,152			7,568,319
Less: Deferred loan fees, net (1)		-			(3,742	)

Gross loans, net of deferred loan fees		7,466,152			7,564,577
Less: Allowance for credit losses		(82,641	)		(68,660	)

Total loans and lease finance receivables	$	7,383,511		$	7,495,917

(1)

Beginning with March 31, 2020, gross loans are presented net of deferred loan fees by respective class of financing receivables.

Summary of loans by type and origination year, according to our internal risk ratings

The following table summarizes loans by type and origination year, according to our internal risk ratings as of the date presented.


	Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
March 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Commercial and industrial loans:
Risk Rating:
Pass	$	35,101	$	160,551	$	79,808	$	74,291	$	48,698	$	85,803	$	423,186	$	8,849	$	916,287
Special Mention		1,066		257		7,405		1,694		539		3,524		12,598		2,442		29,525
Substandard		-		143		796		855		637		37		11,256		1,225		14,949
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Commercial and industrial loans:	$	36,167	$	160,951	$	88,009	$	76,840	$	49,874	$	89,364	$	447,040	$	12,516	$	960,761

SBA:
Risk Rating:
Pass	$	26,599	$	18,009	$	48,416	$	77,219	$	27,922	$	93,865	$	-	$	-	$	292,030
Special Mention		-		-		-		1,177		1,277		7,809		-		-		10,263
Substandard		-		-		1,424		3,835		1,604		3,915		-		-		10,778
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total SBA:	$	26,599	$	18,009	$	49,840	$	82,231	$	30,803	$	105,589	$	-	$	-	$	313,071

Commercial real estate loans:
Risk Rating:
Pass	$	153,366	$	726,268	$	743,909	$	732,319	$	626,561	$	2,021,759	$	197,335	$	18,747	$	5,220,264
Special Mention		-		5,343		9,106		16,484		7,211		52,995		3,457		-		94,596
Substandard		-		-		5,155		5,813		1,315		18,819		250		1,713		33,065
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Commercial real estate loans:	$	153,366	$	731,611	$	758,170	$	754,616	$	635,087	$	2,093,573	$	201,042	$	20,460	$	5,347,925

Construction loans:
Risk Rating:
Pass	$	550	$	13,414	$	13,300	$	35,130	$	10,592	$	5	$	49,591	$	5,463	$	128,045
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Construction loans:	$	550	$	13,414	$	13,300	$	35,130	$	10,592	$	5	$	49,591	$	5,463	$	128,045

SFR mortgage loans:
Risk Rating:
Pass	$	10,473	$	66,680	$	38,192	$	26,819	$	35,992	$	96,795	$	-	$	-	$	274,951
Special Mention		-		-		-		-		-		1,942		-		-		1,942
Substandard		-		-		-		379		-		1,025		-		446		1,850
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total SFR mortgage loans:	$	10,473	$	66,680	$	38,192	$	27,198	$	35,992	$	99,762	$	-	$	446	$	278,743


	Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
March 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Dairy & livestock and agribusiness loans:
Risk Rating:
Pass	$	78	$	2,945	$	1,940	$	8,109	$	2,831	$	14,655	$	192,649	$	-	$	223,207
Special Mention		-		-		166		722		-		-		22,150		3,686		26,724
Substandard		-		-		882		-		4,016		-		4,625		12,660		22,183
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Dairy & livestock and agribusiness loans:	$	78	$	2,945	$	2,988	$	8,831	$	6,847	$	14,655	$	219,424	$	16,346	$	272,114

Municipal lease finance receivables loans:
Risk Rating:
Pass	$	147	$	-	$	3,081	$	10,961	$	7,912	$	28,739	$	-	$	-	$	50,840
Special Mention		-		-		-		-		-		447		-		-		447
Substandard		-		-		-		-		-		-		-		-		-
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Municipal lease finance receivables loans:	$	147	$	-	$	3,081	$	10,961	$	7,912	$	29,186	$	-	$	-	$	51,287

Consumer and other loans:
Risk Rating:
Pass	$	1,647	$	3,197	$	1,160	$	1,372	$	2,094	$	2,612	$	98,953	$	1,582	$	112,617
Special Mention		-		-		-		-		80		148		609		-		837
Substandard		-		-		5		-		-		179		148		420		752
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Consumer and other loans:	$	1,647	$	3,197	$	1,165	$	1,372	$	2,174	$	2,939	$	99,710	$	2,002	$	114,206

Gross loans:
Risk Rating:
Pass	$	227,961	$	991,064	$	929,806	$	966,220	$	762,602	$	2,344,233	$	961,714	$	34,641	$	7,218,241
Special Mention		1,066		5,600		16,677		20,077		9,107		66,865		38,814		6,128		164,334
Substandard		-		143		8,262		10,882		7,572		23,975		16,279		16,464		83,577
Doubtful & Loss		-		-		-		-		-		-		-		-		-

Total Gross loans:	$	229,027	$	996,807	$	954,745	$	997,179	$	779,281	$	2,435,073	$	1,016,807	$	57,233	$	7,466,152

Summary of Loan, Excluding PCI Loans by Internal Risk Ratings

The following table summarizes lo

s by type, according to our internal risk ratings as of the date presented.


	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful & Loss		Total
	(Dollars in thousands)
Commercial and industrial	$	895,234	$	35,473	$	4,420	$	-	$	935,127
SBA		283,430		11,032		10,546		-		305,008
Real estate:
Commercial real estate
Owner occupied		1,977,007		78,208		28,435		-		2,083,650
Non-owner occupied		3,280,580		10,005		382		-		3,290,967
Construction
Speculative		106,895		-		-		-		106,895
Non-speculative		10,030		-		-		-		10,030
SFR mortgage		280,010		1,957		1,501		-		283,468
Dairy & livestock and agribusiness		320,670		35,920		27,119		-		383,709
Municipal lease finance receivables		52,676		470		-		-		53,146
Consumer and other loans		114,870		421		1,028		-		116,319

Total gross loans	$	7,321,402	$	173,486	$	73,431	$	-	$	7,568,319

Schedule of Balance and Activity Related to Allowance for Loan Losses for Held-for-Investment Loans by Type

The following tables present the balance and activity related to the allowance for credit losses for

held-for-investment

loans by type for the periods presented.


	Three Months Ended March 31, 2020
	Ending Balance, prior to adoption of ASU 2016-13 December 31, 2019		Impact of adopting ASU 2016-13			Provision for (Recapture of) Credit Losses Expense			Charge-offs			Recoveries		Ending Balance March 31, 2020
	(Dollars i in thousands)
Commercial and industrial	$	8,880	$	(2,442	)	$	2,947		$	-		$	2	$	9,387
SBA		1,453		1,818			675			-			-		3,946
Real estate:
Commercial real estate		48,629		3,547			6,251			-			-		58,427
Construction		858		655			3,116			-			3		4,632
SFR mortgage		2,339		(2,043	)		(221	)		-			206		281
Dairy & livestock and agribusiness		5,255		(186	)		(803	)		-			-		4,266
Municipal lease finance receivables		623		(416	)		70			-			-		277
Consumer and other loans		623		907			(35	)		(86	)		16		1,425

Total allowance for credit losses	$	68,660	$	1,840		$	12,000		$	(86	)	$	227	$	82,641


	Three Months Ended March 31, 2019
	Ending Balance December 31, 2018		Charge-offs			Recoveries		Provision for (Recapture of) Loan Losses			Ending Balance March 31, 2019
	(Dollars in thousands)
Commercial and industrial	$	7,520	$	-		$	110	$	(31	)	$	7,599
SBA		1,062		(20	)		5		232			1,279
Real estate:				-			-
Commercial real estate		44,934		-			-		1,144			46,078
Construction		981		-			3		(120	)		864
SFR mortgage		2,196		-			68		(76	)		2,188
Dairy & livestock and agribusiness		5,215		(78	)		-		562			5,699
Municipal lease finance receivabl es		775		-			-		(37	)		738
Consumer and other loans		726		(1	)		1		(150	)		576
PCI loans		204		-			-		(24	)		180

Total allowance for loan losses	$	63,613	$	(99	)	$	187	$	1,500		$	65,201

Schedule of Recorded Investment in Loans Held-for-Investment and Related Allowance for Loan Losses by Loan Type


	March 31, 2019
	Recorded Investment in Loans						Allowance for Loan Losses
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deterioriated Credit Quality		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deterioriated Credit Quality
	(Dollars in thousands)
Commercial and industrial	$	8,512	$	948,614	$	-	$	117	$	7,482	$	-
SBA		4,661		333,296		-		317		962		-
Real estate:
Commercial real estate		1,589		5,387,277		-		-		46,078		-
Construction		-		121,912		-		-		864		-
SFR mortgage		5,051		280,736		-		-		2,188		-
Dairy & livestock and agribusiness		-		322,321		-		-		5,699		-
Municipal lease finance receivables		-		61,249		-		-		738		-
Consumer and other loans		477		120,291		-		1		575		-
PCI loans		-		-		15,356		-		-		180

Total	$	20,290	$	7,575,696	$	15,356	$	435	$	64,586	$	180

Schedule of Recorded Investment in, and Aging of, Past Due and Nonaccrual Loans, Excluding PCI Loans by Class of Loans

We seek to manage asset

quality

and control credit risk through diversification of the loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is in charge of monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due loans and larger credits, designed to identify potential charges to the allowance for loan losses, and to determine the adequacy of the ACL, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated loan losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note

3 – Summary of Significant Accounting Policies, included in our Annual Report on Form

10-

K for the year ended December 31, 2019, for additional discussion concerning the Bank’s policy for past due and nonperforming loans.

The following table presents the recorded investment in, and the ag

g of, past due loans (including nonaccrual loans), by type of loans as of the date pres

ent

ed.


	March 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial and industrial	$	347	$	362	$	1,487	$	2,196	$	958,565	$	960,761
SBA		3,086		954		1,669		5,709		307,362		313,071
Real estate:
Commercial real estate
Owner occupied		154		310		250		714		2,069,646		2,070,360
Non-owner occupied		210		-		-		210		3,277,355		3,277,565
Construction
Speculative (1)		-		-		-		-		116,143		116,143
Non-speculative		-		-		-		-		11,902		11,902
SFR mortgage		233		-		486		719		278,024		278,743
Dairy & livestock and agribusiness		166		-		-		166		271,948		272,114
Municipal lease finance receivables		-		-		-		-		51,287		51,287
Consumer and other loans		-		-		93		93		114,113		114,206

Total gross loans	$	4,196	$	1,626	$	3,985	$	9,807	$	7,456,345	$	7,466,152

(1)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

Following the adoption of CECL on January 1, 2020, the definitions of impairment and related impaired loan disclosures were removed. Under CECL, amortized cost of our finance receivables and loans that are on nonaccrual status, including loans with no allowance, are presented as of March 31, 2020 by type of loan.


	March 31, 2020
	Nonaccrual with No Allowance for Credit Losses		Total Nonaccrual (1) (3)		Loans Past Due Over 89 Days Still Accruing
	(Dollars in thousands)
Commercial and industrial	$	549	$	1,703	$	-
SBA		2,110		2,748		-
Real estate:
Commercial real estate
Owner occupied		715		715		-
Non-owner occupied		232		232		-
Construction
Speculative (2)		-		-		-
Non-speculative		-		-		-
SFR mortgage		864		864		-
Dairy & livestock and agribusiness		-		-		-
Municipal lease finance receivables		-		-		-
Consumer and other loans		166		166		-

Total gross loans	$	4,636	$	6,428	$	-

(1)

As of March 31, 2020, $982,000 of nonaccruing loans were current, $154,000 were

30-59

days past due, $1.3 million were

60-89

days past due, and $4.0 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

(

)

Excludes $1.7 million of guaranteed portion of nonaccrual SBA loans that are in process of collection.

The following table presents the recorded investment in, and the aging of, past due and nonaccrual loans, by type of loans as of the date presented.


	December 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		Total Past Due and Accruing		Nonaccrual (1) (3)		Current		Total Loans and Financing Receivables
					(Dollars in thousands)
Commercial and industrial	$	2	$	-	$	2	$	1,266	$	933,859	$	935,127
SBA		870		532		1,402		2,032		301,574		305,008
Real estate:
Commercial real estate
Owner occupied		-		-		-		479		2,083,171		2,083,650
Non-owner occupied		-		-		-		245		3,290,722		3,290,967
Construction
Speculative (2)		-		-		-		-		106,895		106,895
Non-speculative		-		-		-		-		10,030		10,030
SFR mortgage		6		243		249		878		282,341		283,468
Dairy & livestock and agribusiness		-		-		-		-		383,709		383,709
Municipal lease finance receivables		-		-		-		-		53,146		53,146
Consumer and other loans		-		-		-		377		115,942		116,319

Total gross loans	$	878	$	775	$	1,653	$	5,277	$	7,561,389	$	7,568,319

(1)

As of December 31, 2019, $1.2 million of nonaccruing loans were current, $59,000 were

30-59

days past due, $1.1 million were

60-89

days past due and $2.9 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where

there

is no identifi

buyer or renter.

(

)

Excludes $2.0 million of guaranteed porti

of nonaccrual SBA loans that are in process of collection.

Schedule of Held-for-Investment Loans, Individually Evaluated for Impairment by Class of Loans


	Three Months Ended March 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded:
Commercial and industrial	$	8,208	$	12,317	$	-	$	8,230	$	2
SBA		3,400		5,779		-		3,511		11
Real estate:
Commercial real estate
Owner occupied		519		618		-		521		-
Non-owner occupied		1,070		1,231		-		1,084		7
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		5,051		5,865		-		5,082		21
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		476		625		-		482		-

Total		18,724		26,435		-		18,910		41

With a related allowance recorded:
Commercial and industrial		304		309		117		323		-
SBA		1,261		1,236		317		1,261		-
Real estate:
Commercial real estate
Owner occupied		-		-		-		-		-
Non-owner occupied		-		-		-		-		-
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		1		1		1		1		-

Total		1,566		1,546		435		1,585		-

Total impaired loans	$	20,290	$	27,981	$	435	$	20,495	$	41

	December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded:
Commercial and industrial	$	1,091	$	1,261	$	-
SBA		2,243		2,734		-
Real estate:
Commercial real estate
Owner occupied		479		613		-
Non-owner occupied		642		643		-
Construction
Speculative		-		-		-
Non-speculative		-		-		-
SFR mortgage		2,979		3,310		-
Dairy & livestock and agribusiness		-		-		-
Municipal lease finance receivables		-		-		-
Consumer and other loans		377		514		-

Total		7,811		9,075		-

With a related allowance recorded:
Commercial and industrial		253		347		251
SBA		325		324		257
Real estate:
Commercial real estate
Owner occupied		-		-		-
Non-owner occup ied		-		-		-
Construction
Speculative		-		-		-
Non-speculative		-		-		-
SFR mortgage		-		-		-
Dairy & livestock and agribusiness		-		-		-
Municipal lease finance receivables		-		-		-
Consumer and other loans		-		-		-

Total		578		671		508

Total impaired loans	$	8,389	$	9,746	$	508

Summary of pledged assets not separately reported on statement of financial position

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The following table presents the recorded investment in collateral-dependent loans by type of loans as of the date presented.


	March 31, 2020						Number of Loans Dependent on Collateral
	Real Estate		Business Assets		Other		Number of Loans Dependent on Collateral
	(Dollars in thousands)
Commercial and industrial	$	112	$	1,652	$	8		12
SBA		1,852		2,524		8		19
Real estate:
Commercial real estate		1,324		-		-		5
Construction		-		-		-		-
SFR mortgage		864		-		-		3
Dairy & livestock and agribusiness		-		-		-		-
Municipal lease finance receivables		-		-		-		-
Consumer and other loans		84		-		22		4

Total collateral-dependent loans	$	4,236	$	4,176	$	38		43

Summary of Activity Related to Troubled Debt Restructurings

The following table provides a summary of the activity related to TDRs for the periods presented.


	Three Months Ended March 31,
	2020			2019
	(Dollars in thousands)
Performing TDRs:
Beginning balance	$	3,112		$	3,594
New modifications		-			-
Payoffs/payments, net and other		(299	)		(295	)
TDRs returned to accrual status		-			-
TDRs placed on nonaccrual status		-			-

Ending balance	$	2,813		$	3,299

Nonperforming TDRs:
Beginning balance	$	244		$	3,509
New modifications		-			-
Charge-offs		-			(78	)
Transfer to OREO		-			(2,275	)
Payoffs/payments, net and other		(244	)		(879	)
TDRs returned to accrual status		-			-
TDRs placed on nonaccrual status		-			-

Ending balance	$	-		$	277

Total TDRs	$	2,813		$	3,576