Loans and Lease Receivables

12 Months Ended

Dec. 31, 2019

Note 5—Loans and Lease Receivables

Outstanding loan and lease receivables as of December 31, 2019 and 2018 were categorized as follows:

	2019			2018
Commercial real estate	$	1,275,058		$	1,261,594
Residential real estate		711,499			704,899
Construction, land development, and other land		279,403			186,258
Commercial and industrial		1,330,418			1,145,240
Installment and other		6,484			13,675
Lease financing receivables		177,774			187,797
Total loans and leases		3,780,636			3,499,463
Net unamortized deferred fees and costs		2,289			(1,293	)
Initial direct costs		2,736			3,456
Allowance for loan and lease losses		(31,936	)		(25,201	)
Net loans and leases	$	3,753,725		$	3,476,425

	2019			2018
Lease financing receivables
Net minimum lease payments	$	193,359		$	204,646
Unguaranteed residual values		1,347			1,535
Unearned income		(16,932	)		(18,384	)
Total lease financing receivables		177,774			187,797
Initial direct costs		2,736			3,456
Lease financial receivables before allowance for lease losses	$	180,510		$	191,253

Total loans and leases consist of originated loans and leases, acquired impaired loans, and acquired non-impaired loans and leases. At December 31, 2019 and 2018, total loans and leases included the guaranteed amount of U.S. government guaranteed loans of $119.8 million and $108.7 million, respectively. At December 31, 2019 and 2018, installment and other loans included overdraft deposits of $852,000 and $1.7 million, respectively, which were reclassified as loans. At December 31, 2019 and 2018, loans and loans held for sale pledged as security for borrowings were $1.8 billion and $1.4 billion, respectively.

The minimum annual lease payments for lease financing receivables as of December 31, 2019 are summarized as follows:

	Minimum Lease Payments
2020	$	71,820
2021		55,396
2022		37,696
2023		20,466
2024		7,475
Thereafter		506
Total	$	193,359

Note 5—Loans and Lease Receivables (continued)

Originated loans and leases represent originations excluding loans initially acquired in a business combination. However, once an acquired non-impaired loan reaches its maturity date, and is re-underwritten and renewed, it is internally classified as an originated loan. Acquired impaired loans are loans acquired from a business combination with evidence of credit quality deterioration and are accounted for under ASC Topic 310-30. Acquired non-impaired loans and leases represent loans and leases acquired from a business combination without more than insignificant evidence of credit quality deterioration and are accounted for under ASC Topic 310-20. Acquired leases and revolving loans having evidence of credit quality deterioration do not qualify to be accounted for as acquired impaired loans and are accounted for under ASC Topic 310-20. The following tables summarize the balances for each respective loan and lease category as of December 31, 2019 and 2018:

2019	Originated		Acquired Impaired		Acquired Non- Impaired		Total
Commercial real estate	$	792,263	$	135,914	$	348,365	$	1,276,542
Residential real estate		483,072		100,223		128,527		711,822
Construction, land development, and other land		235,794		5,373		37,490		278,657
Commercial and industrial		1,160,996		16,909		153,660		1,331,565
Installment and other		5,372		249		944		6,565
Lease financing receivables		158,155		—		22,355		180,510
Total loans and leases	$	2,835,652	$	258,668	$	691,341	$	3,785,661

2018	Originated		Acquired Impaired		Acquired Non- Impaired		Total
Commercial real estate	$	652,234	$	146,808	$	462,565	$	1,261,607
Residential real estate		466,309		113,934		124,659		704,902
Construction, land development, and other land		144,128		3,779		37,442		185,349
Commercial and industrial		803,508		12,617		328,672		1,144,797
Installment and other		11,718		404		1,596		13,718
Lease financing receivables		159,901		—		31,352		191,253
Total loans and leases	$	2,237,798	$	277,542	$	986,286	$	3,501,626

Acquired impaired loans—As part of the Oak Park River Forest acquisition, the Bank acquired impaired loans in the amount of $52.9 million. As part of the First Evanston acquisition, the Bank acquired impaired loans that are accounted for under ASC 310‑30 in the amount of $25.0 million. Refer to Note 3—Acquisition of a Business for additional information regarding these transactions. There were no other acquired impaired loans purchased during 2019 or 2018. The following table presents a reconciliation of the undiscounted contractual cash flows, non‑accretable difference, accretable yield, and fair value of acquired impaired loans as of May 31, 2018 (First Evanston) and April 30, 2019 (Oak Park River Forest):

	Preliminary Estimates April 30, 2019			May 31, 2018
	Oak Park River Forest			First Evanston
Undiscounted contractual cash flows	$	74,092		$	33,594
Undiscounted cash flows not expected to be collected (non-accretable difference)		(11,401	)		(5,003	)
Undiscounted cash flows expected to be collected		62,691			28,591
Accretable yield at acquisition		(9,764	)		(3,566	)
Estimated fair value of impaired loans acquired at acquisition	$	52,927		$	25,025

Note 5—Loans and Lease Receivables (continued)

The outstanding balance and carrying amount of all acquired impaired loans are summarized below. The balances do not include an allowance for loan and lease losses of $2.8 million and $2.7 million, at December 31, 2019 and 2018, respectively.

	2019				2018
	Outstanding Balance		Carrying Value		Outstanding Balance		Carrying Value
Commercial real estate	$	189,969	$	135,914	$	216,137	$	146,808
Residential real estate		151,641		100,223		173,962		113,934
Construction, land development, and other land		14,841		5,373		11,962		3,779
Commercial and industrial		23,330		16,909		24,972		12,617
Installment and other		1,099		249		1,735		404
Total acquired impaired loans	$	380,880	$	258,668	$	428,768	$	277,542

The following table summarizes the changes in accretable yield for acquired impaired loans for the years ended December 31, 2019, 2018, and 2017:

	2019			2018			2017
Beginning balance	$	37,115		$	36,446		$	36,868
Additions		9,764			3,566			—
Accretion to interest income		(24,535	)		(23,982	)		(24,597	)
Reclassification from nonaccretable difference		17,665			21,085			24,175
Ending balance	$	40,009		$	37,115		$	36,446

Acquired non‑impaired loans and leases— The Company acquired non-impaired loans as part of the Oak Park River Forest acquisition in the amount of $204.5 million. The Company acquired non‑impaired loans as part of the First Evanston acquisition in the amount of $891.0 million. Refer to Note 3—Acquisition of a Business for additional information regarding these transactions.

The unpaid principal balance and carrying value for acquired non‑impaired loans and leases at December 31, 2019 and 2018 were as follows:

	2019				2018
	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial real estate	$	356,787	$	348,365	$	473,262	$	462,565
Residential real estate		130,412		128,527		127,478		124,659
Construction, land development, and other land		38,416		37,490		38,494		37,442
Commercial and industrial		159,599		153,660		344,879		328,672
Installment and other		971		944		1,831		1,596
Lease financing receivables		23,976		22,355		32,977		31,352
Total acquired non-impaired loans and leases	$	710,161	$	691,341	$	1,018,921	$	986,286