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Note 1    Basis of Presentation and Summary of Significant Accounting Policies

BankUnited, Inc. is a national bank holding company with one wholly-owned subsidiary, BankUnited, collectively, the Company. BankUnited, a national banking association headquartered in Miami Lakes, Florida, provides a full range of banking and related services to individual and corporate customers through 74 banking centers located in 14 Florida counties and 5 banking centers located in the New York metropolitan area at June 30, 2020. The Bank also offers certain commercial lending and deposit products through national platforms.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, these do not include all of the information and footnotes required for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in BKU’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected in future periods. 

Certain amounts presented for prior periods have been reclassified to conform to the current period presentation.

Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and disclosures of contingent assets and liabilities. Actual results could differ significantly from these estimates.

Significant estimates include the allowance for credit losses and the fair values of investment securities and other financial instruments.

New Accounting Pronouncements Adopted During the Six Months Ended June 30, 2020

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments. The ASU, along with subsequent ASUs issued to clarify certain of its provisions, introduced new guidance which made substantive changes to the accounting for credit losses. The ASU introduced the CECL model which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts, and is generally expected to result in earlier recognition of credit losses. The ASU also modified certain provisions of the previous OTTI model for AFS debt securities. Credit losses on AFS debt securities are now limited to the difference between the security's amortized cost basis and its fair value, and should be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. The Company adopted this ASU in the first quarter of 2020 using the modified retrospective transition method for the CECL model and a prospective approach for the AFS debt security model. The Company recorded a cumulative-effect adjustment to retained earnings of $23.8 million, which included $4.8 million related to off -balance sheet credit exposures, on January 1, 2020. No cumulative-effect adjustment was recorded related to AFS debt securities upon adoption. The Company has elected to phase-in the initial impact of the adoption of ASC 326 for regulatory capital purposes, allowing the impact of adoption on regulatory capital to be delayed for two years, followed by a three-year transition period. 

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ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional relief for a limited period of time to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Under this ASU, companies are provided with optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contract modifications and hedging relationships that currently utilize LIBOR as their benchmark rate, subject to certain criteria being met. The amendments in the ASU also apply to contemporaneous modifications of other contract terms related to the replacement of LIBOR. The amendments in the ASU are effective for all entities as of March 12, 2020 and will only be in effect through December 31, 2022. To date, the impact of adoption of this ASU on the Company's consolidated financial position, results of operations, and cash flows has not been material.

Accounting Pronouncements Not Yet Adopted

ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions stipulated in ASC 740 and making some other targeted changes to the accounting for income taxes. This ASU is effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2020. The Company has not finalized its evaluation of the impact of adoption on its consolidated financial position, results of operations, and cash flows, but the impact is not currently expected to be material.

Updates to the Company's Significant Accounting Policies

Loans

The Company's loan portfolio contains 1-4 single family residential first mortgages, government insured residential mortgages, an insignificant amount of home equity loans and lines of credit and other consumer loans; multi-family, non-owner occupied commercial real estate, construction and land, owner-occupied commercial real estate and commercial and industrial loans, PPP loans, mortgage warehouse lines of credit and sales-type and direct financing leases. Loans are reported at amortized cost basis, net of the ACL.

Interest income is accrued based on the principal amount outstanding. Non-refundable loan origination fees, net of direct costs of originating or acquiring loans, as well as purchase premiums and discounts, are deferred and recognized as adjustments to yield over the contractual lives of the related loans using the level yield method.

Non-accrual loans

Commercial loans are placed on non-accrual status when (i) management has determined that full repayment of all contractual principal and interest is in doubt, or (ii) the loan is past due 90 days or more as to principal or interest unless the loan is well secured and in the process of collection. Residential and other consumer loans, other than government insured residential loans, are generally placed on non-accrual status when they are 90 days past due. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Payments received on nonaccrual commercial loans are applied as a reduction of principal. Interest payments are recognized as income on a cash basis on nonaccrual residential loans. Commercial loans are returned to accrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential and consumer loans are generally returned to accrual status when less than 90 days past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.

Contractually delinquent government insured residential loans are not classified as non-accrual due to the nature of the guarantee. Contractually delinquent PCD loans are not classified as non-accrual as long as the Company has a reasonable expectation about amounts expected to be collected.

Troubled Debt Restructurings

In certain situations, due to economic or legal reasons related to a borrower's financial difficulties, the Company may grant a concession to the borrower for other than an insignificant period of time that it would not otherwise consider. At that time, the related loan is classified as a TDR. The concessions granted may include rate reductions, principal forgiveness, payment forbearance, extensions of maturity at rates of interest below that commensurate with the risk profile of the loans, modification of payment terms and other actions intended to minimize economic loss. A TDR is generally placed on non-accrual status at the time of the modification unless the borrower was performing prior to the restructuring.

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Under recently issued inter-agency and authoritative guidance and consistent with the CARES Act, short-term (generally periods of six months or less) deferrals or modifications related to COVID-19 will typically not be categorized as TDRs.

Purchased Credit Deteriorated ("PCD") assets

PCD assets are acquired financial assets that, as of the date of acquisition, have experienced a more than insignificant deterioration in credit quality since origination. An assessment is conducted at acquisition to determine whether acquired financial assets meet the criteria to be classified as PCD assets. That assessment may be conducted at the individual asset level, or for a group of assets acquired together that have similar risk characteristics. At acquisition, the ACL related to PCD assets, representing the estimated amount of the UPB of the assets not expected to be collected, is added to the purchase price to determine the amortized cost basis and any non-credit related discount or premium is allocated to the individual assets acquired. The non-credit related discount or premium is accreted or amortized to interest income over the life of the related assets using the level yield method, as long as there is a reasonable expectation about amounts expected to be collected. Subsequent changes in the amount of expected credit losses are recognized immediately by adjusting the ACL and reflecting the periodic changes as credit loss expense or reversal of credit loss expense.

Loans previously categorized as ACI loans were categorized as PCD loans on initial adoption of ASC 326. At adoption, an ACL was recognized and a corresponding adjustment was made to the assets' amortized cost basis. Prior to the adoption of ASC 326, ACI loans were accounted for on a pool basis. These pools were not maintained on adoption. The Company did not re-assess whether modifications to individual PCD loans previously accounted for in pools were TDRs at adoption.

Allowance for Credit Losses ("ACL")

AFS Debt Securities

The Company reviews its AFS debt securities for credit loss impairment at the individual security level on at least a quarterly basis. A security is impaired if its fair value is less than its amortized cost basis. A decline in fair value below amortized cost basis represents a credit loss impairment to the extent the Company does not expect to recover the amortized cost basis of the security. Impairment related to credit losses is recorded through the ACL to the extent fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through the ACL are recorded through other comprehensive income, net of applicable taxes.

In assessing whether an impairment is credit loss related, the Company compares the present value of cash flows expected to be collected to the security's amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an ACL is recorded. The Company discounts expected cash flows at the effective interest rate implicit in the security at the purchase date, adjusted for expected prepayments. For floating rate securities, the Company uses the floating rate as it changes over the life of the security. In developing estimates about cash flows expected to be collected and determining whether a credit loss exists, the Company considers information about past events, current conditions and reasonable and supportable forecasts. Factors and information that the Company uses in making its assessments include, but are not necessarily limited to, the following:

•	The extent to which fair value is less than amortized cost;

•	Adverse conditions specifically related to the security, an industry or geographic area;

•	Changes in the financial condition of the issuer or underlying loan obligors;

•	The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;

•	Failure of the issuer to make scheduled payments;

•	Changes in credit ratings;

•	Relevant market data;

•	Estimated prepayments, defaults, and the value and performance of underlying collateral at the individual security level.

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The relative importance assigned to each of these factors varies depending on the facts and circumstances pertinent to the individual security being evaluated.

Timely payment of principal and interest on securities issued by the U.S. Government, U.S. government agencies and U.S. government sponsored entities is explicitly or implicitly guaranteed by the U. S. government. Therefore, the Company expects to recover the amortized cost basis of these securities.

If the Company intends to sell a security in an unrealized loss position, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, any allowance for credit losses will be written off and the amortized cost basis will be written down to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.

Historically, the Company has not experienced credit losses related to AFS securities or uncollectible interest on its AFS securities. However, AFS securities would be charged off to the extent that there was no reasonable expectation of recovery of amortized cost basis. AFS securities would be placed on non-accrual status if the Company did not reasonably expect to receive interest payments in the future and interest accrued would be reversed against interest income. Securities would be returned to accrual status only when collection of interest was reasonably assured.

Loans

The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The ACL is adjusted through the provision for credit losses to the amount of amortized cost basis not expected to be collected, or in the case of PCD loans, the amount of UPB not expected to be collected, at the balance sheet date. Amortized cost basis includes UPB, unamortized premiums or discounts and deferred fees and costs, net of amounts previously charged off.

The measurement of expected credit losses encompasses information about historical events, current conditions and reasonable and supportable forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Re-evaluation of the ACL estimate in future periods, in light of changes in composition and characteristics of the loan portfolio, changes in the reasonable and supportable forecast and other factors then prevailing may result in material changes in the amount of the ACL and credit loss expense in those future periods.

Loans are charged off against the ACL in the period in which they are deemed uncollectible and recoveries are credited to the ACL when received. Expected recoveries on loans previously charged off, not to exceed the aggregate of amounts previously charged-off and expected to be charged-off, are included in the ACL estimate. For loans secured by residential real estate, an assessment of collateral value is made at no later than 120 days delinquency; any outstanding loan balance in excess of fair value less cost to sell is charged off at no later than 180 days delinquency. Additionally, any outstanding balance in excess of fair value of collateral less cost to sell is charged off (i) within 60 days of receipt of notification of filing from the bankruptcy court, (ii) within 60 days of determination of loss if all borrowers are deceased or (iii) within 90 days of discovery of fraudulent activity. Other consumer loans are typically charged off at 120 days delinquency. Commercial loans are charged off when, in management's judgment, they are considered to be uncollectible.

Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. Factors that may be considered in aggregating loans for this purpose include but are not necessarily limited to, product or collateral type, industry, geography, internal risk rating, credit characteristics such as credit scores or collateral values, and historical or expected credit loss patterns. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans and TDRs, expected credit losses are estimated on an individual basis.

Expected credit losses are estimated over the contractual terms of the loans, adjusted for expected prepayments. Expected prepayments for commercial loans are generally estimated based on the Company's historical experience. For residential loans, expected prepayments are estimated using a model that incorporates industry prepayment data, calibrated to reflect the Company's experience. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

The length of the reasonable and supportable forecast is evaluated at each reporting period and adjusted if deemed necessary. At June 30, 2020, the Company changed from a 5-year to a 2-year reasonable and supportable forecast period in estimating the ACL.

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For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans, and most commercial and commercial real estate loans, expected losses are estimated using econometric models. The models employ a factor based methodology, leveraging data sets containing extensive historical loss and recovery information by industry, geography, product type, collateral type and obligor characteristics, to estimate PD and LGD. Measures of PD for commercial loans incorporate current conditions through market cycle or credit cycle adjustments. For residential loans, the models consider FICO and adjusted LTVs. PDs and LGDs are then conditioned on the reasonable and supportable economic forecast. Projected PDs and LGDs are applied to estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. For criticized or classified loans, PDs may be adjusted to benchmark PDs appropriate to the current risk rating if the most current financial information available is deemed not to be reflective of the borrowers' current financial condition. These loan level estimates are aggregated to generate a collective estimate for groups of loans that share common risk characteristics.

For certain less material portfolios including loans and leases to state and local government entities originated by Pinnacle, small balance commercial loans and consumer loans, the WARM method is used to estimate expected credit losses. For the Pinnacle portfolio, historical loss information is based on municipal historical default and recovery data, segmented by credit rating. For small balance commercial loans, historical loss information is based on the Company's historical loss experience over a five year period. For consumer loans, historical loss information is based on peer data; this portfolio subsegment is not significant. All loss estimates are conditioned as applicable on changes in current conditions and the reasonable and supportable economic forecast. Expected credit losses for mortgage warehouse lines of credit are estimated based primarily on the Company's historical loss experience, conditioned as applicable on changes in current conditions and the reasonable and supportable economic forecast. Generally, given the nature of these loans, losses would be expected to manifest within a very short time period after origination.

The Company expects to collect the amortized cost basis of government insured residential loans and PPP loans due to the nature of the government guarantee, so the quantitative ACL is zero for these loans.

Qualitative factors

Qualitative adjustments are made to the ACL when, based on management’s judgment, there are factors impacting expected credit losses not taken into account by the quantitative calculations. Potential qualitative adjustments are categorized as follows:

•	Economic factors, including material trends and developments that, in management's judgment, may not have been considered in the reasonable and supportable economic forecast;

•	Credit policy and staffing, including the nature and level of policy and procedural exceptions or changes in credit policy not reflected in quantitative results, changes in the quality of underwriting and portfolio management and staff and issues identified by credit review, internal audit or regulators that may not be reflected in quantitative results;

•	Concentrations, considering whether the quantitative estimate adequately accounts for concentration risk in the portfolio;

•	Model imprecision and model validation findings; and

•	Other factors not adequately considered in the quantitative estimate or other qualitative categories identified by management that may materially impact the amount of expected credit losses.

Collateral dependent loans

Collateral dependent loans are those for which the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. These loans do not typically share similar risk characteristics with other loans and expected credit losses are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. Estimates of expected credit losses for collateral dependent loans, whether or not foreclosure is probable, are based on the fair value of the collateral adjusted for selling costs when repayment depends on sale of the collateral.

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Troubled debt restructurings

For TDRs, or loans for which there is a reasonable expectation that a TDR will be executed, that are not collateral dependent, the credit loss estimate is determined by comparing the net present value of expected cash flows, discounted at the loan’s original effective interest rate, to the amortized cost basis of the loan.

Off-balance sheet credit exposures

Expected credit losses related to off-balance sheet credit exposures are estimated over the contractual period for which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Expected credit losses are estimated using essentially the same methodologies employed to estimate expected credit losses on the amortized cost basis of loans, taking into consideration the likelihood and amount of additional amounts expected to be funded over the terms of the commitments. The liability for credit losses on off-balance sheet credit exposures is presented within other liabilities on the consolidated balance sheets, distinct from the ACL. Adjustments to the liability are included in the provision for credit losses.

Accrued Interest Receivable

The Company has elected to present accrued interest receivable separate from the amortized cost basis of financial assets carried at amortized cost. The Company is applying the practical expedient provided in ASC 326 to exclude accrued interest receivable balances from tabular disclosures about financial assets carried at amortized cost. The Company has elected not to estimate an ACL on accrued interest receivable balances since uncollectible accrued interest is timely written off in accordance with the Company's accounting policies for non-accrual loans.

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The computation of basic and diluted earnings per common share is presented below for the periods indicated (in thousands, except share and per share data):

	Three Months Ended June 30,								Six Months Ended June 30,
c	2020				2019				2020				2019
Basic earnings per common share:
Numerator:
Net income	$	76,508			$	81,451			$	45,557			$	147,423
Distributed and undistributed earnings allocated to participating securities	(3,353		)		(3,382		)		(1,939		)		(6,074		)
Income allocated to common stockholders for basic earnings per common share	$	73,155			$	78,069			$	43,618			$	141,349
Denominator:
Weighted average common shares outstanding	92,409,949				97,451,019				93,177,243				98,150,014
Less average unvested stock awards	(1,207,798		)		(1,174,339		)		(1,154,589		)		(1,173,137		)
Weighted average shares for basic earnings per common share	91,202,151				96,276,680				92,022,654				96,976,877
Basic earnings per common share	$	0.80			$	0.81			$	0.47			$	1.46
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per common share	$	73,155			$	78,069			$	43,618			$	141,349
Adjustment for earnings reallocated from participating securities	—				9				—				13
Income used in calculating diluted earnings per common share	$	73,155			$	78,078			$	43,618			$	141,362
Denominator:
Weighted average shares for basic earnings per common share	91,202,151				96,276,680				92,022,654				96,976,877
Dilutive effect of stock options and certain shared-based awards	705				345,899				126,858				312,821
Weighted average shares for diluted earnings per common share	91,202,856				96,622,579				92,149,512				97,289,698
Diluted earnings per common share	$	0.80			$	0.81			$	0.47			$	1.45

Participating securities include unvested shares and 3,023,314 dividend equivalent rights that were issued in conjunction with the IPO of the Company's common stock. These dividend equivalent rights expire in 2021 and participate in dividends on a one-for-one basis.

Potentially dilutive unvested shares and share units totaling 1,743,403 and 1,119,641 were outstanding at June 30, 2020 and 2019, respectively, but excluded from the calculation of diluted earnings per common share because their inclusion would have been anti-dilutive.

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Investment securities include investment securities available for sale, marketable equity securities, and investment securities held to maturity. The investment securities portfolio consisted of the following at the dates indicated (in thousands):

	June 30, 2020
	Amortized Cost				Gross Unrealized								Carrying Value (1)
					Gains				Losses
Investment securities available for sale:
U.S. Treasury securities	$	75,217			$	1,963			$	—			$	77,180
U.S. Government agency and sponsored enterprise residential MBS	2,371,729				13,309				(5,198		)		2,379,840
U.S. Government agency and sponsored enterprise commercial MBS	455,344				9,859				(926		)		464,277
Private label residential MBS and CMOs	1,101,390				16,670				(1,974		)		1,116,086
Private label commercial MBS	2,075,683				16,735				(48,798		)		2,043,620
Single family rental real estate-backed securities	608,019				11,381				(1,193		)		618,207
Collateralized loan obligations	1,166,929				—				(38,176		)		1,128,753
Non-mortgage asset-backed securities	255,854				6,251				(574		)		261,531
State and municipal obligations	239,502				19,993				—				259,495
SBA securities	247,914				2,286				(4,258		)		245,942
	8,597,581				$	98,447			$	(101,097	)		8,594,931
Investment securities held to maturity	10,000												10,000
	$	8,607,581											8,604,931
Marketable equity securities													88,697
													$	8,693,628

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	December 31, 2019
	Amortized Cost				Gross Unrealized								Carrying Value (1)
					Gains				Losses
Investment securities available for sale:
U.S. Treasury securities	$	70,243			$	219			$	(137	)		$	70,325
U.S. Government agency and sponsored enterprise residential MBS	2,018,853				9,835				(6,513		)		2,022,175
U.S. Government agency and sponsored enterprise commercial MBS	366,787				4,920				(731		)		370,976
Private label residential MBS and CMOs	1,001,337				11,851				(1,011		)		1,012,177
Private label commercial MBS	1,719,228				6,650				(1,194		)		1,724,684
Single family rental real estate-backed securities	467,459				4,016				(1,450		)		470,025
Collateralized loan obligations	1,204,905				322				(7,861		)		1,197,366
Non-mortgage asset-backed securities	194,171				1,780				(1,047		)		194,904
State and municipal obligations	257,528				15,774				—				273,302
SBA securities	359,808				4,587				(1,664		)		362,731
	7,660,319				$	59,954			$	(21,608	)		7,698,665
Investment securities held to maturity	10,000												10,000
	$	7,670,319											7,708,665
Marketable equity securities													60,572
													$	7,769,237

(1)	At fair value except for securities held to maturity.

Investment securities held to maturity at June 30, 2020 and December 31, 2019 consisted of one State of Israel bond maturing in 2024. At June 30, 2020 and December 31, 2019, accrued interest receivable on investments totaled $23 million and $28 million, respectively, and is included in other assets in the accompanying consolidated balance sheets.

At June 30, 2020, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments when applicable, were as follows (in thousands):

	Amortized Cost				Fair Value
Due in one year or less	$	908,180			$	914,970
Due after one year through five years	4,875,569				4,830,499
Due after five years through ten years	2,304,114				2,332,121
Due after ten years	509,718				517,341
	$	8,597,581			$	8,594,931

The carrying value of securities pledged as collateral for FHLB advances, public deposits, interest rate swaps and to secure borrowing capacity at the FRB totaled $4.8 billion and $2.4 billion at June 30, 2020 and December 31, 2019, respectively.

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The following table provides information about gains and losses on investment securities for the periods indicated (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Proceeds from sale of investment securities available for sale	$	240,805			$	850,527			$	547,337			$	1,626,250
Gross realized gains:
Investment securities available for sale	$	5,723			$	4,631			$	7,255			$	8,956
Gross realized losses:
Investment securities available for sale	—				(716		)		(2		)		(724		)
Net realized gain	5,723				3,915				7,253				8,232
Net unrealized gains (losses) on marketable equity securities recognized in earnings	1,113				201				(3,870		)		1,669
Gain on investment securities, net	$	6,836			$	4,116			$	3,383			$	9,901

The following tables present the aggregate fair value and the aggregate amount by which amortized cost exceeded fair value for investment securities available for sale in unrealized loss positions aggregated by investment category and length of time that individual securities had been in continuous unrealized loss positions at the dates indicated (in thousands). No ACL was recorded for any investment securities available for sale in an unrealized loss position at June 30, 2020.

	June 30, 2020
	Less than 12 Months								12 Months or Greater								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
U.S. Government agency and sponsored enterprise residential MBS	$	604,143			$	(895	)		$	517,239			$	(4,303	)		$	1,121,382			$	(5,198	)
U.S. Government agency and sponsored enterprise commercial MBS	39,892				(108		)		73,856				(818		)		113,748				(926		)
Private label residential MBS and CMOs	205,524				(1,974		)		—				—				205,524				(1,974		)
Private label commercial MBS	1,302,037				(45,341		)		56,875				(3,457		)		1,358,912				(48,798		)
Single family rental real estate-backed securities	184,785				(1,193		)		—				—				184,785				(1,193		)
Collateralized loan obligations	591,422				(15,873		)		537,331				(22,303		)		1,128,753				(38,176		)
Non-mortgage asset-backed securities	13,857				(45		)		13,472				(529		)		27,329				(574		)
SBA securities	35,136				(326		)		109,837				(3,932		)		144,973				(4,258		)
	$	2,976,796			$	(65,755	)		$	1,308,610			$	(35,342	)		$	4,285,406			$	(101,097	)

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	December 31, 2019
	Less than 12 Months								12 Months or Greater								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
U.S. Treasury securities	$	20,056			$	(137	)		$	—			$	—			$	20,056			$	(137	)
U.S. Government agency and sponsored enterprise residential MBS	579,076				(3,862		)		243,839				(2,651		)		822,915				(6,513		)
U.S. Government agency and sponsored enterprise commercial MBS	99,610				(696		)		6,477				(35		)		106,087				(731		)
Private label residential MBS and CMOs	180,398				(838		)		41,636				(173		)		222,034				(1,011		)
Private label commercial MBS	648,761				(1,060		)		76,302				(134		)		725,063				(1,194		)
Single family rental real estate-backed securities	241,915				(1,445		)		5,460				(5		)		247,375				(1,450		)
Collateralized loan obligations	63,310				(846		)		682,076				(7,015		)		745,386				(7,861		)
Non-mortgage asset-backed securities	78,964				(962		)		7,883				(85		)		86,847				(1,047		)
SBA securities	10,236				(2		)		142,204				(1,662		)		152,440				(1,664		)
	$	1,922,326			$	(9,848	)		$	1,205,877			$	(11,760	)		$	3,128,203			$	(21,608	)

The Company monitors its investment securities available for sale for credit loss impairment on an individual security basis. No securities were determined to be credit loss impaired during the three and six months ended June 30, 2020 or other than temporarily impaired during the three and six months ended June 30, 2019. The Company does not intend to sell securities that are in significant unrealized loss positions at June 30, 2020 and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis, which may be at maturity. In making this determination, the Company considered its current and projected liquidity position, its investment policy as to permissible holdings and concentration limits, regulatory requirements and other relevant factors.

At June 30, 2020, 224 securities available for sale were in unrealized loss positions. The amount of impairment related to 64 of these securities was considered insignificant both individually and in the aggregate, totaling approximately $398 thousand and no further analysis with respect to these securities was considered necessary.

Unrealized losses at June 30, 2020, particularly in the private label CMBS and CLO asset classes, were primarily attributable to widening spreads, resulting in large part from market response to, and dislocation in the wake of, the COVID-19 pandemic.

The basis for concluding that AFS securities were not credit loss impaired and no ACL was considered necessary at June 30, 2020 is further discussed below.

U.S. Government Agency and Government Sponsored Enterprise Securities

At June 30, 2020, twenty-eight U.S. Government agency and sponsored enterprise residential MBS, five U.S. Government agency and sponsored enterprise commercial MBS and eleven SBA securities were in unrealized loss positions. The timely payment of principal and interest on these securities is explicitly or implicitly guaranteed by the U.S. Government. As such, there is an assumption of zero credit loss and the Company expects to recover the entire amortized cost basis of these securities.

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Private Label Securities:

None of the impaired securities had missed principal or interest payments or had been downgraded by a NRSRO at June 30, 2020. The Company performed an analysis comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired securities. This analysis was based on a scenario that we believe to be generally more severe than our reasonable and supportable economic forecast at June 30, 2020, and incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, severity and other relevant factors as described further below. Our analysis also considered the structural characteristics of each security and the level of credit enhancement provided by that structure. Based on the results of this analysis, the Company expects to recover the entire amortized cost basis of its impaired AFS securities at June 30, 2020. No ACL was considered necessary at June 30, 2020.

Private label residential MBS and CMOs

At June 30, 2020,seven private label residential MBS and CMOs were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality measures such as FICO, LTV, documentation, loan type, property type, agency availability criteria and performing status. We also regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data which would indicate further stress in the sector. Our June 30, 2020 analysis projected weighted average collateral losses for this category of 4% compared to weighted average credit support of 17%. As of June 30, 2020, 88% of the impaired securities in this category, based on carrying value, were externally rated AAA, and one security representing 12% of impaired securities in this category was not externally rated; this security was internally rated investment grade.

Private label commercial MBS

At June 30, 2020, seventy private label commercial MBS were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality and type, loan size, loan purpose and other qualitative factors. We also regularly monitor collateral watchlists, bankruptcy data, special servicing trends, delinquency and other economic data which would indicate further stress in the sector. Our June 30, 2020 analysis projected weighted average collateral losses for this category of 13% compared to weighted average credit support of 42%. As of June 30, 2020, 83% of impaired securities in this category, based on carrying value were externally rated AAA, 12% were rated AA and 5% were rated A.

Single family rental real estate-backed securities

At June 30, 2020, ten single family rental real estate-backed securities were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies and recovery lag. We regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data which would indicate further stress in the sector. Our June 30, 2020 analysis projected weighted average collateral losses for this category of 13% compared to weighted average credit support of 49%. As of June 30, 2020, 87% of the impaired securities in this category, based on carrying value, were externally rated AAA and 13% were rated AA.

Collateralized loan obligations

At June 30, 2020, twenty-six collateralized loan obligations were in unrealized loss positions. Leveraged loans underlying these securities have seen pricing pressure as the market looks to evaluate ability of borrowers to maintain payments. Uncertainties surrounding the broad economy and how they may translate into rating downgrades and defaults as the COVID-19 crisis plays out have negatively impacted pricing in the leveraged loan market. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, and delinquencies, calibrated to take into account idiosyncratic risks associated with the underlying collateral. In developing those assumptions, we took into account each sector’s performance pre, during and post the 2008 financial crisis. We regularly engage with bond managers to monitor trends in underlying collateral including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments. Our June 30, 2020 analysis projected weighted average collateral losses for this category of 21% compared to weighted average credit support of 41%. As of June 30, 2020, 84% of

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the impaired securities in this category, based on carrying value, were externally rated AAA, 13% were rated AA and 3% were rated A.

Non-mortgage asset-backed securities

At June 30, 2020, three non-mortgage asset-backed securities were in unrealized loss positions. These securities are backed by student loan collateral. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies, voluntary prepayment rates and recovery lag. In developing those assumptions, we took into account collateral type, delineated by whether collateral consisted of loans to borrowers in school, refinancing, or a mixture. Our June 30, 2020 analysis projected weighted average collateral losses for this category of 14% compared to weighted average credit support of 25%. As of June 30, 2020, 50% of the impaired securities in this category, based on carrying value, were externally rated AAA and 50% were rated AA.

Loans consisted of the following at the dates indicated (dollars in thousands):

	June 30, 2020							December 31, 2019
	Total				Percent of Total			Total				Percent of Total
Residential and other consumer:
1-4 single family residential	$	4,743,866			19.9	%		$	4,953,936			21.4	%
Government insured residential	826,238				3.5	%		698,644				3.0	%
Other consumer loans	7,703				0.1	%		8,539				0.1	%
	5,577,807				23.5	%		5,661,119				24.5	%
Commercial:
Multi-family	1,893,753				7.9	%		2,217,705				9.6	%
Non-owner occupied commercial real estate	4,940,531				20.7	%		5,030,904				21.7	%
Construction and land	246,609				1.0	%		243,925				1.1	%
Owner occupied commercial real estate	2,041,346				8.6	%		2,062,808				8.9	%
Commercial and industrial	4,691,326				19.7	%		4,655,349				20.1	%
PPP	827,359				3.5	%		—				—	%
Pinnacle	1,242,506				5.1	%		1,202,430				5.2	%
Bridge - franchise finance	623,139				2.6	%		627,482				2.6	%
Bridge - equipment finance	589,785				2.5	%		684,794				3.0	%
Mortgage warehouse lending	1,160,728				4.9	%		768,472				3.3	%
	18,257,082				76.5	%		17,493,869				75.5	%
Total loans	23,834,889				100.0	%		23,154,988				100.0	%
Allowance for credit losses	(266,123		)					(108,671		)
Loans, net	$	23,568,766						$	23,046,317

 

Premiums, discounts and deferred fees and costs, excluding the non-credit related discount on PCD loans, totaled $25 million and $50 million at June 30, 2020 and December 31, 2019, respectively. The amortized cost basis of residential PCD loans was $134 million and the related amount of non-credit discount was $135 million at June 30, 2020. The ACL related to PCD residential loans was $1.1 million and $1.7 million at June 30, 2020 and January 1, 2020, the date of initial adoption of ASU 2016-13, respectively.

Included in the table above are direct or sales type finance leases totaling $757 million and $733 million at June 30, 2020 and December 31, 2019, respectively. The amount of income recognized from direct or sales type finance leases for the three and six months ended June 30, 2020 and 2019 totaled $5.3 million, $10.7 million, $5.5 million and $10.8 million, respectively and is recorded as interest income on loans in the consolidated statements of income.

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During the three and six months ended June 30, 2020 and 2019, the Company purchased 1-4 single family residential loans totaling $582 million, $1.1 billion, $589 million and $894 million, respectively. Purchases for the three and six months ended June 30, 2020 and 2019 included $243 million, $529 million, $151 million and $284 million, respectively, of government insured residential loans.

At June 30, 2020 and December 31, 2019, the Company had pledged loans with a carrying value of approximately $11.0 billion and $10.2 billion, respectively, as security for FHLB advances, Federal Reserve discount window capacity and PPPLF borrowings.

At June 30, 2020 and December 31, 2019, accrued interest receivable on loans totaled $108 million and $83 million, respectively, and is included in other assets in the accompanying consolidated balance sheets. The amount of interest income reversed on non-accrual loans was not material for the three and six months ended June 30, 2020.

Allowance for credit losses 

Activity in the allowance for credit losses is summarized below. The balance at December 31, 2019 and amounts presented for the three and six months ended June 30, 2019 represent the allowance for loan and leases losses, estimated using an incurred loss methodology. The ACL at June 30, 2020 and activity for the three and six months then ended were determined using the CECL methodology (in thousands):

	Three Months Ended June 30,
	2020												2019
	Residential and Other Consumer				Commercial				Total				Residential and Other Consumer				Commercial				Total
Beginning balance	$	12,576			$	238,003			$	250,579			$	10,952			$	103,751			$	114,703
Provision (recovery)	(1,924		)		33,508				31,584				131				(2,878		)		(2,747		)
Charge-offs	—				(19,178		)		(19,178		)		—				(1,711		)		(1,711		)
Recoveries	43				3,095				3,138				153				1,743				1,896
Ending balance	$	10,695			$	255,428			$	266,123			$	11,236			$	100,905			$	112,141

	Six Months Ended June 30,
	2020												2019
	Residential and Other Consumer				Commercial				Total				Residential and Other Consumer				Commercial				Total
Beginning balance	$	11,154			$	97,517			$	108,671			$	10,788			$	99,143			$	109,931
Impact of adoption of ASU 2016-13	8,098				19,207				27,305				—				—				—
Provision (recovery)	(8,572		)		162,021				153,449				281				7,253				7,534
Charge-offs	(31		)		(26,953		)		(26,984		)		—				(7,844		)		(7,844		)
Recoveries	46				3,636				3,682				167				2,353				2,520
Ending balance	$	10,695			$	255,428			$	266,123			$	11,236			$	100,905			$	112,141

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The following table presents the components of the provision for credit losses for the periods indicated (in thousands):

	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
Amount related to funded portion of loans	$	31,584			$	153,449
Amount related to off-balance sheet credit exposures	(6,170		)		(2,607		)
Provision for credit losses	$	25,414			$	150,842

Credit quality information

The increase in the ACL from January 1, 2020, the date of initial adoption of ASU 2016-13, to June 30, 2020 was reflective of the estimated impact of the emerging COVID-19 pandemic on the trajectory of the economy and on individual borrowers and portfolio sub-segments. The credit quality of the loan portfolio has been and is likely to continue to be impacted by the developing COVID-19 crisis, its impact on the economy broadly and more specifically on the Company's individual borrowers. Significant uncertainty currently exists about the extent of this impact, and the impact is likely not fully reflected in some of the credit quality indicators disclosed below as of June 30, 2020, due to the ongoing impact of the pandemic.

Credit quality of loans held for investment is continuously monitored by dedicated residential credit risk management and commercial portfolio management functions. The Company also has a workout and recovery department that monitors the credit quality of criticized and classified loans and an independent internal credit review function.

Credit quality indicators for residential loans

Management considers delinquency status to be the most meaningful indicator of the credit quality of residential and other consumer loans, other than government insured residential loans. Delinquency statistics are updated at least monthly. LTV and FICO scores are also important indicators of credit quality for 1-4 single family residential loans other than government insured loans. FICO scores are generally updated at least annually, and were most recently updated in the fourth quarter of 2019. LTVs are typically at origination since we do not routinely update residential appraisals. Substantially all of the government insured residential loans are government insured buyout loans, which the Company buys out of GNMA securitizations upon default. For these loans, traditional measures of credit quality are not particularly relevant considering the guaranteed nature of the loans and the underlying business model. Factors that impact risk inherent in the residential portfolio segment include national and regional economic conditions such as levels of unemployment and wages, as well as residential property values.

1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on delinquency status: 

	June 30, 2020
	Amortized Cost By Origination Year
	2020				2019				2018				2017				2016				Prior				Total
Current	$	249,912			$	807,365			$	488,280			$	753,109			$	776,895			$	1,604,423			$	4,679,984
30 - 59 Days Past Due	5,703				11,477				3,372				2,701				7,417				18,605				49,275
60 - 89 Days Past Due	—				720				75				53				103				1,882				2,833
90 Days or More Past Due	—				807				2,293				—				484				8,190				11,774
	$	255,615			$	820,369			$	494,020			$	755,863			$	784,899			$	1,633,100			$	4,743,866

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	December 31, 2019
	Amortized Cost By Origination Year
	2019				2018				2017				2016				2015				Prior				Total
Current	$	804,913			$	609,814			$	830,710			$	783,318			$	633,833			$	1,225,030			$	4,887,618
30 - 59 Days Past Due	13,915				3,003				3,751				8,419				4,308				12,238				45,634
60 - 89 Days Past Due	1,785				442				137				486				1,766				4,962				9,578
90 Days or More Past Due	—				1,762				914				—				5,030				3,400				11,106
	$	820,613			$	615,021			$	835,512			$	792,223			$	644,937			$	1,245,630			$	4,953,936

1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on LTV: 

	June 30, 2020
	Amortized Cost By Origination Year
LTV	2020				2019				2018				2017				2016				Prior				Total
Less than 61%	$	99,728			$	180,025			$	106,359			$	202,355			$	276,035			$	519,410			$	1,383,912
61% - 70%	62,031				192,880				110,546				136,212				184,600				394,279				1,080,548
71% - 80%	92,387				433,542				245,829				349,993				300,153				689,223				2,111,127
More than 80%	1,469				13,922				31,286				67,303				24,111				30,188				168,279
	$	255,615			$	820,369			$	494,020			$	755,863			$	784,899			$	1,633,100			$	4,743,866

	December 31, 2019
	Amortized Cost By Origination Year
LTV	2019				2018				2017				2016				2015				Prior				Total
Less than 61%	$	171,069			$	134,978			$	183,807			$	228,868			$	197,039			$	372,221			$	1,287,982
61% - 70 %	195,572				128,766				152,502				188,856				154,307				316,031				1,136,034
71% - 80%	442,311				313,779				404,743				338,000				283,202				531,377				2,313,412
More than 80%	11,661				37,498				94,460				36,499				10,389				26,001				216,508
	$	820,613			$	615,021			$	835,512			$	792,223			$	644,937			$	1,245,630			$	4,953,936

1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on FICO score:

	June 30, 2020
	Amortized Cost By Origination Year
FICO	2020				2019				2018				2017				2016				Prior				Total
760 or greater	$	168,920			$	482,818			$	298,650			$	521,199			$	573,011			$	1,093,732			$	3,138,330
720 - 759	70,279				224,961				112,407				138,897				131,205				304,460				982,209
719 or less	16,416				112,590				82,963				95,767				80,683				234,908				623,327
	$	255,615			$	820,369			$	494,020			$	755,863			$	784,899			$	1,633,100			$	4,743,866

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	December 31, 2019
	Amortized Cost By Origination Year
FICO	2019				2018				2017				2016				2015				Prior				Total
760 or greater	$	470,057			$	340,716			$	534,017			$	533,804			$	430,706			$	763,807			$	3,073,107
720 - 759	242,806				185,939				200,623				178,139				141,748				307,195				1,256,450
719 or less	107,750				88,366				100,872				80,280				72,483				174,628				624,379
	$	820,613			$	615,021			$	835,512			$	792,223			$	644,937			$	1,245,630			$	4,953,936

Credit quality indicators for commercial loans

Factors that impact risk inherent in commercial portfolio segments include but are not limited to levels of economic activity, health of the national and regional economy, industry trends, patterns of and trends in customer behavior that influence demand for our borrowers' products and services, and commercial real estate values. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Internal risk ratings are generally indicative of the likelihood that a borrower will default, are a key factor influencing the level and nature of ongoing monitoring of loans and may impact the estimation of the ACL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 million to $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. During the second quarter of 2020, risk ratings were re-evaluated for a substantial portion of the commercial portfolio, with a focus on portfolio segments we identified for enhanced monitoring and loans for which we granted temporary payment deferrals in light of the COVID-19 pandemic. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that could result in deterioration of repayment prospects at some future date if not checked or corrected are categorized as special mention. Loans with well-defined credit weaknesses, including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves, are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors has not been charged off, will be assigned an internal risk rating of doubtful. 

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Commercial credit exposure based on internal risk rating:

	June 30, 2020
	Amortized Cost By Origination Year																								Revolving Loans
	2020				2019				2018				2017				2016				Prior								Total
Multi-Family
Pass	$	42,877			$	316,733			$	190,227			$	210,681			$	347,973			$	633,791			$	39,607			$	1,781,889
Special mention	—				8,149				15,767				19,512				6,209				7,587				—				57,224
Substandard	—				—				—				2,845				9,801				41,994				—				54,640
Total Multi-Family	$	42,877			$	324,882			$	205,994			$	233,038			$	363,983			$	683,372			$	39,607			$	1,893,753
Non-owner occupied commercial real estate
Pass	$	238,451			$	1,202,138			$	736,973			$	509,446			$	590,992			$	814,514			$	107,772			$	4,200,286
Special mention	—				46,971				96,563				47,930				166,139				112,887				—				470,490
Substandard	4,568				32,746				5,029				437				100,748				126,227				—				269,755
Total non-owner occupied commercial real estate	$	243,019			$	1,281,855			$	838,565			$	557,813			$	857,879			$	1,053,628			$	107,772			$	4,940,531
Construction and Land
Pass	$	7,208			$	125,429			$	13,619			$	50,020			$	27,336			$	917			$	243			$	224,772
Special mention	—				1,393				2,965				8,604				4,284				—				—				17,246
Substandard	—				—				888				—				3,357				346				—				4,591
Total Construction and Land	$	7,208			$	126,822			$	17,472			$	58,624			$	34,977			$	1,263			$	243			$	246,609
Owner occupied commercial real estate
Pass	$	128,795			$	303,522			$	276,367			$	267,267			$	311,485			$	466,194			$	39,586			$	1,793,216
Special mention	2,635				26,410				15,528				57,102				41,321				34,201				2,108				179,305
Substandard	—				8,691				17,520				12,203				2,863				18,327				9,221				68,825
Total owner occupied commercial real estate	$	131,430			$	338,623			$	309,415			$	336,572			$	355,669			$	518,722			$	50,915			$	2,041,346
Commercial and industrial
Pass	$	356,049			$	940,865			$	344,774			$	295,769			$	204,049			$	64,485			$	1,989,034			$	4,195,025
Special mention	611				81,305				33,987				2,252				28,507				6,818				89,918				243,398
Substandard	600				46,973				43,472				33,272				18,949				53,470				56,167				252,903
Total commercial and industrial	$	357,260			$	1,069,143			$	422,233			$	331,293			$	251,505			$	124,773			$	2,135,119			$	4,691,326
PPP
Pass	$	827,359			$	—			$	—			$	—			$	—			$	—			$	—			$	827,359
PPP	$	827,359			$	—			$	—			$	—			$	—			$	—			$	—			$	827,359
Pinnacle
Pass	$	125,882			$	134,838			$	92,537			$	232,269			$	227,317			$	429,663			$	—			$	1,242,506
Total Pinnacle	$	125,882			$	134,838			$	92,537			$	232,269			$	227,317			$	429,663			$	—			$	1,242,506
Bridge - Franchise Finance
Pass	$	42,004			$	97,036			$	27,760			$	12,666			$	14,456			$	12,357			$	—			$	206,279
Special mention	42,611				154,808				73,602				37,731				11,255				7,368				—				327,375
Substandard	549				15,494				45,185				5,173				17,778				4,357				—				88,536
Doubtful	—				—				—				—				949				—				—				949
Total Bridge - Franchise Finance	$	85,164			$	267,338			$	146,547			$	55,570			$	44,438			$	24,082			$	—			$	623,139
Bridge - Equipment Finance
Pass	$	24,349			$	193,227			$	103,434			$	94,667			$	54,544			$	67,486			$	—			$	537,707
Special mention	—				6,634				9,510				27,050				—				—				—				43,194
Substandard	—				3,608				4,128				—				1,005				143				—				8,884
Total Bridge - Equipment Finance	$	24,349			$	203,469			$	117,072			$	121,717			$	55,549			$	67,629			$	—			$	589,785
Mortgage Warehouse Lending
Pass	$	—			$	—			$	—			$	—			$	—			$	—			$	1,160,728			$	1,160,728
Total Mortgage Warehouse Lending	$	—			$	—			$	—			$	—			$	—			$	—			$	1,160,728			$	1,160,728

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At June 30, 2020, the balance of revolving loans converted to term loans was immaterial.

The following tables summarize the Company's commercial credit exposure based on internal risk rating, in aggregate, at the dates indicated (in thousands):

	June 30, 2020
	Multi-Family				Non-Owner Occupied Commercial Real Estate				Construction and Land				Owner Occupied Commercial Real Estate				Commercial and Industrial				PPP				Pinnacle				Bridge - Franchise Finance				Bridge - Equipment Finance				Mortgage Warehouse Lending				Total
Pass	$	1,781,889			$	4,200,286			$	224,772			$	1,793,216			$	4,195,025			$	827,359			$	1,242,506			$	206,279			$	537,707			$	1,160,728			$	16,169,767
Special mention	57,224				470,490				17,246				179,305				243,398				—				—				327,375				43,194				—				1,338,232
Substandard(1)	54,640				269,755				4,591				68,825				252,903				—				—				88,536				8,884				—				748,134
Doubtful	—				—				—				—				—				—				—				949				—				—				949
	$	1,893,753			$	4,940,531			$	246,609			$	2,041,346			$	4,691,326			$	827,359			$	1,242,506			$	623,139			$	589,785			$	1,160,728			$	18,257,082

(1)	Includes $561 million of substandard accruing loans at June 30, 2020.

	December 31, 2019
	Multi-Family				Non-Owner Occupied Commercial Real Estate				Construction and Land				Owner Occupied Commercial Real Estate				Commercial and Industrial				Pinnacle				Bridge - Franchise Finance				Bridge - Equipment Finance				Mortgage Warehouse Lending				Total
Pass	$	2,184,771			$	4,932,279			$	240,734			$	1,991,556			$	4,508,563			$	1,202,430			$	562,042			$	663,855			$	768,472			$	17,054,702
Special mention	—				5,831				—				27,870				28,498				—				10,682				—				—				72,881
Substandard (1)	32,934				92,794				3,191				43,382				118,288				—				54,758				20,939				—				366,286
	$	2,217,705			$	5,030,904			$	243,925			$	2,062,808			$	4,655,349			$	1,202,430			$	627,482			$	684,794			$	768,472			$	17,493,869

(1)	Includes $180 million of substandard accruing loans at December 31, 2019.

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Past Due and Non-Accrual Loans:

The following table presents an aging of loans at the dates indicated (in thousands):

	June 30, 2020																				December 31, 2019
	Current				30 - 59 Days Past Due				60 - 89 Days Past Due				90 Days or More Past Due				Total				Current				30 - 59 Days Past Due				60 - 89 Days Past Due				90 Days or More Past Due				Total
1-4 single family residential	$	4,679,984			$	49,275			$	2,833			$	11,774			$	4,743,866			$	4,887,618			$	45,634			$	9,578			$	11,106			$	4,953,936
Government insured residential	51,276				53,017				52,620				669,325				826,238				93,560				45,347				30,426				529,311				698,644
Home equity loans and lines of credit	1,478				69				—				—				1,547				1,320				—				—				—				1,320
Other consumer loans	6,156				—				—				—				6,156				7,219				—				—				—				7,219
Multi-family	1,858,695				29,047				6,011				—				1,893,753				2,217,705				—				—				—				2,217,705
Non-owner occupied commercial real estate	4,859,344				52,937				7,979				20,271				4,940,531				5,015,458				—				928				14,518				5,030,904
Construction and land	246,263				—				—				346				246,609				240,647				2,396				—				882				243,925
Owner occupied commercial real estate	2,020,077				1,081				3,376				16,812				2,041,346				2,041,352				1,336				4,420				15,700				2,062,808
Commercial and industrial	4,593,422				20,855				22,601				54,448				4,691,326				4,595,847				2,313				4,301				52,888				4,655,349
PPP	827,359				—				—				—				827,359				—				—				—				—				—
Pinnacle	1,242,506				—				—				—				1,242,506				1,202,430				—				—				—				1,202,430
Bridge - franchise finance	596,136				—				625				26,378				623,139				610,315				3,840				2,501				10,826				627,482
Bridge - equipment finance	589,785				—				—				—				589,785				677,089				7,705				—				—				684,794
Mortgage warehouse lending	1,160,728				—				—				—				1,160,728				768,472				—				—				—				768,472
	$	22,733,209			$	206,281			$	96,045			$	799,354			$	23,834,889			$	22,359,032			$	108,571			$	52,154			$	635,231			$	23,154,988

Included in the table above is the guaranteed portion of SBA loans past due by 90 days or more totaling $37.3 million and $36.3 million at June 30, 2020 and December 31, 2019, respectively.

Loans contractually delinquent by 90 days or more and still accruing totaled $673 million, substantially all of which were government insured residential loans at June 30, 2020 and $531 million, of which $529 million were government insured residential loans at December 31, 2019. Substantially all of these loans are government insured pool buyout loans, which the Company buys out of GNMA securitizations upon default.

The following table presents information about loans on non-accrual status at the dates indicated (in thousands):

	June 30, 2020								December 31, 2019
	Amortized Cost				Amortized Cost With No Related Allowance				Amortized Cost
Residential and other consumer	$	13,183			$	2,622			$	18,894
Commercial:
Multi-family	6,011				6,011				6,138
Non-owner occupied commercial real estate	46,545				28,598				40,097
Construction and land	3,703				3,357				3,191
Owner occupied commercial real estate	30,493				8,765				27,141
Commercial and industrial	67,702				7,386				74,757
Bridge - franchise finance	32,857				1,848				13,631
Bridge - equipment finance	1,148				537				20,939
	$	201,642			$	59,124			$	204,788

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Included in the table above is the guaranteed portion of non-accrual SBA loans totaling $45.7 million at both June 30, 2020 and December 31, 2019, respectively. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with their contractual terms was approximately $3.0 million and $5.7 million for the three and six months ended June 30, 2020, respectively and $2.5 million and $4.3 million for the three and six months ended June 30, 2019, respectively.

Collateral dependent loans:

The following table presents the amortized cost basis of collateral dependent loans at June 30, 2020 (in thousands):

	Amortized Cost				Extent to Which Secured by Collateral
Residential and other consumer	$	3,283			$	3,273
Commercial:
Multi-family	6,011				6,011
Non-owner occupied commercial real estate	30,980				30,980
Construction and land	3,703				3,703
Owner occupied commercial real estate	21,025				21,025
Commercial and industrial	54,232				29,468
Bridge - franchise finance	24,353				21,178
Bridge - equipment finance	1,148				1,078
Total commercial	141,452				113,443
	$	144,735			$	116,716

Collateral for the multi-family, non-owner occupied commercial real estate, and owner-occupied commercial real estate loan classes generally consists of commercial real estate. Collateral for construction and land loans is typically residential or commercial real estate. Collateral for commercial and industrial loans generally consists of equipment, accounts receivable, inventory and other business assets; owner-occupied commercial real estate loans may also be collateralized by these types of assets. Bridge franchise finance loans may be collateralized by franchise value or by equipment. Bridge equipment finance loans are secured by the financed equipment. Residential loans are collateralized by residential real estate. There have been no significant changes to the extent to which collateral secures collateral dependent loans during the six months ended June 30, 2020.

Foreclosure of residential real estate

The recorded investment in residential loans in the process of foreclosure was $323 million, of which $315 million was government insured, at June 30, 2020 and $257 million, of which $248 million was government insured, at December 31, 2019. The carrying amount of foreclosed residential real estate included in "Other assets" in the accompanying consolidated balance sheet was insignificant at June 30, 2020 and $6 million at December 31, 2019. In response to the COVID-19 pandemic, new foreclosure actions on residential loans have been temporarily suspended.

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Troubled debt restructurings

The following table summarizes loans that were modified in TDRs during the periods indicated, as well as loans modified during the twelve months preceding June 30, 2020 and 2019 that experienced payment defaults during the periods indicated (dollars in thousands):

	Three Months Ended June 30,
	2020														2019
	Loans Modified in TDRs  During the Period							TDRs Experiencing Payment Defaults During the Period							Loans Modified in TDRs  During the Period							TDRs Experiencing Payment Defaults During the Period
	Number of TDRs			Amortized Cost				Number of TDRs			Amortized Cost				Number of TDRs			Amortized Cost				Number of TDRs			Amortized Cost
Government insured residential	52			$	7,291			121			$	19,512			34			$	5,164			31			$	4,355
Non-owner occupied commercial real estate	—			—				1			4,249				1			12,085				1			2,772
Owner occupied commercial real estate	—			—				—			—				—			—				3			1,878
Commercial and industrial	2			1,348				—			—				4			7,354				1			1,233
Bridge - franchise finance	1			919				5			18,718				1			2,073				—			—
	55			$	9,558			127			$	42,479			40			$	26,676			36			$	10,238

	Six Months Ended June 30,
	2020														2019
	Loans Modified in TDRs  During the Period							TDRs Experiencing Payment Defaults During the Period							Loans Modified in TDRs  During the Period							TDRs Experiencing Payment Defaults During the Period
	Number of TDRs			Amortized Cost				Number of TDRs			Amortized Cost				Number of TDRs			Amortized Cost				Number of TDRs			Amortized Cost
1-4 single family residential	1			$	203			—			$	—			2			$	563			—			$	—
Government insured residential	86			12,183				150			23,994				46			6,782				32			4,517
Non-owner occupied commercial real estate	1			4,249				1			4,249				1			12,085				1			2,772
Owner occupied commercial real estate	—			—				—			—				1			849				3			1,878
Commercial and industrial	2			1,348				3			5,448				6			17,994				1			1,233
Bridge - franchise finance	9			14,666				8			23,358				3			3,238				—			—
Bridge - equipment finance	—			—				—			—				1			847				—			—
	99			$	32,649			162			$	57,049			60			$	42,358			37			$	10,400

Modifications during the three and six months ended June 30, 2020 and 2019 included interest rate reductions, restructuring of the amount and timing of required periodic payments, extensions of maturity and covenant waivers. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material.

Under recently issued inter-agency and authoritative guidance and consistent with the CARES Act, short-term (generally periods of six months or less) deferrals or modifications related to COVID-19 will typically not be categorized as TDRs.

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Disclosures Prescribed by Legacy GAAP (Before Adoption of ASU 2016-13) for Prior Periods

The following table presents information about the balance of the ALLL and related loans as of December 31, 2019 (in thousands):

	Residential and Other Consumer				Commercial				Total
Allowance for loan and lease losses:
Ending balance	$	11,154			$	97,517			$	108,671
Ending balance: loans individually evaluated for impairment	$	9			$	20,481			$	20,490
Ending balance: loans collectively evaluated for impairment	$	11,145			$	77,036			$	88,181
Ending balance: ACI loans	$	—			$	—			$	—
Loans:
Ending balance	$	5,661,119			$	17,493,869			$	23,154,988
Ending balance: loans individually evaluated for impairment	$	57,117			$	187,788			$	244,905
Ending balance: loans collectively evaluated for impairment	$	5,454,422			$	17,288,901			$	22,743,323
Ending balance: ACI loans	$	149,580			$	17,180			$	166,760

The table below presents information about loans identified as impaired as of December 31, 2019 (in thousands):

	Recorded Investment				UPB				Related Specific Allowance
With no specific allowance recorded:
1-4 single family residential	$	992			$	989			$	—
Government insured residential	53,428				53,350				—
Multi-family	6,138				6,169				—
Non-owner occupied commercial real estate	38,345				38,450				—
Construction and land	3,191				3,155				—
Owner occupied commercial real estate	17,419				17,488				—
Commercial and industrial	10,585				10,574				—
Bridge - franchise finance	4,115				4,117				—
Bridge - equipment finance	6,807				6,793				—
With a specific allowance recorded:
1-4 single family residential	2,697				2,652				9
Owner occupied commercial real estate	2,522				2,509				401
Commercial and industrial	63,531				63,709				13,992
Bridge - franchise finance	21,011				21,050				2,953
Bridge - equipment finance	14,124				14,024				3,135
Total:
Residential and other consumer	$	57,117			$	56,991			$	9
Commercial	187,788				188,038				20,481
	$	244,905			$	245,029			$	20,490

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The following table presents the average recorded investment in impaired loans for the period indicated (in thousands):

	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
Residential and other consumer:
1-4 single family residential	$	12,732			$	11,011
Commercial:
Multi-family	25,066				25,248
Non-owner occupied commercial real estate	24,599				21,563
Construction and land	9,604				9,730
Owner occupied commercial real estate	12,741				12,124
Commercial and industrial	32,690				30,564
Commercial lending subsidiaries	18,082				19,982
	122,782				119,211
	$	135,514			$	130,222

Note 5     Subordinated Notes

On June 11, 2020, the Company issued $300 million of 5.125% subordinated notes. The notes mature on June 11, 2030 with interest payable semiannually. The notes have an effective interest rate of 5.39% after consideration of issuance discount and costs. The notes may be redeemed by the Company, in whole or in part, on or after March 11, 2030 at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest, subject to the approval of the Federal Reserve. The notes qualify as Tier 2 capital for regulatory capital purposes, subject to applicable limitations.

Note 6    Income Taxes

The Company’s effective income tax rate was 21.0% and 19.3% for the three and six months ended June 30, 2020, respectively, and 25.2% and 25.9% for the three and six months ended June 30, 2019, respectively. The effective income tax rates differed from the statutory federal income tax rate of 21% for the 2019 periods due primarily to the impact of state income taxes, partially offset by the benefit of income not subject to federal tax. These factors were largely offsetting for the 2020 periods, when the effective income tax rate did not differ materially from the Federal statutory rate of 21%. During the three and six months ended June 30 2020, income not subject to tax was a larger percentage of pre-tax income.

The Company enters into LIBOR-based interest rate swaps that are designated as cash flow hedges with the objective of limiting the variability of interest payment cash flows resulting from changes in the benchmark interest rate LIBOR. The Company also enters into LIBOR-based interest rate swaps designated as fair value hedges designed to hedge changes in the fair value of outstanding fixed rate borrowings caused by fluctuations in the benchmark interest rate.

The Company enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage their exposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivative contract positions with primary dealers. These interest rate derivative contracts are not designated as hedging instruments; therefore, changes in the fair value of these derivatives are recognized immediately in earnings. For the three and six months ended June 30, 2020 and 2019, the impact on earnings, included in "other non-interest income" in the accompanying consolidated statements of income, related to changes in fair value of these derivatives was not material.

The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. The Company manages dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, central clearing mechanisms

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and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its commercial borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company does not currently anticipate any significant losses from failure of interest rate derivative counterparties to honor their obligations.

The CME legally characterizes variation margin payments for centrally cleared derivatives as settlements of the derivatives' exposures rather than collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. The Company's clearing agent for interest rate derivative contracts centrally cleared through the CME settles the variation margin daily with the CME; therefore, those interest rate derivative contracts the Company clears through the CME are reported at a fair value of approximately zero at both June 30, 2020 and December 31, 2019.

The following tables set forth certain information concerning the Company’s interest rate contract derivative financial instruments and related hedged items at the dates indicated (dollars in thousands):

	June 30, 2020
			Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Remaining Life in Years
									Notional Amount				Balance Sheet Location		Fair Value
	Hedged Item														Asset				Liability
Derivatives designated as cash flow hedges:
Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings		2.40%		3-Month LIBOR		2.8		$	3,021,000			Other liabilities		$	—			$	(7,156	)
Derivatives designated as fair value hedges:
Receive-fixed interest rate swaps	Variability of fair value of fixed rate borrowings		3-Month LIBOR		1.55%		1.1		250,000				Other liabilities		—				—
Derivatives not designated as hedges:
Pay-fixed interest rate swaps			3.69%		Indexed to 1-month LIBOR		5.9		1,488,928				Other assets / Other liabilities		—				(44,857		)
Pay-variable interest rate swaps			Indexed to 1-month LIBOR		3.69%		5.9		1,488,928				Other assets		145,802				—
Interest rate caps purchased, indexed to 1-month LIBOR					3.71%		0.9		25,989				Other assets		—				—
Interest rate caps sold, indexed to 1-month LIBOR			3.71%				0.9		25,989				Other liabilities		—				—
									$	6,300,834					$	145,802			$	(52,013	)

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	December 31, 2019
			Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Remaining Life in Years
									Notional Amount				Balance Sheet Location		Fair Value
	Hedged Item														Asset				Liability
Derivatives designated as cash flow hedges:
Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings		2.37%		3-Month LIBOR		3.2		$	3,131,000			Other liabilities		$	—			$	(1,607	)
Derivatives not designated as hedges:
Receive-fixed interest rate swaps	Variability of interest cash flows on fixed rate borrowings		3-Month LIBOR		1.55%		1.6		250,000				Other liabilities		—				—
Derivatives not designated as hedges
Pay-fixed interest rate swaps			3.72%		Indexed to 1-month LIBOR		6.4		1,460,355				Other assets / Other liabilities		876				(15,307		)
Pay-variable interest rate swaps			Indexed to 1-month LIBOR		3.72%		6.4		1,460,355				Other assets / Other liabilities		42,810				(2,115		)
Interest rate caps purchased, indexed to 1-month LIBOR					3.30%		0.6		61,004				Other assets		—				—
Interest rate caps sold, indexed to 1-month LIBOR			3.30%				0.6		61,004				Other liabilities		—				—
									$	6,423,718					$	43,686			$	(19,029	)

The following table provides information about the amount of gain (loss) related to derivatives designated as cash flow hedges reclassified from AOCI into interest expense for the periods indicated (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,								Location of Gain (Loss) Reclassified from AOCI into Income
	2020				2019				2020				2019
Interest rate contracts	$	(10,009	)		$	1,688			$	(14,565	)		$	4,411			Interest expense on borrowings

During the three and six months ended June 30, 2020 and 2019, no derivative positions designated as cash flow hedges were discontinued and none of the gains and losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges or because of the early extinguishment of debt. As of June 30, 2020, the amount of net loss expected to be reclassified from AOCI into earnings during the next twelve months was $60.7 million.

The following table provides information about the amount of gain (loss) related to derivatives designated as fair value hedges recognized in earnings for the periods indicated (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,								Location of Gain (Loss) in Consolidated Statements of Income
	2020				2019				2020				2019
Fair value adjustment on derivatives	$	8			$	—			$	4,028			$	—			Interest expense on borrowings
Fair value adjustment on hedged items	(164		)		—				(4,072		)		—				Interest expense on borrowings
Gain recognized on fair value hedges (ineffective portion)	$	(156	)		$	—			$	(44	)		$	—

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The following table provides information about the hedged items related to derivatives designated as fair value hedges at the dates indicated (in thousands):

	June 30, 2020				December 31, 2019				Location in Consolidated Balance Sheets
Contractual balance outstanding of hedged item	$	250,000			$	250,000			FHLB and PPPLF borrowings
Cumulative fair value hedging adjustments	$	3,573			$	(499	)		FHLB and PPPLF borrowings

Some of the Company’s ISDA master agreements with financial institution counterparties contain provisions that permit either counterparty to terminate the agreements and require settlement in the event that regulatory capital ratios fall below certain designated thresholds, upon the initiation of other defined regulatory actions or upon suspension or withdrawal of the Bank’s credit rating. Currently, there are no circumstances that would trigger these provisions of the agreements.

The Company does not offset assets and liabilities under master netting agreements for financial reporting purposes. Information on interest rate swaps subject to these agreements is as follows at the dates indicated (dollars in thousands):

	June 30, 2020
					Gross Amounts Offset in Balance Sheet				Net Amounts Presented in Balance Sheet				Gross Amounts Not Offset in Balance Sheet
	Gross Amounts Recognized												Derivative Instruments				Collateral Pledged				Net Amount
Derivative assets	$	—			$	—			$	—			$	—			$	—			$	—
Derivative liabilities	(52,013		)		—				(52,013		)		—				51,887				(126		)
	$	(52,013	)		$	—			$	(52,013	)		$	—			$	51,887			$	(126	)

	December 31, 2019
					Gross Amounts Offset in Balance Sheet				Net Amounts Presented in Balance Sheet				Gross Amounts Not Offset in Balance Sheet
	Gross Amounts Recognized												Derivative Instruments				Collateral Pledged				Net Amount
Derivative assets	$	876			$	—			$	876			$	(876	)		$	—			$	—
Derivative liabilities	(16,914		)		—				(16,914		)		876				16,038				—
	$	(16,038	)		$	—			$	(16,038	)		$	—			$	16,038			$	—

The difference between the amounts reported for interest rate swaps subject to master netting agreements and the total fair value of interest rate contract derivative financial instruments reported in the consolidated balance sheets is related to interest rate derivative contracts not subject to master netting agreements.

At June 30, 2020, the Company had pledged net financial collateral of $56.0 million as collateral for interest rate swaps in a liability position that are not centrally cleared. The amount of collateral required to be posted varies based on the settlement value of outstanding swaps and in some cases may include initial margin requirements.

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Note 8    Stockholders’ Equity

Accumulated Other Comprehensive Income

Changes in other comprehensive income are summarized as follows for the periods indicated (in thousands):

	Three Months Ended June 30,
	2020												2019
	Before Tax				Tax Effect				Net of Tax				Before Tax				Tax Effect				Net of Tax
Unrealized gains (losses) on investment securities available for sale:
Net unrealized holding gain arising during the period	$	252,893			$	(64,488	)		$	188,405			$	31,736			$	(8,410	)		$	23,326
Amounts reclassified to gain on investment securities available for sale, net	(5,723		)		1,459				(4,264		)		(3,914		)		1,037				(2,877		)
Net change in unrealized gains (losses) on investment securities available for sale	247,170				(63,029		)		184,141				27,822				(7,373		)		20,449
Unrealized losses on derivative instruments:
Net unrealized holding loss arising during the period	(12,288		)		1,218				(11,070		)		(50,637		)		13,419				(37,218		)
Amounts reclassified to interest expense on borrowings	10,009				(2,507		)		7,502				(1,688		)		447				(1,241		)
Net change in unrealized losses on derivative instruments	(2,279		)		(1,289		)		(3,568		)		(52,325		)		13,866				(38,459		)
Other comprehensive income (loss)	$	244,891			$	(64,318	)		$	180,573			$	(24,503	)		$	6,493			$	(18,010	)

	Six Months Ended June 30,
	2020												2019
	Before Tax				Tax Effect				Net of Tax				Before Tax				Tax Effect				Net of Tax
Unrealized gains (losses) on investment securities available for sale:
Net unrealized holding gain (loss) arising during the period	$	(33,743	)		$	8,988			$	(24,755	)		$	61,147			$	(16,204	)		$	44,943
Amounts reclassified to gain on investment securities available for sale, net	(7,253		)		1,849				(5,404		)		(8,231		)		2,181				(6,050		)
Net change in unrealized gains (losses) on investment securities available for sale	(40,996		)		10,837				(30,159		)		52,916				(14,023		)		38,893
Unrealized losses on derivative instruments:
Net unrealized holding loss arising during the period	(122,239		)		30,355				(91,884		)		(78,766		)		20,873				(57,893		)
Amounts reclassified to interest expense on borrowings	14,565				(3,714		)		10,851				(4,411		)		1,169				(3,242		)
Net change in unrealized losses on derivative instruments	(107,674		)		26,641				(81,033		)		(83,177		)		22,042				(61,135		)
Other comprehensive loss	$	(148,670	)		$	37,478			$	(111,192	)		$	(30,261	)		$	8,019			$	(22,242	)

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The categories of AOCI and changes therein are presented below for the periods indicated (in thousands):

	Unrealized Gain (Loss) on Investment Securities Available for Sale				Unrealized Gain (Loss) on Derivative Instruments				Total
Balance at December 31, 2019	$	28,185			(60,012		)		$	(31,827	)
Other comprehensive loss	(30,159		)		(81,033		)		(111,192		)
Balance at June 30, 2020	$	(1,974	)		$	(141,045	)		$	(143,019	)
Balance at December 31, 2018	$	4,194			$	679			$	4,873
Other comprehensive loss	38,893				(61,135		)		(22,242		)
Balance at June 30, 2019	$	43,087			$	(60,456	)		$	(17,369	)

 

Share Awards

Unvested share awards

A summary of activity related to unvested share awards follows for the periods indicated:

	Number of Share Awards			Weighted Average Grant Date Fair Value
Unvested share awards outstanding, December 31, 2019	1,050,455			$	38.24
Granted	644,300			29.73
Vested	(455,260	)		39.15
Canceled or forfeited	(33,137	)		36.21
Unvested share awards outstanding, June 30, 2020	1,206,358			$	33.41
Unvested share awards outstanding, December 31, 2018	1,186,238			$	38.86
Granted	582,353			36.57
Vested	(533,125	)		37.67
Canceled or forfeited	(115,825	)		39.11
Unvested share awards outstanding, June 30, 2019	1,119,641			$	38.21

Unvested share awards are generally valued at the closing price of the Company's common stock on the date of grant. All shares granted prior to 2019 vest in equal annual installments over a period of three years from the date of grant. All shares granted in 2019 and 2020 to Company employees vest in equal annual installments over a period of four years from the date of grant. Shares granted to the Company's Board of Directors vest over a period of one year.

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The following table summarizes the closing price of the Company's stock on the date of grant for shares granted and the aggregate grant date fair value of shares vesting for the periods indicated (in thousands, except per share data):

	Six Months Ended June 30,
	2020				2019
Closing price on date of grant (1)	$13.99 - $30.90				$34.23 - $36.65
Aggregate grant date fair value of shares vesting	$	17,824			$	20,083

(1)	During the six months ended June 30, 2020, the Company granted 599,766 and 44,534 shares with a closing price on date of grant of $30.90 and $13.99, respectively.

The total unrecognized compensation cost of $29.5 million for all unvested share awards outstanding at June 30, 2020 will be recognized over a weighted average remaining period of 2.75 years.

Executive share-based awards

Certain of the Company's executives are eligible to receive annual awards of RSUs and PSUs (collectively, the "share units"). Annual awards of RSUs represent a fixed number of shares and vest on December 31st in equal tranches over three years for grants prior to 2019, and over four years for awards issued in 2019 and 2020. PSUs are initially granted based on a target value. The number of PSUs that ultimately vest at the end of the performance measurement period will be based on the achievement of performance criteria pre-established by the Compensation Committee of the Board of Directors. Upon vesting, the share units will be converted to common stock on a one-for-one basis, or may be settled in cash at the Company's option. The share units will accumulate dividends declared on the Company's common stock from the date of grant to be paid subsequent to vesting.

As a result of the majority of previous settlements being in cash, all RSUs and PSUs have been determined to be liability instruments and are remeasured at fair value each reporting period until the awards are settled. The RSUs are valued based on the closing price of the Company's common stock at the reporting date. The PSUs are valued based on the closing price of the Company's common stock at the reporting date net of a discount related to any applicable market conditions, considering the probability of meeting the defined performance conditions. Compensation cost related to PSUs is recognized during the performance period based on the probable outcome of the respective performance conditions.

A summary of activity related to executive share-based awards for the period indicated follows:

	RSU			PSU
Unvested executive share-based awards outstanding, December 31, 2019	112,116			125,088
Granted	106,731			106,731
Unvested executive share-based awards outstanding, June 30, 2020	218,847			231,819
Unvested executive share-based awards outstanding, December 31, 2018	90,612			99,874
Granted	73,062			73,062
Unvested executive share-based awards outstanding, June 30, 2019	163,674			172,936

The total liability for the share units was $2.9 million at June 30, 2020. The total unrecognized compensation cost of $6.2 million for these share units at June 30, 2020 will be recognized over a weighted average remaining period of 2.45 years.

Incentive awards

The Company's annual incentive compensation arrangements for employees other than those eligible for the executive share-based awards discussed above provide for settlement through a combination of cash payments and unvested share awards following the end of the annual performance period. The dollar value of share awards to be granted is based on the achievement of performance criteria established in the incentive arrangements. The number of shares of common stock to be awarded is variable based on the closing price of the Company's stock on the date of grant; therefore, these awards are initially classified as

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liability instruments, with compensation cost recognized from the beginning of the performance period. Awards related to performance periods prior to 2019 vest over three years and awards related to the 2019 and 2020 performance periods vest in equal installments over a period of four years from the date of grant. These awards are included in the summary of activity related to unvested share awards above. The total liability and unrecognized compensation cost for incentive share awards for the 2020 performance period was not material. The accrued liability and unrecognized compensation cost are based on management's current estimate of the likely outcome of the performance criteria established in the incentive arrangements and may differ from actual results.

The 644,300 unvested share awards granted during the six months ended June 30, 2020, as discussed above, included 114,936 unvested share awards granted under the Company's annual incentive compensation arrangements based on the achievement of established performance criteria for the year ended December 31, 2019.

Option Awards

A summary of activity related to stock option awards for the six months ended June 30, 2020 and 2019 follows:

	Number of Option Awards			Weighted Average Exercise Price
Option awards outstanding, December 31, 2019	737,753			$	26.64
Exercised	(60,000	)		25.48
Option awards outstanding and exercisable, June 30, 2020	677,753			$	26.74
Option awards outstanding, December 31, 2018	964,840			$	26.53
Exercised	(3,910	)		11.14
Canceled or forfeited	(1,960	)		63.74
Option awards outstanding, June 30, 2019	958,970			$	26.52

The intrinsic value of options exercised and related tax benefits was immaterial for the six months ended June 30, 2020 and 2019.

Assets and liabilities measured at fair value on a recurring basis

Following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which those measurements are typically classified.

Investment securities available for sale and marketable equity securities—Fair value measurements are based on quoted prices in active markets when available; these measurements are classified within level 1 of the fair value hierarchy. These securities typically include U.S. Treasury securities and certain preferred stocks. If quoted prices in active markets are not available, fair values are estimated using quoted prices of securities with similar characteristics, quoted prices of identical securities in less active markets, discounted cash flow techniques, or matrix pricing models. These securities are generally classified within level 2 of the fair value hierarchy and include U.S. Government agency securities, U.S. Government agency and sponsored enterprise MBS, preferred stock investments for which level 1 valuations are not available, non-mortgage asset-backed securities, single family rental real estate-backed securities, certain private label residential MBS and CMOs, private label commercial MBS, collateralized loan obligations and state and municipal obligations. Pricing of these securities is generally primarily spread driven. Observable inputs that may impact the valuation of these securities include benchmark yield curves, credit spreads, reported trades, dealer quotes, bids, issuer spreads, current rating, historical constant prepayment rates, historical voluntary prepayment rates, structural and waterfall features of individual securities, published collateral data, and for certain securities, historical constant default rates and default severities.

The Company uses third-party pricing services in determining fair value measurements for investment securities. To obtain an understanding of the methodologies and assumptions used, management reviews written documentation provided by the pricing services, conducts interviews with valuation desk personnel and reviews model results and detailed assumptions used to

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value selected securities as considered necessary. Management has established a robust price challenge process that includes a review by the treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from expectations is challenged. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation source. The Company does not typically adjust the prices provided, other than through this established challenge process. The results of price challenges are subject to review by executive management. The Company has also established a quarterly process whereby prices provided by its primary pricing service for a sample of securities are validated. Any price discrepancies are resolved based on careful consideration of the assumptions and inputs employed by each of the pricing sources.

Servicing rights—Commercial servicing rights are valued using a discounted cash flow methodology incorporating contractually specified servicing fees and market based assumptions about prepayments, discount rates, default rates and costs of servicing. Prepayment and default assumptions are based on historical industry data for loans with similar characteristics. Assumptions about costs of servicing are based on market convention. Discount rates are based on rates of return implied by observed trades of underlying loans in the secondary market. These instruments are classified within level 2 of the fair value hierarchy.

Derivative financial instruments—Fair values of interest rate swaps are determined using widely accepted discounted cash flow modeling techniques. These discounted cash flow models use projections of future cash payments and receipts that are discounted at mid-market rates. Observable inputs that may impact the valuation of these instruments include LIBOR swap rates and LIBOR forward yield curves. These fair value measurements are generally classified within level 2 of the fair value hierarchy.

The following tables present assets and liabilities measured at fair value on a recurring basis at the dates indicated (in thousands):

	June 30, 2020
	Level 1				Level 2				Total
Investment securities available for sale:
U.S. Treasury securities	$	77,180			$	—			$	77,180
U.S. Government agency and sponsored enterprise residential MBS	—				2,379,840				2,379,840
U.S. Government agency and sponsored enterprise commercial MBS	—				464,277				464,277
Private label residential MBS and CMOs	—				1,116,086				1,116,086
Private label commercial MBS	—				2,043,620				2,043,620
Single family rental real estate-backed securities	—				618,207				618,207
Collateralized loan obligations	—				1,128,753				1,128,753
Non-mortgage asset-backed securities	—				261,531				261,531
State and municipal obligations	—				259,495				259,495
SBA securities	—				245,942				245,942
Marketable equity securities	88,697				—				88,697
Servicing rights	—				7,291				7,291
Derivative assets	—				145,802				145,802
Total assets at fair value	$	165,877			$	8,670,844			$	8,836,721
Derivative liabilities	$	—			$	(52,013	)		$	(52,013	)
Total liabilities at fair value	$	—			$	(52,013	)		$	(52,013	)

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	December 31, 2019
	Level 1				Level 2				Total
Investment securities available for sale:
U.S. Treasury securities	$	70,325			$	—			$	70,325
U.S. Government agency and sponsored enterprise residential MBS	—				2,022,175				2,022,175
U.S. Government agency and sponsored enterprise commercial MBS	—				370,976				370,976
Private label residential MBS and CMOs	—				1,012,177				1,012,177
Private label commercial MBS	—				1,724,684				1,724,684
Single family rental real estate-backed securities	—				470,025				470,025
Collateralized loan obligations	—				1,197,366				1,197,366
Non-mortgage asset-backed securities	—				194,904				194,904
State and municipal obligations	—				273,302				273,302
SBA securities	—				362,731				362,731
Marketable equity securities	60,572				—				60,572
Servicing rights	—				7,977				7,977
Derivative assets	—				43,686				43,686
Total assets at fair value	$	130,897			$	7,680,003			$	7,810,900
Derivative liabilities	$	—			$	(19,029	)		$	(19,029	)
Total liabilities at fair value	$	—			$	(19,029	)		$	(19,029	)

Assets and liabilities measured at fair value on a non-recurring basis

Following is a description of the methodologies used to estimate the fair values of assets and liabilities that may be measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified. 

Impaired loans, OREO and other repossessed assets—The carrying amount of collateral dependent impaired loans is typically based on the fair value of the underlying collateral, which may be real estate or other business assets, less estimated costs to sell when repayment is expected to come from the sale of the collateral. The carrying value of OREO is initially measured based on the fair value of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral and OREO are typically based on third-party real estate appraisals which utilize market and income approaches to valuation incorporating both observable and unobservable inputs. When current appraisals are not available, the Company may use brokers’ price opinions, home price indices or other available information about changes in real estate market conditions to adjust the latest appraised value available. These adjustments to appraised values may be subjective and involve significant management judgment. The fair value of repossessed assets or collateral consisting of other business assets may be based on third-party appraisals or internal analyses that use market approaches to valuation incorporating a combination of observable and unobservable inputs.

Fair value measurements related to collateral dependent impaired loans, OREO and other repossessed assets are generally classified within level 3 of the fair value hierarchy.

Operating lease equipment—Fair values of impaired operating lease equipment are typically based upon discounted

cash flow analyses, considering expected lease rates and estimated end of life residual values, typically obtained from independent appraisals. These fair value measurements are classified within level 3 of the fair value hierarchy.

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The following tables present the carrying value of assets for which non-recurring changes in fair value have been recorded for the periods indicated (in thousands):

	June 30, 2020																Losses from Fair Value Changes
	Level 1				Level 2				Level 3				Total				Three Months Ended    June 30, 2020				Six Months Ended June 30, 2020
OREO and repossessed assets	$	—			$	—			$	4,401			$	4,401			$	(243	)		$	(360	)
Impaired loans	$	—			$	—			$	101,353			$	101,353			$	(23,545	)		$	(42,221	)
Operating lease equipment	$	—			$	—			$	839			$	839			$	—			$	(691	)

	June 30, 2019																Losses from Fair Value Changes
	Level 1				Level 2				Level 3				Total				Three Months Ended    June 30, 2019				Six Months Ended    June 30, 2019
OREO and repossessed assets	$	—			$	—			$	1,557			$	1,557			$	(203	)		$	(221	)
Impaired loans	$	—			$	—			$	15,385			$	15,385			$	(529	)		$	(279	)

The following table presents the carrying value and fair value of financial instruments and the level within the fair value hierarchy in which those measurements are classified at the dates indicated (dollars in thousands): 

			June 30, 2020								December 31, 2019
	Level		Carrying Value				Fair Value				Carrying Value				Fair Value
Assets:
Cash and cash equivalents	1		$	402,231			$	402,231			$	214,673			$	214,673
Investment securities	1/2		$	8,693,628			$	8,694,622			$	7,769,237			$	7,769,949
Non-marketable equity securities	2		$	233,051			$	233,051			$	253,664			$	253,664
Loans held for sale	2		$	2,623			$	2,802			$	37,926			$	39,731
Loans, net	3		$	23,568,766			$	24,024,615			$	23,046,317			$	23,350,684
Derivative assets	2		$	145,802			$	145,802			$	43,686			$	43,686
Liabilities:
Demand, savings and money market deposits	2		$	19,339,621			$	19,339,621			$	17,047,344			$	17,047,344
Time deposits	2		$	6,730,803			$	6,762,832			$	7,347,247			$	7,377,301
Federal funds purchased	2		$	100,000			$	100,000			$	100,000			$	100,000
FHLB and PPPLF borrowings	2		$	4,650,599			$	4,648,739			$	4,480,501			$	4,500,969
Notes and other borrowings	2		$	722,332			$	779,966			$	429,338			$	473,327
Derivative liabilities	2		$	52,013			$	52,013			$	19,029			$	19,029

Note 11     Commitments and Contingencies 

The Company issues off-balance sheet financial instruments to meet the financing needs of its customers. These financial instruments include commitments to fund loans, unfunded commitments under existing lines of credit, and commercial and standby letters of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers, and are subject to the same credit policies used in underwriting loans. Collateral may be obtained based on the Company’s credit evaluation of the counterparty. The Company’s maximum exposure to credit loss is represented by the contractual amount of these commitments.

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Commitments to fund loans

These are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. Commitments to fund loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expire without being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements. 

Unfunded commitments under lines of credit

Unfunded commitments under lines of credit include commercial, commercial real estate, home equity and consumer lines of credit to existing customers, for many of which additional extensions of credit are subject to borrowing base requirements. Some of these commitments may mature without being fully funded. 

Commercial and standby letters of credit

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 

Total lending related commitments outstanding at June 30, 2020 were as follows (in thousands):

Commitments to fund loans	$	770,860
Commitments to purchase loans	733,451
Unfunded commitments under lines of credit	3,145,104
Commercial and standby letters of credit	88,438
	$	4,737,853

Legal Proceedings

The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, based upon advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.

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•

Deteriorating economic conditions and a worsening forward looking economic forecast led to a higher provision for credit losses and ACL during the six months ended June 30, 2020. There continues to be significant uncertainty as to the impact of the COVID-19 crisis on future credit loss expense and future levels of the ACL, but they may be more volatile and may change materially from current levels.

•

Levels of criticized and classified assets increased at June 30, 2020, largely as a result of the COVID-19 pandemic. Additionally, a significant number of borrowers have requested relief in the form of temporary payment deferrals. Beginning late in the first quarter of 2020 and continuing through the second quarter, risk ratings were re-evaluated for a substantial portion of the commercial portfolio, with a particular focus on portfolio segments we identified for enhanced monitoring and loans for which we granted temporary payment deferrals in light of the COVID-19 pandemic. At June 30, 2020, we had not experienced an increase in non-performing assets as a result of the pandemic. It is difficult to predict when, if, or to what extent levels of non-performing assets and delinquencies will increase as a result of the pandemic, although they may do so. Similarly, charge-offs may increase. These impacts may manifest in a delayed fashion due to the impact of temporary payment deferrals and various forms of government assistance that our borrowers may receive.

•	The level of loan origination activity, outside of our participation in the PPP, was lower in the second quarter as a result of the pandemic.

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•	Activated and continue to operate under our business continuity plan under the leadership of executive management.

•	Enhanced liquidity monitoring and management protocols.

•	Maintained a regular cadence of Board of Directors update calls.

•	Enhanced the level and frequency of pro-active outreach to borrowers and our portfolio management activities.

•	Segregated certain segments of the loan portfolio for enhanced monitoring.

•	Enhanced our workout and recovery staffing and processes.

•	Enhanced our stress testing framework. Results of internal stress testing indicate that we have sufficient capital to withstand an increase in credit losses materially beyond levels currently expected, and to withstand a severe downturn.

•	Proactively reached out to our critical third party service providers and evaluated their ability to continue to provide support in the current environment. We have experienced no significant service disruptions.

•	Expanded certain employee benefits and launched a number of programs to keep our employees healthy and engaged.

•	Enhanced personal protective measures for employees working at our corporate locations and begun planning for the eventual return to office of a larger percentage of our workforce, when conditions permit. We have not yet set a definite date to begin a phased return to office.

•	Supported our clients through participating in the Small Business Administration’s PPP, and granting payment deferrals and fee waivers on a case-by-case basis.

•	Temporarily halted new residential foreclosure actions.

•

Net income for the three months ended June 30, 2020 was $76.5 million, or $0.80 per diluted share, compared to $81.5 million, or $0.81 per diluted share, for the three months ended June 30, 2019. For the six months ended June 30, 2020, net income was $45.6 million, or $0.47 per diluted share, compared to $147.4 million, or $1.45 per diluted share, for the six months ended June 30, 2019. Results for the six months ended June 30, 2020 were negatively impacted by the application of the CECL accounting methodology, including the expected impact of COVID-19 on the provision for credit losses.

•	PPNR improved by $37.3 million, or 44%, to $122.3 million for the three months ended June 30, 2020 compared to $85.0 million for the immediately preceding three months ended March 31, 2020 and by $16.2 million, compared to $106.1 million for the three months ended June 30, 2019. For the six months ended June 30, 2020 and 2019, PPNR was $207.3 million and $206.6 million, respectively.

•

The net interest margin, calculated on a tax-equivalent basis, increased to 2.39% for the three months ended June 30, 2020 from 2.35% for the immediately preceding quarter. The net interest margin was 2.52% for the three months ended June 30, 2019. The yield on interest earnings assets declined by 0.44% while the cost of interest bearing liabilities declined by 0.60% for the three months ended June 30, 2020 compared to the three months ended March 31, 2020.

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•	The average cost of total deposits declined to 0.80% for the quarter ended June 30, 2020 compared to 1.70% for the quarter ended June 30, 2019. On a spot basis, the APY on total deposits declined to 0.65% at June 30, 2020.

•	The provision for credit losses totaled $25.4 million for the three months ended June 30, 2020. The provision for credit losses was $150.8 million for the six months ended June 30, 2020. For the three and six months ended June 30, 2019, the Company recorded a provision for (recovery of) loan losses, under the incurred loss model, of $(2.7) million and $7.5 million, respectively.

•

Non-interest bearing demand deposits grew by $1.3 billion, or 28%, for the three months ended June 30, 2020, to 23% of total deposits compared to 18% of total deposits at March 31, 2020. Total deposits increased by $1.1 billion during the three months ended June 30, 2020. Growth in non-interest bearing demand deposits for the three months ended June 30, 2020 was positively impacted by proceeds from PPP loans.

•

Loans and leases, including operating lease equipment, grew by $656 million for the three months ended June 30, 2020. Loan and lease growth for the three months ended June 30, 2020 included growth of $827 million in PPP loans and $308 million in mortgage warehouse outstandings, partially offset by expected declines in certain other portfolio segments. We funded over 3,500 PPP loans totaling $876 million during the three months ended June 30, 2020.

•	The net unrealized loss on investment securities available for sale improved to $2.6 million at June 30, 2020 from $249.8 million at March 31, 2020, in response to both declines in market rates and tightening spreads.

•

Stockholders' equity increased by $238.9 million during the three months ended June 30, 2020 to $2.8 billion. The increase was driven by the recovery of $180.6 million in accumulated other comprehensive income related to the reduction in unrealized losses on investment securities available for sale and by the retention of earnings. At June 30, 2020, book value per common share and tangible book value per common share were $29.81 and $28.97, respectively.

•	During the three months ended June 30, 2020, the Company completed an underwritten public offering of $300 million aggregate principal amount of its 5.125% subordinated notes, augmenting Tier 2 capital.

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(1)	On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $3.8 million and $4.4 million, and the tax-equivalent adjustment for tax-exempt investment securities was $0.8 million and $1.1 million for the three months ended June 30, 2020 and 2019, respectively.

(2)	Annualized.

(3)	At fair value except for securities held to maturity.

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(1)	On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $7.5 million and $8.8 million, and the tax-equivalent adjustment for tax-exempt investment securities was $1.6 million and $2.3 million for the six months ended June 30, 2020 and 2019, respectively.

(2)	Annualized.

(3)	At fair value except for securities held to maturity.

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•

The most significant factor leading to the increase in the net interest margin for the quarter ended June 30, 2020 compared to the three months ended March 31, 2020 was the decline in the cost of deposits. The average rate on interest bearing deposits decreased to 1.01% for the three months ended June 30, 2020, from 1.66% for the three months ended March 31, 2020, reflecting initiatives taken to lower rates paid on deposits following actions by the Fed in the fourth quarter of 2019 and first quarter of 2020. We expect the cost of interest bearing deposits to continue to decline.

•	For the three months ended June 30, 2020, the increase in average non-interest bearing demand deposits as a percentage of average total deposits also positively impacted the cost of deposits and the net interest margin.

•	The average rate paid on borrowings declined to 1.97% for the three months ended June 30, 2020, from 2.51% for the three months ended March 31, 2020, reflecting declines in rates on overnight and short-term FHLB advances as well as the impact of PPPLF borrowings priced at rates lower than the average rate paid by the Company on its borrowings.

•

The tax-equivalent yield on loans decreased to 3.71% for the three months ended June 30, 2020, from 4.18% for the three months ended March 31, 2020. The most significant factor contributing to this decrease was the decline in benchmark interest rates, which impacted the level of prepayments of higher rate loans as well as rates earned on both existing floating rate assets and new production. The addition of lower yielding PPP loans to the balance sheet also contributed to the decline in the yield on loans.

•	The tax-equivalent yield on investment securities decreased to 2.48% for the three months ended June 30, 2020 from 2.81% for the three months ended March 31, 2020. The most significant factor contributing to this decrease was the impact of decreases in benchmark interest rates on both existing floating rate assets and new securities added to the portfolio.

•	The average rate on interest bearing deposits decreased to 1.01% and 1.33% for the three and six months ended June 30, 2020, from 2.04% and 2.01% for the three and six months ended June 30, 2019, reflecting initiatives taken to decrease the rate paid on deposits.

•	The average rate on borrowings declined to 1.97% and 2.22%% for the three and six months ended June 30, 2020, from 2.62% and 2.61%% for the three and six months ended June 30, 2019.

•	The tax-equivalent yield on loans decreased to 3.71% and 3.94% for the three and six months ended June 30, 2020, from 4.52% and 4.51% for the three and six months ended June 30, 2019, due primarily to declines in benchmark interest rates.

•	The tax-equivalent yield on investment securities decreased to 2.48% and 2.64% for the three and six months ended June 30, 2020 from 3.61% and 3.63% for the three and months ended June 30, 2019. The most significant factors

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(1)	Recurring operating expenses is a non-GAAP measure. See section entitled "Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measurements to their comparable GAAP financial measurements.

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•	whether we intend to sell the security prior to recovery of its amortized cost basis;

•	whether it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis;

•	The extent to which fair value is less than amortized cost;

•	Adverse conditions specifically related to the security, an industry or geographic area;

•	Changes in the financial condition of the issuer or underlying loan obligors;

•	The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;

•	Failure of the issuer to make scheduled payments;

•	Changes in credit ratings;

•	Relevant market data;

•	Estimated prepayments, defaults, and the value and performance of underlying collateral at the individual security level.

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(1)	Non-performing loans and assets include the guaranteed portion of non-accrual SBA loans totaling $45.7 million or 0.19% of total loans and 0.13% of total assets, at June 30, 2020; compared to $45.7 million or 0.20% of total loans and 0.14% of total assets, at December 31, 2019.

(2)	Annualized for June 30, 2020.

(1)	Includes 232 government insured residential loans modified in TDRs totaling $34.9 million at June 30, 2020; and 346 government insured residential loans modified in TDRs totaling $53.4 million at December 31, 2019.

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(1)	Adoption date of ASU 2016-13.

(2)	Represents percentage of loans receivable in each category to total loans receivable.

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•	deterioration in current economic conditions and in the economic forecast, particularly unemployment levels and commercial property forecasts; and

•	a qualitative overlay based on data collected from borrowers reflecting recent deterioration in operating results or financial condition.

•	an increase related to deterioration in current economic conditions compared to the prior quarter-end, offset by a decrease related to the forward path of the economic forecast, particularly the path of the volatility index and the S&P 500 index which improved from the prior quarter-end;

•	a decrease related to changes in assumptions about expected prepayments; and

•	an increase from a qualitative overlay based on data collected from borrowers that reflected recent deterioration in operating results or financial condition.

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•	Unemployment rates starting at 13.4% and declining to 9% by the end of 2020, and to 7% by the end of 2021;

•	Annualized growth in GDP starting at negative (27%) with recovery beginning in the third quarter of 2020 and returning to pre-recession levels in 2023;

•	VIX trailing average starting at 32, remaining elevated through 2020, and then trending downward; and

•	S&P 500 starting at 2900 and declining moderately through 2020 before increasing.

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