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•	our ability to compete effectively against other financial service providers in our markets;

•	the effect of the current interest rate environment or impact of changes in interest rates or levels of market activity, especially on the fair value of our loan and investment portfolios;

•	economic deterioration or a recession that may affect the ability of borrowers to make contractual payments on loans and may affect the value of real property or other property held as collateral for such loans;

•	changes in credit quality and the effect of credit quality on our provision for credit losses and allowance for loan and lease losses;

•	our ability to attract and retain deposits and other sources of funding or liquidity;

•	the need to retain capital for strategic or regulatory reasons;

•	compression of the net interest margin due to changes in the interest rate environment, forward yield curves, loan products offered, spreads on newly originated loans and leases, and/or changes in our asset or liability mix;

•	reduced demand for our services due to strategic or regulatory reasons;

•	our ability to successfully execute on initiatives relating to enhancements of our technology infrastructure, including client-facing systems and applications;

•	our ability to complete future acquisitions and to successfully integrate such acquired entities or achieve expected benefits, synergies and/or operating efficiencies within expected time frames or at all;

•	legislative or regulatory requirements or changes, including an increase to capital requirements, and increased political and regulatory uncertainty;

•	the impact of the Dodd-Frank Act on our business, business strategies and cost of operations;

•	the impact on our reputation and business from our interactions with business partners, counterparties, service providers and other third parties;

•	higher than anticipated increases in operating expenses;

•	lower than expected dividends paid from the Bank to the holding company;

•	a deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge;

•	the effectiveness of our risk management framework and quantitative models;

•	the costs and effects of failure, interruption or breach of security of our systems or the systems of our contracted vendors;

•	the costs and effects of legal, compliance, and regulatory actions, changes and developments, including the impact of adverse judgments or settlements in litigation, the initiation and resolution of regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews;

•	the impact of the Tax Cuts and Jobs Act on our business and business strategies, or if other changes are made to tax laws or regulations affecting our business, including the disallowance of tax benefits by tax authorities and/or changes in tax filing jurisdictions or entity classifications; and

•	our success at managing risks involved in the foregoing items and all other risk factors described in our audited consolidated financial statements, and other risk factors described in this Form 10-K and other documents filed or furnished by PacWest with the SEC.

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Commercial real estate mortgage. Our commercial real estate mortgage loans generally are collateralized by first deeds of trust on specific commercial properties. The most prevalent types of properties securing our commercial real estate loans are office properties, hotels, retail properties, industrial properties, and various healthcare properties such as skilled nursing facilities and assisted living facilities. The properties are typically located in central business districts across the United States with a significant concentration of collateral properties located in California within our branch footprint. Our commercial real estate loans typically either have interest and principal payments due on an amortization schedule ranging from 25 to 30 years with a lump sum balloon payment due in one to ten years or may have an initial interest-only period followed by an amortization schedule with a lump sum balloon payment due in one to ten years. We also provide commercial real estate secured loans under the SBA's 7(a) Program and 504 Program. Compliant SBA 7(a) loans have an SBA guaranty for 75% of the principal balance. SBA 504 loans are 50% loan-to-value first deed of trust mortgage loans on owner occupied commercial real estate where a second deed of trust is also provided by a nonprofit certified development company. The SBA 7(a) and 504 mortgage loans repay on a twenty-five year amortization schedule.

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Income producing and other residential real estate mortgage. Our income producing and other residential real estate mortgage loans generally are collateralized by first deeds of trust on specific multi-family and other residential properties. The most prevalent types of properties securing our income producing and other residential real estate loans are multi-family, condominium, pooled single-family rental properties, and individual single-family properties. We also purchase multi-family secured real estate mortgage loans from other banks due primarily to the favorable credit risk profile of multi-family loans. When we purchase multi-family loans from other banks, we re-underwrite the loans at time of purchase. Multi-family loans typically repay on a 30-year amortization schedule. We do not typically originate single-family mortgage loans, although we do purchase this type of loan from a third-party lender.

•

Real estate construction and land. Our real estate construction and land loans generally are collateralized by first deeds of trust on specific residential and commercial properties. The most prevalent types of properties securing our construction and land loans are multi-family, condominium, and hotel properties. Construction loans typically finance from 50% to 70% of the costs to construct residential and commercial properties. The terms are generally one to three years with short-term, performance-based extension options. We do not currently originate single-family construction loans, although we do purchase this type of loan from a third-party lender.

•	increased competition in pricing and loan structure;

•	the economic conditions of the United States;

•	interest rate increases;

•	decreased real estate values in the markets where we lend;

•	the borrower's inability to repay our loan due to decreased cash flow or operating losses;

•	the borrower’s inability to refinance or payoff our loan upon maturity;

•	loss of our loan principal stemming from a collateral foreclosure; and

•	various environmental risks, including natural disasters.

•	construction costs being more than anticipated;

•	construction taking longer than anticipated;

•	failure by developers and contractors to meet project specifications or timelines;

•	disagreement between contractors, subcontractors and developers;

•	demand for completed projects being less than anticipated; and

•	buyers of the completed projects not being able to secure permanent financing.

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•	requiring borrowers to invest and maintain a meaningful cash equity interest in the properties securing our loans;

•	reviewing each loan request and renewal individually;

•	using a credit committee approval process for the approval of each loan request (or aggregated credit exposures) over a certain dollar amount;

•	adhering to written loan acceptance standards, including among other factors, maximum loan to acquisition or construction cost ratios, maximum loan to as-is or stabilized value ratios, and minimum operating cash flow requirements;

•	considering market rental rates relative to our underwritten or projected rental rates;

•	considering the experience of our borrowers and our borrowers’ abilities to operate and manage the properties securing our loans;

•	evaluating the supply of comparable real estate and new supply under construction in the collateral's market area;

•	obtaining independent third-party appraisals that are reviewed by our appraisal department;

•	obtaining environmental risk assessments; and

•	obtaining seismic studies where appropriate.

•	considering the experience of our borrowers and our borrowers’ abilities to manage the properties during construction and into the stabilization periods;

•	obtaining project completion guaranties from our borrowers;

•	including covenants in our construction loan agreements that require the borrowers to fund costs that exceed the initial construction budgets;

•	implementing a controlled disbursement process for loan proceeds in accordance with an agreed upon schedule, which usually results in the borrowers' equity being invested before loan advances commence and which ensures the costs to complete the projects are in balance with our remaining unfunded loan commitments;

•	conducting project site visits and using construction consultants who review the progress of the project; and

•	monitoring the construction costs compared to the budgeted costs and the remaining costs to complete.

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Lender finance & timeshare. These are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables owed to our borrowers. The borrowers include commercial lenders, consumer lenders, and timeshare operators. The primary sources of repayment are the operating incomes of the borrowers and the collection of the finance receivables securing the loans. The loans are typically revolving lines of credit with terms of one to three years with contractual borrowing availability as a percentage of eligible collateral.

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Equipment finance. These are loans and leases used to purchase equipment essential to the operations of our borrower or lessee and are secured by the specific equipment financed. The primary source of repayment is the operating income of the borrower or lessee. The loan and lease terms are two to ten years and generally amortize to either a full repayment or residual balance or investment that is expected to be collected through a sale of the equipment to the lessee or a third party.

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Other asset-based. These are loans used for working capital and are secured by trade accounts receivable and/or inventories. The primary sources of repayment are the operating incomes of the borrowers, the collection of the receivables securing the loans, and/or the sale of the inventories securing the loans. The loans are typically revolving lines of credit with terms of one to three years with contractual borrowing availability as a percentage of eligible collateral. In conjunction with our healthcare real estate loans, we may provide healthcare operators with asset-based loans secured by healthcare accounts receivable to support working capital needs.

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Premium finance. These are loans used to finance annual life insurance premiums and are fully secured by the corresponding cash surrender value of life insurance contracts and other liquid collateral with one year terms that, generally, renew annually. The primary sources of repayment are the cash flow of the borrowers and guarantors, repayment from our loans being refinanced by other lenders, or the application of cash surrender value proceeds to the loans.

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Venture capital. These are loans to venture-backed companies or loans directly to venture capital firms. Loans to venture-backed companies support the borrowers’ operations, including operating losses, working capital requirements, and fixed asset acquisitions. The borrowers are at various stages in their development (early, expansion, or late), and are, generally, reporting operating losses. The primary sources of repayment are future additional venture capital equity investments or the sale of the company or its assets. The loan terms are generally one to four years, and the loans are typically secured by a first priority, secured blanket lien on all corporate assets and/or a lien on intellectual property. This loan segment also includes equity fund loans which are loans made directly to venture capital firms, venture capital funds, and venture capital management companies to provide a bridge to the receipt of capital calls and to support the borrowers’ working capital needs, such as the cost of raising a new venture fund or leasehold improvements for new office space. The primary sources of repayment are receipt of capital calls, proceeds from sales of portfolio company investments, and management fees. The loan terms are generally one to four years, and the loans are typically secured by a first position lien on the assets of the business, an assignment of capital call rights and/or an assignment of management fees.

•	Secured business. These are secured business loans originated through the Community Banking group. The primary source of repayment is the cash flow of the borrowers. The loans can be up to five years and are secured by a specific asset or assets of the borrower.

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Security monitoring. These are loans to security monitoring companies used to support the operations of companies that provide business and residential security systems and the accompanying alarm monitoring services. Loans to security monitoring companies are secured primarily by the monitoring contracts between the borrowers and their customers. The primary sources of repayment are the operating incomes of the borrowers, proceeds from the sales of security monitoring contracts to other monitoring companies, and proceeds from the sale of the borrowers themselves. The loans are typically revolving lines of credit with terms of one to three years with contractual borrowing availability as a ratio of the total recurring monthly billing amount from eligible monitoring contracts (collateral). Loans to security monitoring borrowers are usually considered leveraged loans. According to regulatory guidance, leveraged loans are typically loans where the proceeds are used for buyouts or acquisitions and where the resulting total debt levels are four or more times the annual adjusted earnings of the borrower.

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Other lending. Loans aggregated into the category of “Other lending” are various commercial loan types including Community Banking group business loans secured by a blanket lien on the borrowers’ businesses, loans to homeowner associations, loans to municipalities and non-profit borrowers, and SBA 7(a) loans for small business expansion. The primary sources of repayments for the Community Banking group business loans, non-profit borrowers, and SBA 7(a) business expansion loans are the operations of the borrowers. The primary sources of repayment for loans to municipalities are tax collections from their tax jurisdictions.

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Cash flow. Until December 2017, we actively originated cash flow loans to finance business acquisitions and recapitalizations to various types of borrowers, with greater emphasis on borrowers operating in the healthcare and technology industries. In December 2017, we exited most cash flow lending business lines, and agreed to sell $1.5 billion of cash flow loans (of which $481.1 million were held for sale at December 31, 2017 and were subsequently sold in the first quarter of 2018). At December 31, 2018, we held $114.1 million of cash flow loans, including $92.5 million from the lending businesses that we exited in December 2017.

•	the economic conditions of the United States;

•	interest rate increases;

•	deterioration of the value of the underlying collateral;

•	increased competition in pricing and loan structure;

•	the deterioration of a borrower’s or guarantor’s financial capabilities; and

•	various environmental risks, including natural disasters, which can negatively affect a borrower’s business.

•	considering the prospects for the borrower's industry and competition;

•	considering our past experience with the borrower and with the collateral type;

•	considering our current loan and lease portfolio concentration by loan type and collateral type;

•	reviewing each loan request and renewal individually;

•	using our credit committee approval process for the approval of each loan request (or aggregate credit exposure) over a certain dollar amount; and

•	adhering to written loan underwriting policies and procedures including, among other factors, loan structures and covenants.

•	monitoring the economic conditions in the regions or areas in which our borrowers are operating;

•	measuring operating performance of our borrower or collateral and comparing it to our underwriting expectations;

•	assessing compliance with financial and operating covenants as set forth in our loan agreements and considering the effects of incidences of noncompliance and taking corrective actions;

•	assigning a credit risk rating to each loan and ensuring the accuracy of our credit risk ratings by using an independent credit review function to assess the appropriateness of the credit risk ratings assigned to loans;

•	conducting loan portfolio review meetings where senior management and members of credit administration discuss the credit status and related action plans on loans with unfavorable credit risk ratings; and

•	subjecting loan modifications and loan renewal requests to underwriting and assessment standards similar to the underwriting and assessment standards applied before closing the loans.

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•	the economic conditions of the United States and the levels of unemployment;

•	the amount of credit offered to consumers in the market;

•	interest rate increases;

•	consumer bankruptcy laws which allow consumers to discharge certain debts (excluding student loans);

•	compliance with consumer lending regulations;

•	additional regulations and oversight by the CFPB; and

•	the ability of the sub-servicers of the Bank’s student loans to service the loans in accordance with the terms of the loan purchase agreements.

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(1)	At December 31, 2018, the remaining balances of the technology, healthcare, and general cash flow loans held for investment of the lending businesses that we exited in December 2017 totaled $92.5 million. At December 31, 2017 and 2016, the balances of these loans totaled $249.3 million and $2.3 billion. Such cash flow loans are included in the "Other commercial" loan portfolio class in the table.

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•	4.5% CET1 to risk‑weighted assets;

•	6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk‑weighted assets;

•	8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk‑weighted assets; and

•	4% Tier 1 capital to average consolidated assets as reported on regulatory financial statements (known as the “leverage ratio”).

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•	a decrease in the demand for our loans and leases and other products and services offered by us;

•	a decrease in our deposit balances due to overall reductions in the accounts of customers;

•	a decrease in the value of our loans and leases;

•	an increase in the level of nonperforming and classified loans and leases:

•	an increase in provisions for credit losses and loan and lease charge-offs;

•	a decrease in net interest income derived from our lending and deposit gathering activities;

•	a decrease in the Company's stock price; or

•	an increase in our operating expenses associated with attending to the effects of certain circumstances listed above.

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ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(1)

The PacWest Bancorp 2017 Stock Incentive Plan (the “2017 Incentive Plan”) was approved by our stockholders at our May 15, 2017 Annual Meeting of Stockholders, authorizing for issuance 4,000,000 shares. Upon approval of the 2017 Incentive Plan by our stockholders, the PacWest 2003 Stock Incentive Plan (the "2003 Incentive Plan") was frozen and no new awards can be granted under the 2003 Incentive Plan.

(2)

Amount includes PRSUs granted in 2018 that may be issued at the end of their three-year performance period if certain financial metrics are met. The number of units shown represents a target amount and the number of units that will ultimately vest is unknown. Amount does not include 772,081 shares of unvested time-based restricted stock outstanding under the 2017 Incentive Plan with a zero exercise price as of December 31, 2018.

(3)	The 2017 Incentive Plan permits these remaining shares to be issued in the form of options, restricted stock, or stock appreciation rights.

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(1)	Includes shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards.

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(1)	Operating results of acquired companies are included from the respective acquisition dates. See Note 3. Acquisitions of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”

(2)	For information regarding this calculation, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Non‑GAAP Measurements.”

(3)	Includes 1,344,656 shares, 1,436,120 shares, 1,476,132 shares, 1,211,951 shares, and 1,108,505 shares of unvested restricted stock outstanding at December 31, 2018, 2017, 2016, 2015, and 2014.

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(4)	Amounts and ratios related to 2018 are for total loans and leases held for investment, net of deferred fees. Amounts and ratios related to 2017 and prior years are for Non-PCI loans and leases held for investment, net of deferred fees.

(5)	Amounts and ratios are for total loans and leases held for investment, net of deferred fees.

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•	current economic trends and forecasts;

•	current collateral values, performance trends, and overall outlook in the markets where we lend;

•	legal and regulatory matters that could impact our borrowers’ ability to repay our loans and leases;

•	loan and lease portfolio composition and any loan concentrations;

•	current lending policies and the effects of any new policies or policy amendments;

•	loan and lease production volume and mix;

•	loan and lease portfolio credit performance trends;

•	results of our independent credit review; and

•	changes in management related to credit administration functions.

•	Pass: Loans and leases rated as "pass" are not adversely classified and collection and repayment in full are expected.

•	Special Mention: Loans and leases rated as "special mention" have a potential weakness that requires management's attention. If not addressed, these potential weaknesses may result in further deterioration in the borrower's ability to repay the loan or lease.

•	Substandard: Loans and leases rated as "substandard" have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the possibility that we will sustain some loss if the weaknesses are not corrected.

•	Doubtful: Loans and leases rated as "doubtful" have all the weaknesses of those rated as "substandard," with the additional trait that the weaknesses make collection or repayment in full highly questionable and improbable.

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Return on average tangible equity, tangible common equity ratio, and tangible book value per share: Given that the use of these measures is prevalent among banking regulators, investors and analysts, we disclose them in addition to the related GAAP measures of return on average equity, equity to assets ratio, and book value per share, respectively. The reconciliations of these non-GAAP measurements to the GAAP measurements are presented in the following tables for and as of the periods presented.

(1)	Net earnings divided by average stockholders' equity.

(2)	Net earnings divided by average tangible common equity.

(1)	Tangible common equity divided by tangible assets.

(2)	Tangible common equity divided by shares outstanding.

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(1)	Includes nonaccrual loans and leases and loan fees. Starting with the third quarter of 2017, includes tax-equivalent adjustments related to tax-exempt interest on loans.

(2)	Includes discount accretion on acquired loans of $29.3 million, $26.1 million, and $79.5 million for 2018, 2017, and 2016, respectively.

(3)	Includes tax-equivalent adjustments of $6.5 million, $19.4 million, and $19.5 million for 2018, 2017, and 2016, respectively, related to tax-exempt interest on municipal securities. The federal statutory rate utilized was 21% for 2018 and 35% for 2017 and 2016.

(4)	Tax equivalent.

(5)	Total deposits is the sum of interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.

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(1)	Starting with the third quarter of 2017, includes tax-equivalent adjustments related to tax-exempt interest on loans.

(2)	Tax equivalent.

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(1)	Amounts and ratios related to 2018 are for total loans and leases held for investment, net of deferred fees. Amounts and ratios related to 2017 and 2016 are for Non-PCI loans and leases held for investment, net of deferred fees.

(2)	See "- Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment" for detail of charge-offs and recoveries by loan portfolio segment, class, and subclass for the periods presented.

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(1)	Calculation reduces average equity by average intangible assets.

(2)	See "Non-GAAP Measurements."

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(1)	In connection with our adoption of ASU 2016-01 and ASU 2018-03 on January 1, 2018, we reclassified $7.1 million of equity investments from securities available-for-sale to other assets in the first quarter of 2018. The reclassification was applied prospectively without prior period amounts being restated.

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(1)	Rates on tax-exempt securities are contractual rates and are not presented on a tax-equivalent basis.

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(1)	Loans and leases by portfolio class and subclass not available.

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Commercial real estate mortgage loans decreased by 10% to $4.8 billion or 27% of total loans and leases held for investment at December 31, 2018 from $5.4 billion or 32% at December 31, 2017. The lower balance and composition ratio was attributable primarily to the balance of healthcare real estate loans declining to $451.8 million at December 31, 2018 from $843.7 million at December 31, 2017. This decline in new healthcare real estate lending was the result of fewer loan opportunities meeting our credit standards.

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Income producing and other residential real estate mortgage loans increased by 25% to $3.1 billion or 17% of total loans and leases held for investment at December 31, 2018 from $2.5 billion or 14% at December 31, 2017. The higher balance and composition ratio was attributable to our continued emphasis on originating and purchasing multi-family secured real estate mortgage loans during 2018 due primarily to the favorable credit risk profile of those loans.

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Commercial real estate construction and land loans increased by 19% to $912.6 million or 5% of total loans and leases held for investment at December 31, 2018 from $769.1 million or 5% at December 31, 2017. The higher balance and comparable composition ratio was attributable to our continued emphasis on these types of loans and balances on existing loans increasing as disbursements occur during the construction phase.

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Residential real estate construction and land loans increased by 61% to $1.3 billion or 8% of total loans and leases held for investment at December 31, 2018 from $822.2 million or 5% at December 31, 2017. The higher balance and composition ratio was attributable to our continued emphasis on originating multi-family secured real estate construction loans in markets with strong demand for new multi-family housing.

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Asset-based loans and leases increased by 13% to $3.3 billion or 18% of total loans and leases held for investment at December 31, 2018 from $2.9 billion or 17% at December 31, 2017. The higher balance and composition ratio was due primarily to net loan growth in lender finance & timeshare loans and premium finance loans attributable to continued emphasis on originations for these loan types because of their favorable historical credit performance. Lender finance & timeshare loans increased to $1.8 billion at December 31, 2018 from $1.6 billion at December 31, 2017, and premium finance loans increased to $356.4 million at December 31, 2018 from $232.7 million at December 31, 2017.

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Venture capital loans decreased by 4% to $2.0 billion or 11% of total loans and leases held for investment at December 31, 2018 from $2.1 billion or 13% at December 31, 2017. The lower balance and composition ratio was attributable primarily to lower early stage and late stage loans to venture-backed companies, offset partially by higher equity fund loans. The increase in equity fund loans was due to continued emphasis on originations because of favorable historical credit performance. Early stage loans and late stage loans decreased to $225.6 million and $107.6 million at December 31, 2018 from $443.4 million and $255.0 million at December 31, 2017. Equity fund loans increased to $797.5 million at December 31, 2018 from $471.2 million at December 31, 2017.

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Other commercial loans decreased by 1% to $2.06 billion or 12% of total loans and leases held for investment at December 31, 2018 from $2.07 billion or 12% at December 31, 2017. The lower balance was attributable primarily to lower cash flow loans, which decreased to $114.1 million at December 31, 2018 from $278.9 million at December 31, 2017. Cash flow loans include the declining balances of certain cash flow lending businesses that we exited in December 2017. At December 31, 2018 and 2017, the remaining balances of these loans were $92.5 million and $249.3 million, respectively.

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(1)	Includes direct financing leases but excludes equipment leased to others under operating leases.

(2)	The weighted average rate on production presents contractual rates on a tax equivalent basis and does not include amortized fees. Amortized fees added approximately 31 basis points to loan yields in 2018 and 30 basis points to loan yields in 2017.

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(1)	Amounts and ratios related to 2018 are for total loans and leases. Amounts and ratios related to 2017 and prior years are for Non-PCI loans and leases.

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(1)	Amounts and ratios related to 2018 are for total loans and leases. Amounts and ratios related to 2017 and prior years are for Non-PCI loans and leases.

(2)	The allowance for loan losses related to PCI loans of $6.4 million as of December 31, 2017 is reflected in the beginning balance for 2018.

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•	The real estate mortgage allowance increased due to a higher amount of unamortized purchase discount at December 31, 2017 related to real estate mortgage loans purchased in connection with the acquisition of CUB on October 20, 2017. Such purchase discount offsets the allowance for loan and lease losses related to these purchased loans.

•	The real estate construction and land allowance increased due to net loan growth in this portfolio segment and a higher balance of special mention rated loans at December 31, 2018. Special mention loans have a higher allowance for loans and lease losses.

•	The commercial allowance decreased due to a lower amount of specific reserves on impaired commercial loans at December 31, 2018.

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(1)	Amounts and ratios are for total loans and leases held for investment, net of deferred fees.

(2)	Amount related to 2018 is for total loans and leases held for investment, net of deferred fees. Amounts related to 2017 and prior years are for Non-PCI loans and leases held for investment, net of deferred fees.

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(1)	Amounts and ratios related to 2018 are for total loans and leases held for investment, net of deferred fees. Amounts and ratios related to 2017 are for Non-PCI loans and leases held for investment, net of deferred fees.

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(1)	Amounts related to 2018 are for total loans and leases held for investment, net of deferred fees. Amounts related to 2017 and 2016 are for Non-PCI loans and leases held for investment, net of deferred fees.

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(1)	Amounts and ratio related to 2018 are for total loans and leases held for investment, net of deferred fees. Amounts and ratios related to 2017 and 2016 are for Non-PCI loans and leases held for investment, net of deferred fees.

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(1)	Ratios for December 31, 2018 reflect the minimum required plus capital conservation buffer phase-in for 2018; ratios for December 31, 2017 reflect the minimum required plus capital conservation buffer phase-in for 2017. The capital conservation buffer increases by 0.625% each year through 2019.

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(1)	Excludes purchase accounting fair value adjustments.

(2)	Excludes interest on subordinated debentures as these instruments are floating rate.

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(1)	Entire amount recognized in "Gain (loss) on sale of securities" on the Consolidated Statements of Earnings.

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(1)	Impact due to adoption on January 1, 2017 of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting."

(2)	Impact due to adoption on January 1, 2018 of ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" and ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."

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•	current economic trends and forecasts;

•	current collateral values, performance trends, and overall outlook in the markets where we lend;

•	legal and regulatory matters that could impact our borrowers’ ability to repay our loans and leases;

•	loan and lease portfolio composition and any loan concentrations;

•	current lending policies and the effects of any new policies or policy amendments;

•	loan and lease production volume and mix;

•	loan and lease portfolio credit performance trends;

•	results of our independent credit review; and

•	changes in management related to credit administration functions.

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•	Pass: Loans and leases rated as "pass" are not adversely classified and collection and repayment in full are expected.

•	Special Mention: Loans and leases rated as "special mention" have a potential weakness that requires management's attention. If not addressed, these potential weaknesses may result in further deterioration in the borrower's ability to repay the loan or lease.

•	Substandard: Loans and leases rated as "substandard" have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the possibility that we will sustain some loss if the weaknesses are not corrected.

•	Doubtful: Loans and leases rated as "doubtful" have all the weaknesses of those rated as "substandard," with the additional trait that the weaknesses make collection or repayment in full highly questionable and improbable.

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(1)	In connection with our adoption of ASU 2016-01 and ASU 2018-03 on January 1, 2018, we reclassified $7.1 million of equity investments from securities available-for-sale to other assets in the first quarter of 2018. The reclassification was applied prospectively without prior period amounts being restated.

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(1)	In connection with our adoption of ASU 2016-01 and ASU 2018-03 on January 1, 2018, we reclassified $7.1 million of equity investments from securities available-for-sale to other assets in the first quarter of 2018. The reclassification was applied prospectively without prior period amounts being restated.

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(1)	Excludes PCI loans.

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(1)	Excludes PCI loans.

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(1)	Excludes PCI loans.

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(1)	Excludes PCI loans.

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(1)	Excludes PCI loans.

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(1)	For loans and leases reported as impaired at December 31, 2018, 2017, and 2016, amounts were calculated based on the period of time such loans and leases were impaired during the reported period.

(2)	Excludes PCI loans.

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(1)

The population of defaulted TDRs for the period indicated includes only those loans restructured during the preceding 12-month period. For example, for the year ended December 31, 2018, the population of defaulted TDRs includes only those loans restructured after December 31, 2017. The table excludes defaulted TDRs in those classes for which the recorded investment was zero at the end of the period.

(2)	One commercial asset-based loan with a pre-modification balance of $27.3 million and a post-modification balance of $32.3 million was previously restructured in December 2017.

(3)	Represents the balance at December 31, 2018, and there were no charge-offs.

(4)	Represents the balance at December 31, 2017, and is net of charge-offs of $68,000.

(5)	Represents the balance at December 31, 2016, and there were no charge-offs.

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(1)	The allowance for loan losses related to PCI loans of $6.4 million as of December 31, 2017 is reflected in the beginning balance of the allowance for loan and lease losses for the year ended December 31, 2018.

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(1)	The allowance for loan losses related to PCI loans of $6.4 million as of December 31, 2017 is reflected in the beginning balance of the allowance for loan and lease losses for the year ended December 31, 2018.

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(1)	Includes equity investments without readily determinable fair values of $12.5 million and $8.2 million at December 31, 2018 and 2017.

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(1)	Denomination is in Euros with a value of €25.8 million.

(2)	Acquired in the CUB acquisition on October 20, 2017 and redeemed in the first quarter of 2018.

(3)	Amount represents the fair value adjustment on trust preferred securities assumed in acquisitions.

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•	Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

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Level 2: Observable inputs other than Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data, either directly or indirectly, for substantially the full term of the financial instrument. This category generally includes municipal securities, agency residential and commercial MBS, collateralized loan obligations, registered publicly rated private label CMOs, corporate debt securities, SBA securities, and asset-backed securitizations.

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Level 3: Inputs to a valuation methodology that are unobservable, supported by little or no market activity, and significant to the fair value measurement. These valuation methodologies generally include pricing models, discounted cash flow models, or a determination of fair value that requires significant management judgment or estimation. This category also includes observable inputs from a pricing service not corroborated by observable market data, and includes our non-rated private label CMOs, non-rated private label asset-backed securities, and equity warrants.

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(1)	The annual default rates and loss severity rates were the same for all of the asset-backed securities.

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(1)	Upon exercise, warrants become equity securities in public companies. These are often subject to lock-up restrictions that must be met before the equity security can be sold, during which time they are reported as equity investments with readily determinable fair values.

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(1)	Represents cash dividends paid to holders of unvested restricted stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.

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Revenue earned at a point in time. Examples of revenue earned at a point in time are ATM transaction fees, wire transfer fees, NSF fees, and credit and debit card interchange fees. Revenue is generally derived from transactional information accumulated by our systems and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer's transaction. The Company is the principal in each of these contracts with the exception of credit and debit card interchange fees, in which case the Company is acting as the agent and records revenue net of expenses paid to the principal.

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Revenue earned over time. The Company earns certain revenue from contracts with customers monthly. Examples of this type of revenue are deposit account service fees, investment management fees, merchant referral services, MasterCard marketing incentives and safe deposit box fees. Account service charges, management fees and referral fees are recognized on a monthly basis while any transaction-based revenue is recorded as the activity occurs. Revenue is primarily based on the number and type of transactions and is generally derived from transactional information accumulated by our systems. Revenue is recorded in the same period as the related transactions occur or services are rendered to the customer.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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(a)	1. Financial Statements

2.	Financial Statement Schedules

3.	Exhibits

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(b)	Exhibits

(c)	Excluded Financial Statements

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