The Company adopted the CECL methodology for measuring credit losses as of January 1, 2020. All disclosures as of and for the three months ended March 31, 2020 are presented in accordance with ASC 326, Financial Instruments – Credit Losses (ASC 326). The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP.

The Company has certain lending policies and procedures in place that are designed to minimize the level of risk within the loan portfolio. Diversification of the loan portfolio manages the risk associated with fluctuations in economic conditions. Authority levels are established for the extension of credit to ensure consistency throughout the Company. It is necessary that policies, processes and practices implemented to control the risks of individual credit transactions and portfolio segments are sound and adhered to. The Company maintains an independent loan review department that reviews and validates the risk assessment on a continual basis. Management regularly evaluates the results of the loan reviews. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Commercial loans are made based on the identified cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts from its customers.

Specialty lending loans include Asset-based and Factoring loans. Asset-based loans are offered primarily in the form of revolving lines of credit to commercial borrowers that do not generally qualify for traditional bank financing. Asset-based loans are underwritten based primarily upon the value of the collateral pledged to secure the loan, rather than on the borrower’s general financial condition. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite loans to these borrowers. Factoring loans provide working capital through the purchase and/or financing of accounts receivable to borrowers in the transportation industry and to commercial borrowers that do not generally qualify for traditional bank financing.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Company requires that an appraisal of the collateral be made at origination and on an as-needed basis, in conformity with current market conditions and regulatory requirements. The underwriting standards address both owner and non-owner occupied real estate. Also included in Commercial real estate are Construction loans that are underwritten using feasibility studies, independent appraisal reviews, sensitivity analysis or absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are based upon estimates of costs and value associated with the complete project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their repayment being sensitive to interest rate changes, governmental regulation of real property, economic conditions, and the availability of long-term financing.

Consumer real estate loans, including residential real estate and home equity loans, are underwritten based on the borrower’s loan-to-value percentage, collection remedies, and overall credit history.

Consumer loans are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer loans and leases. The underwriting and review practices combined with the relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Consumer loans and leases that are 90 days past due or more are considered non-performing.

Credit cards include both commercial and consumer credit cards. Commercial credit cards are generally unsecured and are underwritten with criteria similar to commercial loans, including an analysis of the borrower’s cash flow, available business capital, and overall credit-worthiness of the borrower. Consumer credit cards are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer credit cards and periodically reviews the distribution of FICO scores relative to historical periods to monitor credit risk on its consumer credit card loans.

Credit risk is a potential loss resulting from nonpayment of either the primary or secondary exposure. Credit risk is mitigated with formal risk management practices and a thorough initial credit-granting process including consistent underwriting standards and approval process. Control factors or techniques to minimize credit risk include knowing the client, understanding total exposure, analyzing the client and debtor’s financial capacity, and monitoring the client’s activities. Credit risk and portions of the portfolio risk are managed through concentration considerations, average risk ratings, and other aggregate characteristics.

This table provides a summary of loan classes and an aging of past due loans at March 31, 2020 and December 31, 2019 (in thousands):

	December 31, 2019
	30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Non- Accrual Loans		Total Past Due		Current		Total Loans
Loans
Commercial:
Commercial	$	10,491	$	250	$	25,592	$	36,333	$	5,805,669	$	5,842,002
Asset-based		—		—		—		—		292,231		292,231
Factoring		—		—		—		—		170,560		170,560
Commercial – credit card		760		52		24		836		181,402		182,238
Real estate:
Real estate – construction		3,933		—		95		4,028		838,318		842,346
Real estate – commercial		3,365		36		24,030		27,431		4,301,293		4,328,724
Real estate – residential		485		—		2,748		3,233		930,043		933,276
Real estate – HELOC		544		—		2,798		3,342		474,809		478,151
Consumer:
Consumer – credit card		1,835		1,681		803		4,319		222,423		226,742
Consumer – other		81		50		257		388		133,086		133,474
Leases		—		—		—		—		1,978		1,978
Total loans	$	21,494	$	2,069	$	56,347	$	79,910	$	13,351,812	$	13,431,722

The Company sold consumer real estate loans with proceeds of $75.7 million and $21.3 million in the secondary market without recourse during the three months ended March 31, 2020 and March 31, 2019, respectively.

The Company has ceased the recognition of interest on loans with a carrying value of $97.0 million and $56.3 million at March 31, 2020 and December 31, 2019, respectively. Restructured loans totaled $14.3 million and $19.8 million at March 31, 2020 and December 31, 2019, respectively. Loans 90 days past due and still accruing interest amounted to $2.2 million and $2.1 million at March 31, 2020 and December 31, 2019, respectively. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. There was an insignificant amount of interest reversed related to loans on nonaccrual during 2020. Nonaccrual loans with no related allowance for credit losses totaled $68.2 million at March 31, 2020.

The following table provides the amortized cost of nonaccrual loans with no related allowance for credit losses by loan class at March 31, 2020 (in thousands):

The following table provides a summary of the amortized cost balance of each of the Company’s loan classes disaggregated by collateral type and origination year as of March 31, 2020 (in thousands):

	March 31, 2020
													Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans


Loan Segment and Type	Amortized Cost Basis by Origination Year - Term Loans
Loan Segment and Type	2020		2019		2018		2017		2016		Prior						Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory	$	955,311	$	1,012,606	$	660,657	$	267,071	$	235,386	$	186,903	$	2,429,565	$	10,701	$	5,758,200
Agriculture		967		12,068		3,946		6,332		4,556		1,949		148,744		—		178,562
Overdrafts		—		—		—		—		—		—		15,602		—		15,602
Total Commercial and industrial		956,278		1,024,674		664,603		273,403		239,942		188,852		2,593,911		10,701		5,952,364
Specialty lending:
Asset-based lending		8,503		61,289		—		—		—		—		286,844		—		356,636
Factoring		—		—		—		—		—		—		166,789		—		166,789
Total Specialty lending		8,503		61,289		—		—		—		—		453,633		—		523,425
Commercial real estate:
Owner-occupied		89,443		426,334		300,415		237,437		175,338		290,695		30,328		17,368		1,567,358
Non-owner-occupied		111,865		566,992		288,939		267,792		263,488		279,534		69,403		73,130		1,921,143
Farmland		22,470		75,807		54,607		52,831		92,875		77,722		50,267		177		426,756
5+ Multi-family		7,257		110,450		48,822		91,199		119,504		11,714		1,770		—		390,716
1-4 Family construction		—		—		—		—		—		—		40,463		—		40,463
General construction		7,750		4,807		5,857		936		548		2,957		910,394		4,102		937,351
Total Commercial real estate		238,785		1,184,390		698,640		650,195		651,753		662,622		1,102,625		94,777		5,283,787
Consumer real estate:
HELOC		17,606		23,227		13,430		454		86		2,916		419,468		—		477,187
First lien: 1-4 family		119,235		358,923		110,014		126,240		111,528		118,687		1,412		—		946,039
Junior lien: 1-4 family		2,298		9,308		3,559		2,267		1,201		2,361		291		—		21,285
Total Consumer real estate		139,139		391,458		127,003		128,961		112,815		123,964		421,171		—		1,444,511
Consumer:
Revolving line		—		—		—		—		—		85		85,927		—		86,012
Auto		4,314		13,670		5,117		3,110		1,553		1,036		—		—		28,800
Other		1,245		8,509		3,156		638		1,271		355		16,735		—		31,909
Total Consumer		5,559		22,179		8,273		3,748		2,824		1,476		102,662		—		146,721
Credit cards:
Consumer		—		—		—		—		—		—		203,318		—		203,318
Commercial		—		—		—		—		—		—		170,289		—		170,289
Total Credit cards		—		—		—		—		—		—		373,607		—		373,607
Leases and other:
Leases		—		557		—		833		—		769		—		—		2,159
Other		586		12,693		9,470		3,444		2,414		5,889		188,640		—		223,136
Total Leases and other		586		13,250		9,470		4,277		2,414		6,658		188,640		—		225,295
Total loans	$	1,348,850	$	2,697,240	$	1,507,989	$	1,060,584	$	1,009,748	$	983,572	$	5,236,249	$	105,478	$	13,949,710

Accrued interest on loans totaled $44.1 million as of March 31, 2020 and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost basis of loans presented above. Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivables.

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans, net charge-offs, non-performing loans, and general economic conditions.

The Company utilizes a risk grading matrix to assign a rating to each of its commercial, commercial real estate, and construction real estate loans. The loan ratings are summarized into the following categories: Non-watch list, Watch, Special Mention, Substandard, and Doubtful. Any loan not classified in one of the categories described below is considered to be a Non-watch list loan. A description of the general characteristics of the loan rating categories is as follows:

A discussion of the credit quality indicators that impact each type of collateral securing Commercial and industrial loans is included below:

Equipment, accounts receivable, and inventory General commercial and industrial loans are secured by working capital assets and non-real estate assets. The general purpose of these loans is for financing capital expenditures and current operations for commercial and industrial entities. These assets are short-term in nature. In the case of accounts receivable and inventories, the repayment of debt is reliant upon converting assets into cash or through goods and services being sold and collected. Collateral based-risk is due to aged short-term assets, which can be indicative of underlying issues with the borrower and lead to the value of the collateral being overstated.

Agriculture Agricultural loans are secured by non-real estate agricultural assets. These include shorter-term assets such as equipment, crops, and livestock. The risks associated with loans to finance crops or livestock include the borrower’s ability to successfully raise and market the commodity. Adverse weather conditions and other

natural perils can dramatically affect farmers’ or ranchers’ production and ability to service debt. Volatile commodity prices present another significant risk for agriculture borrowers. Market price volatility and production cost volatility can affect both revenues and expenses.

Overdrafts Commercial overdrafts are typically short-term and unsecured. Some commercial borrowers tie their overdraft obligation to their line of credit, so any draw on the line of credit will satisfy the overdraft.

Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position. The following table provides a summary of the amortized cost balance by collateral type and risk rating as of March 31, 2020 (in thousands):

	March 31, 2020
													Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans


Risk by Collateral	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2020		2019		2018		2017		2016		Prior						Total
Equipment/Accounts Receivable/Inventory
Non-watch list	$	889,106	$	970,210	$	608,207	$	249,951	$	198,513	$	182,297	$	2,231,968	$	6,191	$	5,336,443
Watch		28,487		17,722		40,462		6,142		25,592		3,224		82,337		—		203,966
Special Mention		97		408		2,366		2,251		9,240		624		27,778		3,990		46,754
Substandard		37,621		24,127		9,622		2,947		2,041		719		87,157		520		164,754
Doubtful		—		139		—		5,780		—		39		325		—		6,283
Total Equipment/Accounts Receivable/Inventory	$	955,311	$	1,012,606	$	660,657	$	267,071	$	235,386	$	186,903	$	2,429,565	$	10,701	$	5,758,200
Agriculture
Non-watch list	$	832	$	10,113	$	3,374	$	2,991	$	3,982	$	1,769	$	102,899	$	—	$	125,960
Watch		135		161		532		144		503		45		12,223		—		13,743
Special Mention		—		475		22		163		22		—		3,285		—		3,967
Substandard		—		1,319		18		3,034		49		135		30,337		—		34,892
Doubtful		—		—		—		—		—		—		—		—		—
Total Agriculture	$	967	$	12,068	$	3,946	$	6,332	$	4,556	$	1,949	$	148,744	$	—	$	178,562

A discussion of the credit quality indicators that impact each type of collateral securing Specialty loans is included below:

Asset-based lending General asset-based loans are secured by accounts receivable, inventory, equipment, and real estate. The purpose of these loans is for financing current operations for commercial customers. The repayment of debt is reliant upon collection of the accounts receivable within 30 to 90 days or converting assets into cash or through goods and services being sold and collected. The Company tracks each individual borrower credit risk based on their loan to collateral position. Any borrower position where the underlying value of collateral is below the fair value of the loan is considered out-of-margin and inherently higher risk.

Factoring General factoring loans are secured by accounts receivable. The purpose of these loans is for financing current operations for trucking or other commercial customers. The repayment of debt is reliant upon collection of the accounts receivable within 30 to 90 days. The Company tracks each individual borrower credit risk based on their loan to collateral position. Any borrower that has experienced a position where the underlying value of collateral is below the fair value of the loan is considered out-of-margin and inherently higher risk.

The following table provides a summary of the amortized cost balance by collateral type and risk rating as of March 31, 2020 (in thousands):

A discussion of the credit quality indicators that impact each type of collateral securing Commercial real estate loans is included below:

Owner-occupied Owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The loans rely on the owner-occupied operations to service debt which cover a broad spectrum of industries. Real estate debt can carry a significant amount of leverage for a borrower to maintain.

Non-owner-occupied Non-owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The key element of risk in this type of lending is the cyclical nature of real estate markets. Although national conditions affect the overall real estate industry, the effect of national conditions on local markets is equally important. Factors such as unemployment rates, consumer demand, household formation, and the level of economic activity can vary widely from state to state and among metropolitan areas. In addition to geographic considerations, markets can be defined by property type. While all sectors are influenced by economic conditions, some sectors are more sensitive to certain economic factors than others.

Farmland Farmland loans are secured by real estate used for agricultural purposes such as crop and livestock production. Assets used as collateral are long-term assets that carry the ability to have longer amortizations and maturities. Longer terms carry the risk of added susceptibility to market conditions. The limited purpose of some Agriculture-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge.

5+ Multi-family 5+ multi-family loans are secured by a multi-family residential property. The primary risks associated with this type of collateral are largely driven by economic conditions. The national and local market conditions can change with unemployment rates or competing supply of multi-family housing. Tenants may not be able to afford their housing or have better options and this can result in increased vacancy. Rents may need to be lowered to fill apartment units. Increased vacancy and lower rental rates not only drive the borrower’s ability to repay debt but also contribute to how the collateral is valued.

1-4 Family construction 1-4 family construction loans are secured by 1-4 family residential real estate and are in the process of construction or improvements being made. The predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Market conditions also play an important role in understanding the risk profile. Risk from adverse changes in market conditions from the start of development to completion can result in deflated collateral values

General construction General construction loans are secured by commercial real estate in process of construction or improvements being made and their repayment is dependent on the collateral’s completion. Construction lending presents unique risks not encountered in term financing of existing real estate. The predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Commercial properties under construction are susceptible to market and economic conditions. Demand from prospective customers may erode after construction begins because of a general economic slowdown or an increase in the supply of competing properties.

	March 31, 2020
													Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans


Risk by Collateral	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2020		2019		2018		2017		2016		Prior						Total
Owner-occupied
Non-watch list	$	84,399	$	418,347	$	252,193	$	203,728	$	166,497	$	281,410	$	18,351	$	17,368	$	1,442,293
Watch		—		6,398		35,581		—		—		502		—		—		42,481
Special Mention		—		990		6,327		1,722		2,100		1,987		43		—		13,169
Substandard		5,044		599		6,314		31,987		6,102		6,796		11,934		—		68,776
Doubtful		—		—		—		—		639		—		—		—		639
Total Owner-occupied	$	89,443	$	426,334	$	300,415	$	237,437	$	175,338	$	290,695	$	30,328	$	17,368	$	1,567,358
Non-owner-occupied
Non-watch list	$	111,681	$	566,241	$	288,939	$	260,214	$	260,735	$	273,040	$	69,403	$	73,130	$	1,903,383
Watch		—		300		—		7,578		1,983		5,105		—		—		14,966
Special Mention		—		—		—		—		—		1,329		—		—		1,329
Substandard		184		451		—		—		770		60		—		—		1,465
Doubtful		—		—		—		—		—		—		—		—		—
Total Non-owner-occupied	$	111,865	$	566,992	$	288,939	$	267,792	$	263,488	$	279,534	$	69,403	$	73,130	$	1,921,143
Farmland
Non-watch list	$	20,730	$	56,685	$	31,484	$	38,394	$	65,139	$	34,394	$	27,597	$	177	$	274,600
Watch		123		3,727		15,251		6,299		5,294		26,809		19,193		—		76,696
Special Mention		—		—		1,220		510		1,462		507		205		—		3,904
Substandard		1,617		15,395		6,652		7,628		20,980		16,012		3,272		—		71,556
Doubtful		—		—		—		—		—		—		—		—		—
Total Farmland	$	22,470	$	75,807	$	54,607	$	52,831	$	92,875	$	77,722	$	50,267	$	177	$	426,756
5+ Multi-family
Non-watch list	$	7,257	$	107,990	$	48,822	$	89,850	$	111,374	$	11,714	$	1,770	$	—	$	378,777
Watch		—		—		—		1,349		—		—		—		—		1,349
Special Mention		—		2,460		—		—		6,269		—		—		—		8,729
Substandard		—		—		—		—		1,861		—		—		—		1,861
Doubtful		—		—		—		—		—		—		—		—		—
Total 5+ Multi-family	$	7,257	$	110,450	$	48,822	$	91,199	$	119,504	$	11,714	$	1,770	$	—	$	390,716
1-4 Family construction
Non-watch list	$	—	$	—	$	—	$	—	$	—	$	—	$	40,463	$	—	$	40,463
Watch		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total 1-4 Family construction	$	—	$	—	$	—	$	—	$	—	$	—	$	40,463	$	—	$	40,463
General construction
Non-watch list	$	6,828	$	4,713	$	5,689	$	936	$	548	$	2,957	$	907,000	$	4,102	$	932,773
Watch		617		—		—		—		—		—		—		—		617
Special Mention		305		—		—		—		—		—		—		—		305
Substandard		—		—		168		—		—		—		3,394		—		3,562
Doubtful		—		94		—		—		—		—		—		—		94
Total General construction	$	7,750	$	4,807	$	5,857	$	936	$	548	$	2,957	$	910,394	$	4,102	$	937,351

A discussion of the credit quality indicators that impact each type of collateral securing Consumer real estate loans is included below:

HELOC HELOC loans are revolving lines of credit secured by 1-4 family residential property. The primary risk is the borrower’s inability to repay debt. Revolving notes are often associated with HELOCs that can be secured by real estate without a 1st lien priority. Collateral is susceptible to market volatility impacting home values or economic downturns.

First lien: 1-4 family First lien 1-4 family loans are secured by a first lien on 1-4 family residential property. These term loans carry longer maturities and amortizations. The longer tenure exposes the borrower to multiple economic cycles, coupled with longer amortizations that result in smaller principal reduction early in the life of the loan. Collateral is susceptible to market volatility impacting home values.

Junior lien: 1-4 family Junior lien 1-4 family loans are secured by a junior lien on 1-4 family residential property. The Company’s primary risk is the borrower’s inability to repay debt and not being in a priority lien position. Collateral is susceptible to market volatility impacting home values or economic downturns.

A borrower is considered non-performing if the Company has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan origination vintage basis. Certain vintages, based on their maturation cycle, could be at higher risk due to collateral-based risk factors. The following table provides a summary of the amortized cost balance by collateral type and risk rating as of March 31, 2020 (in thousands):

A discussion of the credit quality indicators that impact each type of collateral securing Consumer loans is included below:

Revolving line Consumer Revolving lines of credit are secured by consumer assets other than real estate. The primary risk associated with this collateral is related to market volatility and the value of the underlying financial assets.

Auto Direct consumer auto loans are secured by new and used consumer vehicles. The primary risk with this collateral class is the rate at which the collateral depreciates.

Other This category includes Other consumer loans made to an individual. The primary risk for this category is for those loans where the loan is unsecured. This collateral type also includes other unsecured lending such as consumer overdrafts.

following table provides a summary of the amortized cost balance by collateral type and risk rating as of March 31, 2020 (in thousands):

A discussion of the credit quality indicators that impact Credit card loans is included below:

Consumer Consumer credit card loans are revolving loans made to individuals. The primary risk associated with this collateral class is credit card debt is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. The highly competitive environment for credit card lending provides consumers with ample opportunity to hold several credit cards from different issuers and to pay only minimum monthly payments on outstanding balances. In such an environment, borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a personal catastrophic event.

The consumer credit card portfolio is segmented by borrower payment activity. Transactors are defined as accounts that pay off their balance by the end of each statement cycle. Revolvers are defined as an account that carries a balance from statement cycle to the next. These accounts incur monthly finance charges, and, sometimes, late fees. Revolvers are inherently higher risk and are tracked by FICO score.

Commercial Commercial credit card loans are revolving loans made to small and commercial businesses. The primary risk associated with this collateral class is credit card debt is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. Borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a catastrophic event.

The commercial credit card portfolio is segmented by current and past due payment status. A borrower is past due after 30 days. In general, commercial credit card customers do not have incentive to hold a balance resulting in paying interest on credit card debt as commercial customers will typically have other debt obligations with lower interest rates in which they can utilize for capital.

The following table provides a summary of the amortized cost balance of consumer credit cards by risk rating as of March 31, 2020 (in thousands):

The following table provides a summary of the amortized cost balance of commercial credit cards by risk rating as of March 31, 2020 (in thousands):

A discussion of the credit quality indicators that impact each type of collateral securing Leases and other loans is included below:

Leases Leases are either loans to individuals for household, family and other personal expenditures or are loans related to all other direct financing and leveraged leases on property for leasing to lessees other than for household, family and other personal expenditure purposes. Leases to individuals are secured by the lease between the lessor and the lessee. All other leases are secured by the lease between the lessor and the lessee. These assignments grant the creditor a security interest in the rent stream from any lease, an important source of cash to pay the note in case of the borrower’s default.

Other Other loans are loans that are obligations of states and political subdivisions in the U.S., loans to non-depository financial institutions, loans for purchasing or carrying securities, or all other non-consumer loans. Risk associated with other loans is tied to the underlying collateral by each type of loan. Collateral is generally equipment, account receivable, inventory, 1-4 family residential construction and susceptible to the same risks mentioned with those collateral types previously. Other risks consist of collateral that is secured by the stock of the non-depository financial institution, which can be unlisted stock with a limited market for the stock or volatility of asset values driven by market performance.

The description of the general characteristics of the loan rating categories is as described above, however in the prior period disclosures the Substandard loan rating category may also include loans where the collection of full principal is doubtful or remote.

All other classes of loans are generally evaluated and monitored based on payment activity. Non-performing loans include restructured loans on non-accrual and all other non-accrual loans.

This table provides an analysis of the credit risk profile of each loan class at December 31, 2019 (in thousands):

The allowance for credit losses (ACL) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance

when management believes the loan balance becomes uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in portfolio industry-based segmentation, risk rating and FICO score changes, prepayment assumptions, changes in environmental conditions, or other relevant factors. For economic forecasts, the Company uses the Moody’s baseline scenario. The Company has developed a dynamic reasonable and supportable forecast period that ranges from one to three years and changes based on economic conditions. Due to current economic conditions, the Company’s reasonable and supportable forecast period is one year. After the reasonable and supportable forecast period, the Company reverts to historical losses. The reversion method applied to each portfolio can either be cliff or straight-line over four periods. The method is determined by loss specific data at the end of the reasonable and supportable forecast period.

The ACL is measured on a collective (pool) basis when similar risk characteristics exists. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods. The Company’s portfolio segmentation consists of Commercial and industrial, Specialty lending, Commercial real estate, Consumer real estate, Consumer, Credit cards, Leases and other, and Held-to-maturity securities. Multiple modeling techniques are used to measure credit losses based on the portfolio.

The Commercial & industrial and Leases and other segments are measured using a probability of default and loss given default method. Primary risk drivers within the segment are risk ratings of the individual loans along with changes of macro-economic variables such as unemployment, the 2-Year Treasury Rate, and farm income.

Collateral positions for Specialty lending loans are continuously monitored by the Company and the borrower is required to continually adjust the amount of collateral securing the loan. Credit losses are measured for any position where the amortized cost basis is greater than the fair value of the collateral.

The Commercial real estate segment is measured using a probability of default and loss given default method. Primary risk drivers within the segment are risk ratings of the individual loans, along with changes of macro-economic variables, such as unemployment, interest rates, construction activity, farm income, and vacancy rates.

The Consumer real estate and Consumer segments are measured using an origination vintage loss rate method. The primary risk driver within the segments is year of origination along with changes of macro-economic variables such as unemployment and the home price index.

The Credit card segment contains both consumer and commercial credit cards. Consumer credit cards are measured using a probability of default and loss given default method. Primary risk drivers within the segment are FICO ratings of the individual card holders along with changes of macro-economic variables such as unemployment and retail sales. Commercial credit cards are measured using roll-rate loss rate method based on days past due.

The Held-to-maturity (HTM) securities segment is measured using a loss rate method based on historical bond rating transitions. Primary risk drivers within the segment are bond ratings in the portfolio along with changes of macro-economic conditions. For further discussion on these securities, including the aging and amortized cost balance of HTM securities, see Note 5, “Securities.”

See the credit quality indicators presented previously for a summary of current risk in the Company’s portfolio. Changes in economic forecasts will affect all portfolio segments, updated financial records from borrowers will affect portfolio segments by risk rating, updated FICO scores will affect consumer credit cards, payment performance will affect consumer and commercial credit card portfolio segments, and updated bond credit ratings will affect held-to-maturity securities. The Company actively monitors all credit quality indicators for risk changes that will influence the current estimate.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. 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 troubled debt restructuring (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 cancelable by the Company.

Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management first estimates the future cash flows expected to be received and then applies those expected future cash flows to the credit card balance. Expected credit losses for credit cards are determined by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting period until the expected payments have been fully allocated. The ACL is recorded for the excess of the balance outstanding as of the reporting period over the expected principal payments.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are excluded from the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for undiscounted selling costs as appropriate. All loans are considered collateral dependent if placed on non-accrual or are considered to be a TDR.

A loan modification is considered a TDR when a concession has been granted to a debtor experiencing financial difficulties. The allowance for credit loss on a TDR is measured using the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original effective interest rate of the loan.

This table provides a rollforward of the allowance for credit losses by portfolio segment for the three months ended March 31, 2020 (in thousands):

This table provides a rollforward of the allowance for loan losses by portfolio segment for the three months ended March 31, 2019 (in thousands):

This table provides the amortized cost balance of financial assets considered collateral dependent as of March 31, 2020 (in thousands):

	March 31, 2020
Loan Segment and Type	Amortized Cost of Collateral Dependent Assets		Related Allowance for Credit Losses		Amortized Cost of Collateral Dependent Assets with no related Allowance
Commercial and industrial:
Equipment/Accounts Receivable/Inventory	$	34,636	$	6,607	$	14,125
Agriculture		7,977		—		7,977
Total Commercial and industrial		42,613		6,607		22,102
Specialty lending:
Asset-based lending		907		—		907
Factoring		548		41		104
Total Specialty lending		1,455		41		1,011
Commercial real estate:
Owner-occupied		32,561		21		27,389
Non-owner-occupied		1,221		—		1,221
Farmland		9,316		—		9,316
5+ Multi-family		—		—		—
1-4 Family construction		—		—		—
General construction		3,489		595		777
Total Commercial real estate		46,587		616		38,703
Consumer real estate:
HELOC		3,351		—		3,351
First lien: 1-4 family		2,082		—		2,082
Junior lien: 1-4 family		268		81		175
Total Consumer real estate		5,701		81		5,608
Consumer:
Revolving line		124		—		124
Auto		56		—		56
Other		4		—		4
Total Consumer		184		—		184
Leases and other:
Leases		—		—		—
Other		69		—		69
Total Leases and other		69		—		69
Total loans	$	96,609	$	7,345	$	67,677

This table provides an analysis of impaired loans by class at December 31, 2019 (in thousands):

	As of December 31, 2019
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	32,301	$	20,986	$	856	$	21,842	$	271	$	31,271
Asset-based		948		948		—		948		—		190
Factoring		2,979		2,979		—		2,979		—		3,917
Commercial – credit card		—		—		—		—		—		—
Real estate:
Real estate – construction		97		95		—		95		—		19
Real estate – commercial		28,258		19,314		4,928		24,242		387		19,826
Real estate – residential		1,751		1,617		93		1,710		80		846
Real estate – HELOC		—		—		—		—		—		—
Consumer:
Consumer – credit card		—		—		—		—		—		—
Consumer – other		—		—		—		—		—		70
Leases		—		—		—		—		—		—
Total	$	66,334	$	45,939	$	5,877	$	51,816	$	738	$	56,139

A loan modification is considered a TDR when a concession has been granted to a debtor experiencing financial difficulties. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve their financial condition. The Company’s TDRs are considered collateral dependent and evaluated as part of the allowance for credit loss as described above in the Allowance for Credit Losses section of this note.

The Company had no outstanding commitments to lend to borrowers with loan modifications classified as TDRs as of March 31, 2020 and March 31, 2019. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term.

For the three-month periods ended March 31, 2020 and March 31, 2019, the Company had no new TDRs. For the three-month periods ended March 31, 2020 and March 31, 2019, the Company had no TDRs for which there was a payment default within the 12 months following the restructure date.

For the three-month period ended March 31, 2020, the Company had one loan modification for $7 thousand due to the effects of Coronavirus Disease 2019 (COVID-19) which was not identified as a TDR, consistent with the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. The Company anticipates additional loans to be restructured due to the effects of COVID-19 in the coming periods that will not be identified as TDRs. See further discussion of the impacts of COVID-19 on the Company’s consolidated financial statements in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”