Loans held for investment summarized by portfolio segment are as follows (in thousands).

(1)

Primarily represents margin loans to customers and correspondents associated with broker-dealer segment operations.

Non-accrual loans, excluding those classified as held for sale, are summarized by class in the following table (in thousands).


	March 31,		December 31,
	2020		2019
Commercial real estate:
Non-owner occupied	$	18,168	$	3,813
Owner occupied		5,184		3,495
Commercial and industrial		47,121		15,262
Construction and land development		1,402		1,316
1-4 family residential		10,599		7,382
Consumer		310		26
Broker-dealer		—		—
	$	82,784	$	31,294

At March 31, 2020 and December 31, 2019, an additional $4.6 million and $4.8 million, respectively, of real estate loans secured by residential properties and classified as held for sale were in non-accrual status.

The following table provides further details associated with non-accrual loans (in thousands).


							Three Months Ended
							March 31, 2020
	Non-accrual Loans						Interest Income
March 31, 2020	with Allowance		with No Allowance		Total		Recognized (1)
Commercial real estate:
Non-owner occupied	$	9,179	$	8,989	$	18,168	$	(97)
Owner occupied		1,162		4,022		5,184		16
Commercial and industrial		39,950		7,171		47,121		300
Construction and land development		176		1,226		1,402		22
1-4 family residential		1,516		9,083		10,599		983
Consumer		310		—		310		(5)
Broker-dealer		—		—		—		—
	$	52,293	$	30,491	$	82,784	$	1,219

(1)	Interest income recognized on non-accrual loans during the three months ended March 31, 2019 was $0.4 million.

The Company considers non-accrual loans to be collateral-dependent unless there are underlying mitigating circumstances. The practical expedient to measure the allowance using the fair value of the collateral has been implemented. Loans accounted for on a non-accrual basis were primarily comprised of two commercial non-owner

occupied real estate loans totaling $15.3 million, a single commercial and industrial loan totaling $23.8 million and various 1-4 family residential, commercial real estate, and construction and land development loans totaling $8.0 million that were previously evaluated as a part of PCI loan pools prior to CECL.

The Bank classifies loan modifications as TDRs when it concludes that it has both granted a concession to a debtor and that the debtor is experiencing financial difficulties. Loan modifications are typically structured to create affordable payments for the debtor and can be achieved in a variety of ways. The Bank modifies loans by reducing interest rates and/or lengthening loan amortization schedules. The Bank may also reconfigure a single loan into two or more loans (“A/B Note”). The typical A/B Note restructure results in a “bad” loan which is charged off and a “good” loan or loans, the terms of which comply with the Bank’s customary underwriting policies. The debt charged off on the “bad” loan is not forgiven to the debtor.

Information regarding TDRs granted during the three months ended March 31, 2020, is shown in the following table (dollars in thousands). There were no TDRs granted during the three months ended March 31, 2019. At March 31, 2020 and December 31, 2019, the Bank had nominal unadvanced commitments to borrowers whose loans have been restructured in TDRs.


	Three Months Ended March 31, 2020
	Number of	Balance at		Balance at
	Loans	Extension		End of Period
Commercial real estate:
Non-owner occupied	—	$	—	$	—
Owner occupied	—		—		—
Commercial and industrial	1		1,089		1,166
Construction and land development	—		—		—
1-4 family residential	—		—		—
Consumer	—		—		—
Broker-dealer	—		—		—
Covered	—		—		—
	1	$	1,089	$	1,166

There were no TDRs granted during the twelve months preceding March 31, 2020 or 2019 for which a payment was at least 30 days past due.

An analysis of the aging of the Company’s loan portfolio is shown in the following tables (in thousands).


													Accruing Loans
	Loans Past Due		Loans Past Due		Loans Past Due		Total		Current		Total		Past Due
March 31, 2020	30-59 Days		60-89 Days		90 Days or More		Past Due Loans		Loans		Loans		90 Days or More
Commercial real estate:
Non-owner occupied	$	6,488	$	16,772	$	199	$	23,459	$	1,721,265	$	1,744,724	$	—
Owner occupied		12,152		2,685		3,400		18,237		1,299,081		1,317,318		—
Commercial and industrial		6,740		1,125		2,768		10,633		2,091,335		2,101,968		47
Construction and land development		3,955		3		98		4,056		951,117		955,173		97
1-4 family residential		16,832		2,600		5,896		25,328		651,302		676,630		—
Consumer		167		158		284		609		42,578		43,187		—
Broker-dealer		—		—		—		—		506,250		506,250		—
	$	46,334	$	23,343	$	12,645	$	82,322	$	7,262,928	$	7,345,250	$	144


													Accruing Loans
	Loans Past Due		Loans Past Due		Loans Past Due		Total		Current		Total		Past Due
December 31, 2019	30-59 Days		60-89 Days		90 Days or More		Past Due Loans		Loans		Loans		90 Days or More
Commercial real estate:
Non-owner occupied	$	4,062	$	—	$	2,790	$	6,852	$	1,702,500	$	1,709,352	$	—
Owner occupied		1,813		880		3,265		5,958		1,285,213		1,291,171		—
Commercial and industrial		5,967		1,735		3,395		11,097		2,014,623		2,025,720		3
Construction and land development		7,580		1,827		—		9,407		931,157		940,564		—
1-4 family residential		12,058		3,442		6,520		22,020		769,000		791,020		—
Consumer		455		34		—		489		46,557		47,046		—
Broker-dealer		—		—		—		—		576,527		576,527		—
	$	31,935	$	7,918	$	15,970	$	55,823	$	7,325,577	$	7,381,400	$	3

In addition to the loans shown in the tables above, PrimeLending had $101.2 million and $102.7 million of loans included in loans held for sale (with an aggregate unpaid principal balance of $102.4 million and $104.0 million, respectively) that were 90 days past due and accruing interest at March 31, 2020 and December 31, 2019, respectively. These loans are guaranteed by U.S. government agencies and include loans that are subject to repurchase, or have been repurchased, by PrimeLending.

Management tracks credit quality trends on a quarterly basis related to: (i) past due levels, (ii) non-performing asset levels, (iii) classified loan levels and (iv) general economic conditions in state and local markets.

A description of the risk rating internal grades for commercial loans is presented in the following table.


Risk Rating	Internal Grade	Risk Rating Description
Pass low risk	1 - 3	Represents loans to very high credit quality commercial borrowers of investment or near investment grade. These borrowers have significant capital strength, moderate leverage, stable earnings and growth, and readily available financing alternatives. Smaller entities, regardless of strength, would generally not fit in these grades. Commercial borrowers entirely cash secured are also included in this category.
Pass normal risk	4 - 7	Represents loans to commercial borrowers of solid credit quality with moderate risk. Borrowers in these grades are differentiated from higher grades on the basis of size (capital and/or revenue), leverage, asset quality and the stability of the industry or market area.
Pass high risk	8 - 10	Represents "pass grade" loans to commercial borrowers of higher, but acceptable credit quality and risk. Such borrowers are differentiated from Pass Normal Risk in terms of size, secondary sources of repayment or they are of lesser stature in other key credit metrics in that they may be over-leveraged, under capitalized, inconsistent in performance or in an industry or an economic area that is known to have a higher level of risk, volatility, or susceptibility to weaknesses in the economy.
Watch	11	Represents loans on management's "watch list" and is intended to be utilized on a temporary basis for pass grade commercial borrowers where a significant risk-modifying action is anticipated in the near term.
Special mention	12	Represents loans with potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loans and weaken the Company's credit position at some future date.
Substandard accrual	13	Represents loans, in accordance with regulatory guidelines, for which the accrual of interest has not been stopped, but are inadequately protected by the current sound worth and paying capacity of the obligor or the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Substandard non-accrual	14	Represents loans, in accordance with regulatory guidelines, for which the accrual of interest has been stopped and includes loans where interest is more than 90 days past due and not fully secured and loans where a specific valuation allowance may be necessary.
Doubtful	15	Represents loans, in accordance with regulatory guidelines, that are placed on non-accrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty.
Loss	16	Represents loans, in accordance with regulatory guidelines, that are to be charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. Rating is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt.

For 1-4 family residential and consumer loans, the Company utilizes separate credit models designed for these types of loans to estimate the PD and LGD grades for the allowance for credit losses calculation. The primary driver of the PD score is the borrower's FICO score at origination. A portion of the Company’s 1-4 family residential loans were acquired as part of a FDIC-assisted transaction in 2013 and the FICO information at origination was incomplete. The credit scores were refreshed in 2016 and these new scores were used as a proxy for the FICO score at origination. New originations and loan purchases are scored using the FICO score at origination. FICO score bands are assigned following prevalent industry standards and are used as the credit quality indicator for these types of loans. Substandard non-accrual loans are treated as a separate category in the credit scoring grid as the probability of default is 100% and the FICO score is no longer a relevant predictor.

The following table presents loans held for investment grouped by asset class and credit quality indicator, segregated by year of origination or renewal (in thousands).


	Amortized Cost Basis by Origination Year
March 31, 2020	2020		2019		2018		2017		2016			2015 and Prior	Revolving		Total
Commercial real estate: non-owner occupied
Internal Grade 1-3 (Pass low risk)	$	2,702	$	42,015	$	9,354	$	14,536	$	15,164	$	19,926	$	402	$	104,099
Internal Grade 4-7 (Pass normal risk)		45,963		186,755		150,078		149,826		148,241		126,033		25,449		832,345
Internal Grade 8-11 (Pass high risk and watch)		48,289		117,730		169,739		126,886		174,480		82,043		1,145		720,312
Internal Grade 12 (Special mention)		—		—		—		—		—		—		—		—
Internal Grade 13 (Substandard accrual)		—		1,189		1,784		4,317		8,387		54,123		—		69,800
Internal Grade 14 (Substandard non-accrual)		—		15,330		—		882		—		1,956		—		18,168
Commercial real estate: owner occupied
Internal Grade 1-3 (Pass low risk)	$	19,261	$	35,707	$	11,362	$	27,494	$	23,433	$	48,577	$	2	$	165,836
Internal Grade 4-7 (Pass normal risk)		73,334		153,997		219,995		91,386		75,445		124,679		31,734		770,570
Internal Grade 8-11 (Pass high risk and watch)		6,627		76,220		64,306		92,640		33,586		43,919		15,103		332,401
Internal Grade 12 (Special mention)		—		—		—		—		—		48		—		48
Internal Grade 13 (Substandard accrual)		3,466		2,436		3,980		11,661		9,105		12,631		—		43,279
Internal Grade 14 (Substandard non-accrual)		555		—		81		2,528		1,041		979		—		5,184
Commercial and industrial
Internal Grade 1-3 (Pass low risk)	$	20,004	$	14,683	$	7,762	$	6,239	$	4,817	$	881	$	92,106	$	146,492
Internal Grade 4-7 (Pass normal risk)		36,169		119,001		77,750		58,562		25,450		19,585		374,251		710,768
Internal Grade 8-11 (Pass high risk and watch)		40,361		98,826		64,810		26,805		41,982		3,828		200,425		477,037
Internal Grade 12 (Special mention)		844		1,372		2,028		492		5,246		—		13,306		23,288
Internal Grade 13 (Substandard accrual)		28		3,411		8,785		2,642		6,596		4,396		16,475		42,333
Internal Grade 14 (Substandard non-accrual)		30,145		2,445		1,506		8,225		231		379		4,190		47,121
Construction and land development
Internal Grade 1-3 (Pass low risk)	$	4,717	$	21,250	$	23,557	$	282	$	1,169	$	337	$	1,956	$	53,268
Internal Grade 4-7 (Pass normal risk)		80,147		237,466		106,525		38,310		7,760		5,038		41,525		516,771
Internal Grade 8-11 (Pass high risk and watch)		24,257		164,164		133,025		22,711		4,431		2,119		6,899		357,606
Internal Grade 12 (Special mention)		—		—		—		—		—		—		—		—
Internal Grade 13 (Substandard accrual)		—		1,135		—		—		—		7		—		1,142
Internal Grade 14 (Substandard non-accrual)		—		458		—		—		768		176		—		1,402
Construction and land development - individuals
FICO less than 620	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
FICO between 620 and 720		—		4,394		1,474		—		—		—		—		5,868
FICO greater than 720		3,171		10,617		5,184		—		—		—		—		18,972
Substandard non-accrual		—		—		—		—		—		—		—		—
Other (1)		144		—		—		—		—		—		—		144
1-4 family residential
FICO less than 620	$	—	$	738	$	3,724	$	231	$	1,110	$	40,354	$	545	$	46,702
FICO between 620 and 720		1,252		11,793		15,878		10,850		13,739		48,114		1,585		103,211
FICO greater than 720		16,389		84,807		105,533		54,505		50,839		106,744		4,521		423,338
Substandard non-accrual		—		—		—		101		439		10,059		—		10,599
Other (1)		8,660		58,480		9,557		2,238		1,466		10,152		2,227		92,780
Consumer
FICO less than 620	$	318	$	1,830	$	312	$	193	$	59	$	100	$	373	$	3,185
FICO between 620 and 720		2,145		5,082		971		919		183		152		2,686		12,138
FICO greater than 720		2,722		8,327		3,694		542		500		131		5,062		20,978
Substandard non-accrual		—		—		—		35		—		25		250		310
Other (1)		2,346		3,178		673		66		56		—		257		6,576

Total loans with credit quality measures	$	474,016	$	1,484,836	$	1,203,427	$	756,104	$	655,723	$	767,491	$	842,474	$	6,184,071
Commercial and industrial (collateral maintenance)															$	654,929
Broker-dealer (collateral maintenance)															$	506,250
Total loans held for investment															$	7,345,250

(1) Loans classified in this category were assigned a FICO score based on various factors specific to the borrower for credit modeling purposes.

Allowance for Credit Losses for Loans Held for Investment

The allowance for credit losses for loans held for investment represents management’s best estimate of all expected credit losses over the expected contractual life of our existing portfolio. Management revised its methodology for determining the allowance for credit losses upon the implementation of CECL. Management considers the level of allowance for credit losses to be a reasonable and supportable estimate of expected credit losses inherent within the loans held for investment portfolio as of March 31, 2020. While the Company believes it has an appropriate allowance for the existing loan portfolio at March 31, 2020, additional provision for losses on existing loans may be necessary in the future. Future changes in the allowance for credit losses are expected to be volatile given dependence upon, among other things, the portfolio composition and quality, as well as the impact of significant drivers, including prepayment assumptions and macroeconomic conditions and forecasts. In addition to the allowance for credit losses, the Company maintains a separate allowance for credit losses related to off-balance sheet credit exposures, including unfunded loan commitments, and this amount is included in other liabilities within the consolidated balance sheets (see Note 14 to the consolidated financial statements). For further information on the policies that govern the estimation of the allowances for credit losses levels, see Note 1 to the consolidated financial statements.

The increase in the allowance for credit losses for loans held for investment during the first quarter of 2020 was primarily attributable to changes within the Bank. As previously discussed, the Company adopted the new CECL standard and recorded transition adjustment entries that resulted in an allowance for credit losses of $73.7 million as of January 1, 2020, an increase of $12.6 million. This increase included an increase in credit losses of $18.9 million from the expansion of the loss horizon to life of loan, partially offset by the elimination of the non-credit component within the historical allowance related to previously categorized PCI loans of $6.3 million.

During the three months ended March 31, 2020, reserves on individually evaluated loans increased $17.6 million, while reserves on expected losses of collectively evaluated loans increased primarily due to the increase in the expected lifetime credit losses under CECL attributable to the deteriorating economic outlook associated with the impact of the market disruption caused by the novel coronavirus (“COVID-19”) pandemic. While not material, the change in the allowance for credit losses during the three months ended March 31, 2020 was also attributable to other factors including, but not limited to, loan growth, loan mix and changes in risk rating grades.

Changes in the allowance for credit losses for loans held for investment, distributed by portfolio segment, are shown below (in thousands).


	Balance,		Transition		Provision for				Recoveries on		Balance,
	Beginning of		Adjustment		(Reversal of)		Loans		Charged Off		End of
Three Months Ended March 31, 2020	Period		CECL		Credit Losses		Charged Off		Loans		Period
Commercial real estate	$	31,595	$	8,073	$	14,475	$	(214)	$	10	$	53,939
Commercial and industrial		17,964		3,193		18,446		(1,440)		387		38,550
Construction and land development		4,878		577		907		(2)		—		6,360
1-4 family residential		6,386		(29)		201		(203)		10		6,365
Consumer		265		748		246		(176)		120		1,203
Broker-dealer		48		—		274		—		—		322
Total	$	61,136	$	12,562	$	34,549	$	(2,035)	$	527	$	106,739


	Balance,		Transition		Provision for				Recoveries on		Balance,
	Beginning of		Adjustment		(Reversal of)		Loans		Charged Off		End of
Three Months Ended March 31, 2019	Period		CECL		Credit Losses		Charged Off		Loans		Period
Commercial real estate	$	27,100	$	—	$	(255)	$	—	$	—	$	26,845
Commercial and industrial		21,980		—		458		(1,818)		648		21,268
Construction and land development		6,061		—		(153)		—		—		5,908
1-4 family residential		3,956		—		389		(28)		14		4,331
Consumer		267		—		586		(454)		10		409
Broker-dealer		122		—		(74)		—		—		48
Total	$	59,486	$	—	$	951	$	(2,300)	$	672	$	58,809