Commercial and industrial (C&I). C&I loans primarily include commercial and industrial lending used for general corporate purposes, working capital and liquidity, and “event-driven." “Event-driven” loans support client merger, acquisition or recapitalization activities. C&I lending is structured as revolving lines of credit, letter of credit facilities, term loans and bridge loans. Risk factors considered in determining the allowance for corporate loans include the borrower’s financial strength, seniority of the loan, collateral type, leverage, volatility of collateral value, debt cushion, and covenants.

Real Estate. Real estate loans include residential real estate non-conforming loans, residential real estate conforming loans, commercial real estate, and home equity lines of credit. The allowance methodology related to real estate loans considers several factors, including, but not limited to, loan-to-value ratio, FICO score, home price index, delinquency status, credit limits, and utilization rates.

Securities-based loans. Securities-based loans allow clients to borrow money against the value of qualifying securities for any suitable purpose other than purchasing, trading, or carrying securities or refinancing margin debt. The majority of consumer loans are structured as revolving lines of credit and letter of credit facilities and are primarily offered through Stifel’s Pledged Asset ("SPA") program. The allowance methodology for securities-based lending considers the collateral type underlying the loan, including the liquidity and trading volume of the collateral, position concentration and other borrower specific factors such as personal guarantees.

Construction and land. Short-term loans used to finance the development of a real estate project.

The following table presents the balance and associated percentage of each major loan category in our bank loan portfolio at March 31, 2019 and December 31, 2018 (in thousands, except percentages):

	March 31, 2019						December 31, 2018
	Balance			Percent			Balance			Percent
Commercial and industrial	$	3,314,564			37.6	%	$	3,304,234			38.5	%
Residential real estate		2,928,228			33.2			2,875,014			33.5
Securities-based loans		1,860,989			21.1			1,786,966			20.8
Commercial real estate		361,950			4.1			318,961			3.7
Construction and land		175,023			2.0			138,245			1.6
Home equity lines of credit		44,235			0.5			38,098			0.4
Other		124,095			1.5			120,129			1.5
Gross bank loans		8,809,084			100.0	%		8,581,647			100.0	%
Unamortized loan discount, net		(10,624	)					(12,155	)
Loans in process		(5,075	)					27,984
Unamortized loan fees, net		1,476						5,972
Allowance for loan losses		(88,172	)					(85,833	)
Bank loans, net	$	8,706,689					$	8,517,615

At March 31, 2019 and December 31, 2018, Stifel Bancorp had loans outstanding to its executive officers, directors, and their affiliates in the amount of $3.2 million and $4.0 million, respectively, and loans outstanding to other Stifel Financial Corp. executive officers, directors, and their affiliates in the amount of $19.5 million and $24.8 million, respectively.

At March 31, 2019 and December 31, 2018, we had loans held for sale of $144.2 million and $205.6 million, respectively. For the three months ended March 31, 2019 and 2018, we recognized gains of $0.9 million and $2.5 million, respectively, from the sale of originated loans, net of fees and costs.

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2019 (in thousands).

	Three Months Ended March 31, 2019
	Beginning Balance		Provision		Charge-offs			Recoveries		Ending Balance
Commercial and industrial	$	68,367	$	211	$	(12	)	$	—	$	68,566
Residential real estate		11,228		270		—			87		11,585
Securities-based loans		1,978		249		—			—		2,227
Commercial real estate		1,778		643		—			—		2,421
Construction and land		1,241		483		—			—		1,724
Home equity lines of credit		310		61		—			1		372
Other		88		78		(44	)		24		146
Qualitative		843		288		—			—		1,131
	$	85,833	$	2,283	$	(56	)	$	112	$	88,172

The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at March 31, 2019 (in thousands):

	Allowance for Loan Losses						Recorded Investment in Loans
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and industrial	$	8,677	$	59,889	$	68,566	$	23,654	$	3,290,910	$	3,314,564
Residential real estate		24		11,561		11,585		619		2,927,609		2,928,228
Securities-based loans		—		2,227		2,227		—		1,860,989		1,860,989
Commercial real estate		—		2,421		2,421		—		361,950		361,950
Construction and land		—		1,724		1,724		—		175,023		175,023
Home equity lines of credit		—		372		372		184		44,051		44,235
Other		24		122		146		196		123,899		124,095
Qualitative		—		1,131		1,131		—		—		—
	$	8,725	$	79,447	$	88,172	$	24,653	$	8,784,431	$	8,809,084

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2018 (in thousands):

	Three Months Ended March 31, 2018
	Beginning Balance		Provision			Charge-offs			Recoveries		Ending Balance
Commercial and industrial	$	54,474	$	1,971		$	(12	)	$	—	$	56,433
Residential real estate		8,430		349			—			—		8,779
Securities-based loans		2,088		(194	)		—			—		1,894
Commercial real estate		1,520		(200	)		—			—		1,320
Home equity lines of credit		162		1			—			1		164
Construction and land		100		99			—			—		199
Other		16		—			(2	)		1		15
Qualitative		676		17			—			—		693
	$	67,466	$	2,043		$	(14	)	$	2	$	69,497

The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at December 31, 2018 (in thousands):

	Allowance for Loan Losses						Recorded Investment in Loans
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and industrial	$	8,678	$	59,689	$	68,367	$	23,677	$	3,280,557	$	3,304,234
Residential real estate		24		11,204		11,228		519		2,874,495		2,875,014
Securities-based loans		—		1,978		1,978		—		1,786,966		1,786,966
Commercial real estate		—		1,778		1,778		—		318,961		318,961
Construction and land		—		1,241		1,241		—		138,245		138,245
Home equity lines of credit		—		310		310		184		37,914		38,098
Other		1		87		88		21		120,108		120,129
Qualitative		—		843		843		—		—		—
	$	8,703	$	77,130	$	85,833	$	24,401	$	8,557,246	$	8,581,647

In determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience, and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.

There are two components of the allowance for loan losses: the inherent allowance component and the specific allowance component.

The inherent allowance component of the allowance for loan losses is used to estimate the probable losses inherent in the loan portfolio and includes non-homogeneous loans that have not been identified as impaired and portfolios of smaller balance homogeneous loans. The Company maintains methodologies by loan product for calculating an allowance for loan losses that estimates the inherent losses in the loan portfolio. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered in the calculations. The allowance for loan losses is maintained at a level reasonable to ensure that it can adequately absorb the estimated probable losses inherent in the portfolio.

The specific allowance component of the allowance for loan losses is used to estimate probable losses for non-homogeneous exposures, including loans modified in a troubled debt restructuring, which have been specifically identified for impairment analysis by the Company and determined to be impaired. At March 31, 2019, we had $24.7 million of impaired loans, net of discounts, which included $9.1 million in troubled debt restructurings. The specific allowance on impaired loans at March 31, 2019 was $8.7 million. At December 31, 2018, we had $24.4 million of impaired loans, net of discounts, which included $9.1 million in troubled debt restructurings. The specific allowance on impaired loans at December 31, 2018 was $8.7 million. The gross interest income related to impaired loans, which would have been recorded, had these loans been current in accordance with their original terms, and the interest income recognized on these loans during the three months ended March 31, 2019 and 2018, were insignificant to the consolidated financial statements.

The tables below present loans that were individually evaluated for impairment by portfolio segment at March 31, 2019 and December 31, 2018, including the average recorded investment balance for the year to date period presented (in thousands):

	March 31, 2019
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	23,654	$	220	$	23,434	$	23,654	$	8,677	$	23,821
Residential real estate		677		452		167		619		24		630
Home equity lines of credit		184		184		—		184		—		184
Other		345		—		196		196		24		233
Total	$	24,860	$	856	$	23,797	$	24,653	$	8,725	$	24,868

	December 31, 2018
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	23,677	$	242	$	23,435	$	23,677	$	8,678	$	23,807
Residential real estate		544		352		167		519		24		275
Home equity lines of credit		184		184		—		184		—		184
Other		694		11		10		21		1		70
Total	$	25,099	$	789	$	23,612	$	24,401	$	8,703	$	24,336

The following table presents the aging of the recorded investment in past due loans at March 31, 2019 and December 31, 2018 by portfolio segment (in thousands):

	As of March 31, 2019
	30 – 89 Days Past Due		90 or More Days Past Due		Total Past Due		Current Balance		Total
Commercial and industrial	$	—	$	14,644	$	14,644	$	3,299,920	$	3,314,564
Residential real estate		5,944		227		6,171		2,922,057		2,928,228
Securities-based loans		—		—		—		1,860,989		1,860,989
Commercial real estate		—		—		—		361,950		361,950
Construction and land		—		—		—		175,023		175,023
Home equity lines of credit		—		—		—		44,235		44,235
Other		45		65		110		123,985		124,095
Total	$	5,989	$	14,936	$	20,925	$	8,788,159	$	8,809,084

	As of March 31, 2019*
	Non-Accrual		Restructured		Total
Commercial and industrial	$	14,718	$	8,936	$	23,654
Residential real estate		452		167		619
Home equity lines of credit		184		—		184
Other		196		—		196
Total	$	15,550	$	9,103	$	24,653

*	There were no loans past due 90 days and still accruing interest at March 31, 2019.

	As of December 31, 2018
	30 – 89 Days Past Due		90 or More Days Past Due		Total Past Due		Current Balance		Total
Commercial and industrial	$	—	$	14,656	$	14,656	$	3,289,578	$	3,304,234
Residential real estate		6,970		377		7,347		2,867,667		2,875,014
Securities-based loans		—		—		—		1,786,966		1,786,966
Commercial real estate		—		—		—		318,961		318,961
Construction and land		—		—		—		138,245		138,245
Home equity lines of credit		33		—		33		38,065		38,098
Other		—		134		134		119,995		120,129
Total	$	7,003	$	15,167	$	22,170	$	8,559,477	$	8,581,647

	As of December 31, 2018*
	Non-Accrual		Restructured		Total
Commercial and industrial	$	14,741	$	8,936	$	23,677
Residential real estate		352		167		519
Home equity lines of credit		184		—		184
Other		21		—		21
Total	$	15,298	$	9,103	$	24,401

*	There were no loans past due 90 days and still accruing interest at December 31, 2018.

Loans meet the definition of Pass when they are performing and do not demonstrate adverse characteristics that are likely to result in a credit loss. A loan is determined to be impaired when principal or interest becomes 90 days past due or when collection becomes uncertain. At the time a loan is determined to be impaired, the accrual of interest and amortization of deferred loan origination fees is discontinued (“non-accrual status”), and any accrued and unpaid interest income is reversed.

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk. Trends in delinquency ratios are an indicator, among other considerations, of credit risk within our loan portfolio. The level of nonperforming assets represents another indicator of the potential for future credit losses. Accordingly, key metrics we track and use in evaluating the credit quality of our loan portfolio include delinquency and nonperforming asset rates, as well as charge-off rates and our internal risk ratings of the loan portfolio. In general, we are a secured lender. At March 31, 2019 and December 31, 2018, 98.5% and 98.4% of our loan portfolio was collateralized, respectively. Collateral is required in accordance with the normal credit evaluation process based upon the creditworthiness of the customer and the credit risk associated with the particular transaction. The Company uses the following definitions for risk ratings:

Pass. A credit exposure rated pass has a continued expectation of timely repayment, all obligations of the borrower are current, and the obligor complies with material terms and conditions of the lending agreement.

Special Mention. Extensions of credit that have potential weakness that deserve management’s close attention, and if left uncorrected may, at some future date, result in the deterioration of the repayment prospects or collateral position.

Substandard. Obligor has a well-defined weakness that jeopardizes the repayment of the debt and has a high probability of payment default with the distinct possibility that the Company will sustain some loss if noted deficiencies are not corrected.

Doubtful. Inherent weakness in the exposure makes the collection or repayment in full, based on existing facts, conditions and circumstances, highly improbable, and the amount of loss is uncertain.

Substandard loans are regularly reviewed for impairment. Doubtful loans are considered impaired. When a loan is impaired the impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent.

Based on the most recent analysis performed, the risk category of our loan portfolio was as follows: (in thousands):

	As of March 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	3,265,303	$	22,281	$	26,980	$	—	$	3,314,564
Residential real estate		2,927,609		—		619		—		2,928,228
Securities-based loans		1,860,989		—		—		—		1,860,989
Commercial real estate		361,950		—		—		—		361,950
Construction and land		175,023		—		—		—		175,023
Home equity lines of credit		44,051		—		184		—		44,235
Other		123,677		222		—		196		124,095
Total	$	8,758,602	$	22,503	$	27,783	$	196	$	8,809,084

	As of December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and industrial	$	3,254,698	$	34,795	$	14,741	$	—	$	3,304,234
Residential real estate		2,874,495		—		519		—		2,875,014
Securities-based loans		1,786,966		—		—		—		1,786,966
Commercial real estate		318,961		—		—		—		318,961
Construction and land		138,245		—		—		—		138,245
Home equity lines of credit		37,914		—		184		—		38,098
Other		119,912		196		—		21		120,129
Total	$	8,531,191	$	34,991	$	15,444	$	21	$	8,581,647