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 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. 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.

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.

Construction loans 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.

Underwriting standards for residential real estate and home equity loans are 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 and periodically reviews the distribution of FICO scores relative to historical periods to monitor credit risk on its credit card loans. 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 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, 2019 and December 31, 2018 (in thousands):

	March 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	$	10,532	$	71	$	31,868	$	42,471	$	5,377,088	$	5,419,559
Asset-based		—		—		—		—		386,670		386,670
Factoring		—		—		5,747		5,747		253,172		258,919
Commercial – credit card		485		109		—		594		195,502		196,096
Real estate:
Real estate – construction		3,064		—		—		3,064		788,855		791,919
Real estate – commercial		5,434		—		20,566		26,000		3,869,010		3,895,010
Real estate – residential		122		—		1,196		1,318		719,177		720,495
Real estate – HELOC		1,138		—		2,730		3,868		516,847		520,715
Consumer:
Consumer – credit card		1,646		1,691		744		4,081		216,751		220,832
Consumer – other		127		3		419		549		134,157		134,706
Leases		—		—		—		—		4,811		4,811
Total loans	$	22,548	$	1,874	$	63,270	$	87,692	$	12,462,040	$	12,549,732

	December 31, 2018
	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	$	5,717	$	133	$	27,060	$	32,910	$	5,195,492	$	5,228,402
Asset-based		—		—		—		—		380,738		380,738
Factoring		—		—		—		—		261,591		261,591
Commercial – credit card		490		90		—		580		165,754		166,334
Real estate:
Real estate – construction		—		—		—		—		792,565		792,565
Real estate – commercial		7,385		90		11,662		19,137		3,695,143		3,714,280
Real estate – residential		246		3,750		807		4,803		702,701		707,504
Real estate – HELOC		764		—		2,776		3,540		542,181		545,721
Consumer:
Consumer – credit card		2,022		1,945		648		4,615		226,367		230,982
Consumer – other		199		1		65		265		144,520		144,785
Leases		—		—		—		—		5,248		5,248
Total loans	$	16,823	$	6,009	$	43,018	$	65,850	$	12,112,300	$	12,178,150

The Company sold residential real estate loans with proceeds of $21.3 million and $9.7 million in the secondary market without recourse during the three months ended March 31, 2019 and March 31, 2018, respectively.

The Company has ceased the recognition of interest on loans with a carrying value of $63.3 million and $43.0 million at March 31, 2019 and December 31, 2018, respectively. Restructured loans totaled $20.7 million and $21.1 million at March 31, 2019 and December 31, 2018, respectively. Loans 90 days past due and still accruing interest amounted to $1.9 million and $6.0 million at March 31, 2019 and December 31, 2018, respectively. There was an insignificant amount of interest recognized on impaired loans during 2019 and 2018.

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, and Substandard. 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:

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 March 31, 2019 and December 31, 2018 (in thousands):

	Commercial				Asset-based				Factoring
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2019		2018		2019		2018		2019		2018
Non-watch list	$	4,908,422	$	4,788,234	$	323,576	$	296,719	$	233,762	$	260,727
Watch		219,601		192,653		—		—		—		—
Special Mention		104,104		55,927		63,094		84,019		19,410		864
Substandard		187,432		191,588		—		—		5,747		—
Total	$	5,419,559	$	5,228,402	$	386,670	$	380,738	$	258,919	$	261,591

	Real estate – construction				Real estate – commercial
	March 31,		December 31,		March 31,		December 31,
	2019		2018		2019		2018
Non-watch list	$	791,302	$	792,256	$	3,698,013	$	3,551,537
Watch		512		204		68,279		64,998
Special Mention		—		—		49,810		32,826
Substandard		105		105		78,908		64,919
Total	$	791,919	$	792,565	$	3,895,010	$	3,714,280

Credit Exposure

Credit Risk Profile Based on Payment Activity

	Commercial – credit card				Real estate – residential				Real estate – HELOC
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2019		2018		2019		2018		2019		2018
Performing	$	196,096	$	166,334	$	719,299	$	706,697	$	517,985	$	542,945
Non-performing		—		—		1,196		807		2,730		2,776
Total	$	196,096	$	166,334	$	720,495	$	707,504	$	520,715	$	545,721

	Consumer – credit card				Consumer – other				Leases
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2019		2018		2019		2018		2019		2018
Performing	$	220,088	$	230,334	$	134,287	$	144,720	$	4,811	$	5,248
Non-performing		744		648		419		65		—		—
Total	$	220,832	$	230,982	$	134,706	$	144,785	$	4,811	$	5,248

The allowance for loan losses (ALL) is a reserve established through a provision for loan losses charged to expense, which represents management’s judgment of inherent probable losses within the Company’s loan portfolio as of the balance sheet date. The allowance is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. Accordingly, the methodology is based on historical loss trends. The Company’s process for determining the appropriate level of the allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for probable loan losses reflects loan quality trends, including the levels of, and trends related to, non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors.

The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and estimated losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific loans; however, the entire allowance is available for any loan that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available at the time, the adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including, among other things, the performance of the Company’s loan portfolio, the economy, changes in interest rates, and changes in the regulatory environment.

The Company’s allowance for loan losses consists of specific valuation allowances and general valuation allowances based on historical loan loss experience for similar loans with similar characteristics and trends, general economic conditions, and other qualitative risk factors both internal and external to the Company.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of impaired loans. Loans are classified based on an internal risk grading process that evaluates the obligor’s ability to repay, the underlying collateral, if any, and the economic environment and industry in which the borrower operates. When a loan is considered impaired, the loan is analyzed to determine the need, if any, to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk rating of the loan, and economic conditions affecting the borrower’s industry.

General valuation allowances are calculated based on the historical loss experience of specific types of loans including an evaluation of the time span and volume of the actual charge-off. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are updated based on actual charge-off experience. A valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio, time span to charge-off, and the total dollar amount of the loans in the pool. The Company’s pools of similar loans include similarly risk-graded groups of commercial loans, commercial real estate loans, commercial credit card, home equity loans, consumer real estate loans and consumer and other loans. The Company also considers a loan migration analysis for criticized loans. This analysis includes an assessment of the probability that a loan will move to a loss position based on its risk rating. The consumer credit card pool is evaluated based on delinquencies and credit scores. In addition, a portion of the allowance is determined by a review of qualitative factors by management.

Generally, the unsecured portion of a commercial or commercial real estate loan is charged off when, after analyzing the borrower’s financial condition, it is determined that the borrower is incapable of servicing the debt, little or no prospect for near term improvement exists, and no realistic and significant strengthening action is pending. For collateral dependent commercial or commercial real estate loans, an analysis is completed regarding the Company’s collateral position to determine if the amounts due from the borrower are in excess of the calculated current fair value of the collateral. Specific allocations of the allowance for loan losses are made for any collateral deficiency. If a collateral deficiency is ultimately deemed to be uncollectible, the amount is charged off. Revolving commercial loans (such as commercial credit cards) which are past due 90 cumulative days are classified as a loss and charged off.

Generally, a consumer loan, or a portion thereof, is charged off in accordance with regulatory guidelines which provide that such loans be charged off when the Company becomes aware of the loss, such as from a triggering event that may include, but is not limited to, new information about a borrower’s intent and ability to repay the loan, bankruptcy, fraud, or death. However, the charge-off timeframe should not exceed the specified delinquency time frames, which state that closed-end retail loans (such as real estate mortgages, home equity loans and consumer installment loans) that become past due 120 cumulative days and open-end retail loans (such as home equity lines of credit and consumer credit cards) that become past due 180 cumulative days are classified as a loss and charged off.

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

	Three Months Ended March 31, 2019
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	80,888		$	13,664		$	9,071		$	12		$	103,635
Charge-offs		(11,163	)		(114	)		(2,467	)		—			(13,744	)
Recoveries		626			73			721			—			1,420
Provision		9,981			767			1,603			(1	)		12,350
Ending balance	$	80,332		$	14,390		$	8,928		$	11		$	103,661
Ending balance: individually evaluated for impairment	$	5,547		$	101		$	—		$	—		$	5,648
Ending balance: collectively evaluated for impairment		74,785			14,289			8,928			11			98,013
Loans:
Ending balance: loans	$	6,261,244		$	5,928,139		$	355,538		$	4,811		$	12,549,732
Ending balance: individually evaluated for impairment		37,493			21,197			349			—			59,039
Ending balance: collectively evaluated for impairment		6,223,751			5,906,942			355,189			4,811			12,490,693

This table provides a rollforward of the allowance for loan losses by portfolio segment for the three months ended March 31, 2018 (in thousands):

	Three Months Ended March 31, 2018
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	81,156		$	9,312		$	10,083		$	53		$	100,604
Charge-offs		(7,318	)		(1,742	)		(2,700	)		—			(11,760	)
Recoveries		471			230			757			—			1,458
Provision		6,748			1,938			1,320			(6	)		10,000
Ending balance	$	81,057		$	9,738		$	9,460		$	47		$	100,302
Ending balance: individually evaluated for impairment	$	4,986		$	127		$	—		$	—			5,113
Ending balance: collectively evaluated for impairment		76,071			9,611			9,460			47			95,189
Loans:
Ending balance: loans	$	5,242,307		$	5,764,398		$	428,938		$	23,151		$	11,458,794
Ending balance: individually evaluated for impairment		48,190			15,344			—			—			63,534
Ending balance: collectively evaluated for impairment		5,194,117			5,749,054			428,938			23,151			11,395,260

This table provides an analysis of impaired loans by class at March 31, 2019 and December 31, 2018 (in thousands):

	As of March 31, 2019
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	38,722	$	10,154	$	21,592	$	31,746	$	5,547	$	31,377
Asset-based		—		—		—		—		—		—
Factoring		5,747		5,747		—		5,747		—		2,873
Commercial – credit card		—		—		—		—		—		—
Real estate:
Real estate – construction		—		—		—		—		—		—
Real estate – commercial		26,887		20,750		159		20,909		23		14,425
Real estate – residential		301		193		95		288		78		290
Real estate – HELOC		—		—		—		—		—		—
Consumer:
Consumer – credit card		—		—		—		—		—		—
Consumer – other		350		349		—		349		—		174
Leases		—		—		—		—		—		—
Total	$	72,007	$	37,193	$	21,846	$	59,039	$	5,648	$	49,139

	As of December 31, 2018
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	40,402	$	16,470	$	14,536	$	31,006	$	4,605	$	43,335
Asset-based		—		—		—		—		—		—
Factoring		—		—		—		—		—		275
Commercial – credit card		—		—		—		—		—		—
Real estate:
Real estate – construction		—		—		—		—		—		55
Real estate – commercial		10,856		7,776		165		7,941		28		11,279
Real estate – residential		304		197		95		292		78		303
Real estate – HELOC		—		—		—		—		—		—
Consumer:
Consumer – credit card		—		—		—		—		—		—
Consumer – other		—		—		—		—		—		—
Leases		—		—		—		—		—		—
Total	$	51,562	$	24,443	$	14,796	$	39,239	$	4,711	$	55,247

A loan modification is considered a troubled debt restructuring (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 restructured loans are individually evaluated for impairment and evaluated as part of the allowance for loan loss as described above in the Allowance for Loan 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, 2019 and March 31, 2018. 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, 2019 and March 31, 2018, the Company had no new TDRs. For the three-month periods ended March 31, 2019 and March 31, 2018, the Company had no TDRs for which there was a payment default within the 12 months following the restructure date.