Loans And Allowance For Credit Losses [Text Block] | 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES The loan portfolio consists of various types of loans made principally to borrowers located within the states of Texas and Oklahoma and is categorized by major type as follows: June 30, December 31, 2015 2014 (Dollars in thousands) Residential mortgage loans held for sale $ 10,482 $ 8,602 Commercial and industrial 1,654,517 1,806,267 Real estate: Construction, land development and other land loans 1,068,056 1,026,475 1-4 family residential (including home equity) 2,552,170 2,513,579 Commercial real estate (including multi-family residential) 2,958,239 3,030,340 Farmland 399,654 361,943 Agriculture 201,091 189,703 Consumer and other 270,126 307,274 Total loans held for investment 9,103,853 9,235,581 Total $ 9,114,335 $ 9,244,183 (i) Commercial and Industrial Loans . (ii) Commercial Real Estate (iii) 1-4 Family Residential Loans . (iv) Construction, Land Development and Other Land Loans. (v) Agriculture Loans . (vi) Consumer Loans . The Company maintains an independent loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. 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. Concentrations of Credit. Foreign Loans. Related Party Loans. An analysis of activity with respect to these related party loans is as follows: June 30, December 31, 2015 2014 (Dollars in thousands) Beginning balance on January 1 $ 4,940 $ 6,187 New loans 174 4,913 Repayments and reclassified related loans (1,161 ) (6,160 ) Ending balance $ 3,953 $ 4,940 Nonperforming Assets and Nonaccrual and Past Due Loans. The Company generally places a loan on nonaccrual status and ceases accruing interest when the payment of principal or interest is delinquent for 90 days, or earlier in some cases, unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan. The Company requires appraisals on loans collateralized by real estate. With respect to potential problem loans, an evaluation of the borrower’s overall financial condition is made to determine the need, if any, for possible writedowns or appropriate additions to the allowance for credit losses. An aging analysis of past due loans, segregated by category of loan, is presented below: June 30, 2015 Loans Past Due and Still Accruing 90 or More Total Past Nonaccrual Current Total 30-89 Days Days Due Loans Loans Loans Loans (Dollars in thousands) Construction, land development and other land loans $ 2,896 $ 153 $ 3,049 $ 421 $ 1,064,586 $ 1,068,056 Agriculture and agriculture real estate (includes farmland) 728 - 728 605 599,412 600,745 1-4 family (includes home equity) (1) 2,456 - 2,456 2,987 2,557,209 2,562,652 Commercial real estate (includes multi-family residential) 5,640 - 5,640 7,536 2,945,063 2,958,239 Commercial and industrial 16,615 - 16,615 20,164 1,617,738 1,654,517 Consumer and other 302 - 302 274 269,550 270,126 Total $ 28,637 $ 153 $ 28,790 $ 31,987 $ 9,053,558 $ 9,114,335 December 31, 2014 Loans Past Due and Still Accruing 90 or More Total Past Nonaccrual Current Total 30-89 Days Days Due Loans Loans Loans Loans (Dollars in thousands) Construction, land development and other land loans $ 7,667 $ - $ 7,667 $ 526 $ 1,018,282 $ 1,026,475 Agriculture and agriculture real estate (includes farmland) 2,995 377 3,372 96 548,178 551,646 1-4 family (includes home equity) (1) 2,261 82 2,343 3,570 2,516,268 2,522,181 Commercial real estate (includes multi-family residential) 12,679 65 12,744 6,340 3,011,256 3,030,340 Commercial and industrial 18,305 869 19,174 20,537 1,766,556 1,806,267 Consumer and other 612 800 1,412 353 305,509 307,274 Total $ 44,519 $ 2,193 $ 46,712 $ 31,422 $ 9,166,049 $ 9,244,183 (1) Includes $10.5 million and $8.6 million of residential mortgage loans held for sale at June 30, 2015 and December 31, 2014, respectively. The following table presents information regarding nonperforming assets as of the dates indicated: June 30, December 31, 2015 2014 (Dollars in thousands) Nonaccrual loans (1) $ 31,987 $ 31,422 Accruing loans 90 or more days past due 153 2,193 Total nonperforming loans 32,140 33,615 Repossessed assets 173 67 Other real estate 2,806 3,237 Total nonperforming assets $ 35,119 $ 36,919 Nonperforming assets to total loans and other real estate 0.39 % 0.40 % (1) Includes troubled debt restructurings of $661 thousand and $911 thousand as of June 30, 2015 and December 31, 2014, respectively. The Company had $35.1 million in nonperforming assets at June 30, 2015 compared with $36.9 million at December 31, 2014, of which $30.3 million and $30.7 million, respectively, were originated by acquired banks. These results are reflective of the Company’s conservative lending approach. If interest on nonaccrual loans had been accrued under the original loan terms, approximately $1.6 million and $483 thousand would have been recorded as income for the six months ended June 30, 2015 and 2014, respectively. Acquired Loans. Non-PCI loan identification considers the following factors: account types, remaining terms, annual interest rates or coupons, current market rates, interest types, past delinquencies, timing of principal and interest payments, loan to value ratios, loss exposures and remaining balances. Accretion of purchased discounts on PCI loans will be based on estimated future cash flows, regardless of contractual maturities. Accretion of purchased discounts on Non-PCI loans will be recognized on a level-yield basis based on contractual maturity of individual loans. PCI Loans. June 30, December 31, 2015 2014 (Dollars in thousands) PCI loans: Outstanding balance $ 94,601 $ 129,412 Less: discount 48,277 72,270 Recorded investment $ 46,324 $ 57,142 Changes in the accretable yield for acquired PCI loans as of the three and six months ended June 30, 2015 and 2014 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 (Dollars in thousands) Balance at beginning of period $ 7,870 $ 8,470 $ 9,867 $ 9,855 Additions - 7,158 - 7,158 Reclassifications from nonaccretable 1,695 4,532 8,632 6,035 Accretion (3,214 ) (5,471 ) (12,148 ) (8,359 ) Balance at June 30 $ 6,351 $ 14,689 $ 6,351 $ 14,689 Income recognition on PCI loans is subject to the Company’s ability to reasonably estimate both the timing and amount of future cash flows. PCI loans for which the Company is accruing interest income are not considered non-performing or impaired. The non-accretable difference represents contractual principal and interest the Company does not expect to collect. Non-PCI Loans . June 30, December 31, 2015 2014 (Dollars in thousands) Non-PCI loans: Outstanding balance $ 1,727,123 $ 2,186,111 Less: discount 67,895 89,105 Recorded investment $ 1,659,228 $ 2,097,006 Changes in the discount accretion for Non-PCI loans for the three and six months ended June 30, 2015 and December 31, 2014 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 (Dollars in thousands) Balance at beginning of period $ 78,289 $ 77,163 $ 89,105 $ 87,798 Additions - 66,059 - 66,059 Accretion charge-offs (6 ) (14 ) (109 ) (62 ) Accretion (10,388 ) (19,881 ) (21,101 ) (30,468 ) Balance at June 30 $ 67,895 $ 123,327 $ 67,895 $ 123,327 Impaired Loans. Impaired loans are set forth in the following tables. No interest income was recognized on impaired loans subsequent to their classification as impaired. The average recorded investment presented in the tables below is reported on a year-to-date basis. June 30, 2015 Unpaid Contractual Average Recorded Principal Related Recorded Investment Balance Allowance Investment (Dollars in thousands) With no related allowance recorded: Construction, land development and other land loans $ 156 $ 159 $ - $ 204 Agriculture and agriculture real estate (includes farmland) 545 551 - 276 1-4 family (includes home equity) 1,858 2,005 - 1,857 Commercial real estate (includes multi-family residential) 5,560 5,606 - 5,350 Commercial and industrial 6,845 7,577 - 8,531 Consumer and other 62 62 - 4,103 Total 15,026 15,960 - 20,321 With an allowance recorded: Construction, land development and other land loans 273 466 185 371 Agriculture and agriculture real estate (includes farmland) 11 19 11 33 1-4 family (includes home equity) 1,093 1,136 243 1,281 Commercial real estate (includes multi-family residential) 1,847 3,442 743 1,752 Commercial and industrial 6,724 6,787 2,004 4,621 Consumer and other 205 243 87 238 Total 10,153 12,093 3,273 8,296 Total: Construction, land development and other land loans 429 625 185 575 Agriculture and agriculture real estate (includes farmland) 556 570 11 309 1-4 family (includes home equity) 2,951 3,141 243 3,138 Commercial real estate (includes multi-family residential) 7,407 9,048 743 7,102 Commercial and industrial 13,569 14,364 2,004 13,152 Consumer and other 267 305 87 4,341 $ 25,179 $ 28,053 $ 3,273 $ 28,617 December 31, 2014 Unpaid Contractual Average Recorded Principal Related Recorded Investment Balance Allowance Investment (Dollars in thousands) With no related allowance recorded: Construction, land development and other land loans $ 250 $ 256 $ - $ 264 Agriculture and agriculture real estate (includes farmland) - - - 7 1-4 family (includes home equity) 1,710 1,831 - 1,147 Commercial real estate (includes multi-family residential) 5,093 5,126 - 3,792 Commercial and industrial 9,485 9,678 - 4,794 Consumer and other 8,144 8,161 - 4,080 Total 24,682 25,052 - 14,084 With an allowance recorded: Construction, land development and other land loans 276 276 225 138 Agriculture and agriculture real estate (includes farmland) 46 55 24 34 1-4 family (includes home equity) 1,426 1,473 418 1,973 Commercial real estate (includes multi-family residential) 62 63 24 838 Commercial and industrial 2,454 4,182 1,597 1,783 Consumer and other 234 251 205 164 Total 4,498 6,300 2,493 4,930 Total: Construction, land development and other land loans 526 532 225 402 Agriculture and agriculture real estate (includes farmland) 46 55 24 41 1-4 family (includes home equity) 3,136 3,304 418 3,120 Commercial real estate (includes multi-family residential) 5,155 5,189 24 4,630 Commercial and industrial 11,939 13,860 1,597 6,577 Consumer and other 8,378 8,412 205 4,244 $ 29,180 $ 31,352 $ 2,493 $ 19,014 Credit Quality Indicators. Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 Grade 6 Grade 7 Grade 8 Grade 9 The following table presents risk grades and PCI loans by category of loan at June 30, 2015. Impaired loans include loans in risk grades 7, 8 and 9. Construction, Agriculture and Commercial Land Agriculture Real 1-4 Family Real Estate Development and Estate (includes (includes (includes Multi- Commercial Consumer and Other Land Loans Farmland) Home Equity) (1) Family Residential) Industrial Other Total (Dollars in thousands) Grade 1 $ 118 $ 12,641 $ - $ 2,127 $ 57,264 $ 44,653 $ 116,803 Grade 2 17,798 5,943 29,016 24,310 25,650 34,552 137,269 Grade 3 1,028,829 544,791 2,470,309 2,713,249 1,326,302 180,176 8,263,656 Grade 4 17,980 26,697 45,416 143,541 124,379 2,998 361,011 Grade 5 113 5,950 2,130 19,033 68,839 7,446 103,511 Grade 6 1,223 3,667 7,105 28,083 20,470 34 60,582 Grade 7 214 556 2,890 7,210 10,319 267 21,456 Grade 8 215 - 61 197 3,250 - 3,723 Grade 9 - - - - - - - PCI Loans (2) 1,566 500 5,725 20,489 18,044 - 46,324 Total $ 1,068,056 $ 600,745 $ 2,562,652 $ 2,958,239 $ 1,654,517 $ 270,126 $ 9,114,335 (1) Includes $10.5 million of residential mortgage loans held for sale at June 30, 2015. (2) Of the total PCI loans, $26.6 million were classifed as substandard at June 30, 2015. The following table presents risk grades and PCI loans by category of loan at December 31, 2014. Impaired loans include loans in risk grades 7, 8 and 9. Construction, Agriculture and Commercial Land Agriculture Real 1-4 Family Real Estate Development and Estate (includes (includes (includes Multi- Commercial Consumer and Other Land Loans Farmland) Home Equity) (1) Family Residential) and Industrial Other Total (Dollars in thousands) Grade 1 $ - $ 13,507 $ - $ - $ 61,697 $ 41,240 $ 116,444 Grade 2 - - - - - - - Grade 3 1,022,002 528,400 2,503,679 2,965,455 1,698,558 257,588 8,975,682 Grade 4 - - - - - - - Grade 5 497 4,265 1,174 10,424 3,266 18 19,644 Grade 6 2,308 4,921 8,266 25,839 4,707 50 46,091 Grade 7 526 46 3,136 5,155 11,834 8,378 29,075 Grade 8 - - - - 105 - 105 Grade 9 - - - - - - - PCI Loans (2) 1,142 507 5,926 23,467 26,100 - 57,142 Total $ 1,026,475 $ 551,646 $ 2,522,181 $ 3,030,340 $ 1,806,267 $ 307,274 $ 9,244,183 (1) Includes $8.6 million of residential mortgage loans held for sale at December 31, 2014. (2) Of the total PCI loans, $32.0 million were classifed as substandard at December 31, 2014. Allowance for Credit Losses. The Company’s allowance for credit losses consists of two components: a specific valuation allowance based on probable losses on specifically identified loans and a general valuation allowance based on historical loan loss experience, general economic conditions and other qualitative risk factors both internal and external to the Company. In setting the specific valuation allowance, the Company follows a loan review program to evaluate the credit risk in the total loan portfolio and assigns risk grades to each loan. Through this loan review process, the Company maintains an internal list of impaired loans which, along with the delinquency list of loans, helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses. All loans that have been identified as impaired are reviewed on a quarterly basis in order to determine whether a specific reserve is required. For certain impaired loans, the Company allocates a specific loan loss reserve primarily based on the value of the collateral securing the impaired loan in accordance with ASC Topic 310-10, “ Receivables. In connection with this review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements include: • for 1-4 family residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition and marketability of collateral; • for commercial real estate loans and multifamily residential loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type; • for construction, land development and other land loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio; • for commercial and industrial loans, the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral; • for agricultural real estate loans, the experience and financial capability of the borrower, projected debt service coverage of the operations of the borrower and loan to value ratio; and • for non-real estate agricultural loans, the operating results, experience and financial capability of the borrower, historical and expected market conditions and the value, nature and marketability of collateral. In determining the amount of the general valuation allowance, management considers factors such as historical loan loss experience, concentration risk of specific loan types, the volume, growth and composition of the Company’s loan portfolio, current economic conditions that may affect the borrower’s ability to pay and the value of collateral, the evaluation of the Company’s loan portfolio through its internal loan review process, general economic conditions and other qualitative risk factors both internal and external to the Company and other relevant factors in accordance with ASC Topic 450, “ Contingencies. In addition, for each category, the Company considers secondary sources of income and the financial strength and credit history of the borrower and any guarantors. At June 30, 2015, the allowance for credit losses totaled $81.0 million or 0.89% of total loans, including acquired loans with discounts. At December 31, 2014, the allowance for credit losses totaled $80.8 million or 0.87% of total loans, including acquired loans with discounts. The following table details activity in the allowance for credit losses by category of loan for the three and six months ended June 30, 2015 and 2014 . Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Agriculture Construction, and Commercial Land Agriculture 1-4 Family Real Estate Development Real Estate (includes (includes Commercial and Other (includes Home Multi-Family and Consumer Land Loans Farmland) Equity) Residential) Industrial and Other Total (Dollars in thousands) Allowance for credit losses: Three Months Ended Balance March 31, 2015 $ 16,858 $ 3,277 $ 16,778 $ 12,538 $ 30,084 $ 1,428 $ 80,963 Provision for credit losses 49 429 (173 ) 578 (907 ) 524 500 Charge-offs - - (31 ) (136 ) (98 ) (744 ) (1,009 ) Recoveries 2 65 19 22 126 284 518 Net charge-offs 2 65 (12 ) (114 ) 28 (460 ) (491 ) Balance June 30, 2015 $ 16,909 $ 3,771 $ 16,593 $ 13,002 $ 29,205 $ 1,492 $ 80,972 Six Months Ended Balance January 1, 2015 $ 15,825 $ 3,722 $ 16,377 $ 12,744 $ 30,002 $ 2,092 $ 80,762 Provision for credit losses 1,227 (94 ) 314 405 (321 ) 219 1,750 Charge-offs (151 ) - (129 ) (179 ) (826 ) (1,473 ) (2,758 ) Recoveries 8 143 31 32 350 654 1,218 Net charge-offs (143 ) 143 (98 ) (147 ) (476 ) (819 ) (1,540 ) Balance June 30, 2015 $ 16,909 $ 3,771 $ 16,593 $ 13,002 $ 29,205 $ 1,492 $ 80,972 Allowance for credit losses: Three Months Ended Balance March 31, 2014 $ 13,600 $ 1,356 $ 18,718 $ 23,371 $ 8,653 $ 1,398 $ 67,096 Provision for credit losses 1,508 (751 ) 593 313 2,240 2,422 6,325 Charge-offs (153 ) (1 ) (523 ) (26 ) (59 ) (879 ) (1,641 ) Recoveries 38 844 117 21 123 343 1,486 Net charge-offs (115 ) 843 (406 ) (5 ) 64 (536 ) (155 ) Balance June 30, 2014 $ 14,993 $ 1,448 $ 18,905 $ 23,679 $ 10,957 $ 3,284 $ 73,266 Six Months Ended Balance January 1, 2014 $ 14,353 $ 1,229 $ 17,046 $ 24,835 $ 8,167 $ 1,652 $ 67,282 Provision for credit losses 738 (705 ) 2,396 (1,091 ) 2,807 2,780 6,925 Charge-offs (155 ) (15 ) (662 ) (128 ) (202 ) (1,924 ) (3,086 ) Recoveries 57 939 125 63 185 776 2,145 Net charge-offs (98 ) 924 (537 ) (65 ) (17 ) (1,148 ) (941 ) Balance June 30, 2014 $ 14,993 $ 1,448 $ 18,905 $ 23,679 $ 10,957 $ 3,284 $ 73,266 The following table details the amount of the allowance for credit losses allocated to each category of loan as of June 30, 2015 , December 31, 2014 and June 30, 2014 , detailed on the basis of the impairment methodology used by the Company. Agriculture Construction, and Commercial Land Agriculture 1-4 Family Real Estate Development Real Estate (includes (includes Commercial and Other (includes Home Multi-Family and Consumer Land Loans Farmland) Equity) Residential) Industrial and Other Total (Dollars in thousands) Allowance for credit losses related to: June 30, 2015 Individually evaluated for impairment $ 185 $ 11 $ 243 $ 743 $ 2,004 $ 87 $ 3,273 Collectively evaluated for impairment 16,724 3,760 16,350 12,259 27,038 1,405 77,536 PCI loans - - - - 163 - 163 Total allowance for credit losses $ 16,909 $ 3,771 $ 16,593 $ 13,002 $ 29,205 $ 1,492 $ 80,972 December 31, 2014 Individually evaluated for impairment $ 225 $ 24 $ 418 $ 24 $ 1,597 $ 205 $ 2,493 Collectively evaluated for impairment 15,600 3,698 15,959 12,720 28,405 1,887 78,269 PCI loans - - - - - - - Total allowance for credit losses $ 15,825 $ 3,722 $ 16,377 $ 12,744 $ 30,002 $ 2,092 $ 80,762 June 30, 2014 Individually evaluated for impairment $ - $ 53 $ 249 $ 47 $ 2,887 $ 92 $ 3,328 Collectively evaluated for impairment 14,993 1,395 18,656 23,632 8,070 3,192 69,938 PCI loans - - - - - - - Total allowance for credit losses $ 14,993 $ 1,448 $ 18,905 $ 23,679 $ 10,957 $ 3,284 $ 73,266 The following table details the recorded investment in loans as of June 30, 2015 , December 31, 2014 and June 30, 2014, excluding $10.5 million, $8.6 million and $8.4 million, respectively, of residential mortgage loans held for sale, related to each balance in the allowance for credit losses by category of loan. Agriculture Construction, and Commercial Land Agriculture 1-4 Family Real Estate Development Real Estate (includes (includes Commercial and Other (includes Home Multi-Family and Consumer Land Loans Farmland) Equity) Residential) Industrial and Other Total (Dollars in thousands) Recorded investment in loans: June 30, 2015 Individually evaluated for impairment $ 429 $ 556 $ 2,951 $ 7,407 $ 13,569 $ 267 $ 25,179 Collectively evaluated for impairment 1,066,061 599,689 2,543,494 2,930,343 1,622,904 269,859 9,032,350 PCI loans 1,566 500 5,725 20,489 18,044 - 46,324 Total loans evaluated for impairment $ 1,068,056 $ 600,745 $ 2,552,170 $ 2,958,239 $ 1,654,517 $ 270,126 $ 9,103,853 December 31, 2014 Individually evaluated for impairment $ 526 $ 46 $ 3,136 $ 5,155 $ 11,939 $ 8,378 $ 29,180 Collectively evaluated for impairment 1,024,807 551,093 2,504,517 3,001,718 1,768,228 298,896 9,149,259 PCI loans 1,142 507 5,926 23,467 26,100 - 57,142 Total loans evaluated for impairment $ 1,026,475 $ 551,646 $ 2,513,579 $ 3,030,340 $ 1,806,267 $ 307,274 $ 9,235,581 June 30, 2014 Individually evaluated for impairment $ 315 $ 75 $ 1,180 $ 937 $ 10,094 $ 127 $ 12,728 Collectively evaluated for impairment 1,001,378 541,703 2,403,165 2,996,361 2,098,292 167,044 9,207,943 PCI loans 3,406 582 8,807 30,647 35,641 - 79,083 Total loans evaluated for impairment $ 1,005,099 $ 542,360 $ 2,413,152 $ 3,027,945 $ 2,144,027 $ 167,171 $ 9,299,754 Troubled Debt Restructurings. Receivables (Topic 310)-A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” Six Months Ended June 30, 2015 2014 Pre- Post- Pre- Post- Modification Modification Modification Modification Outstanding Outstanding Outstanding Outstanding Number of Recorded Recorded Number of Recorded Recorded Loans Investment Investment Loans Investment Investment (Dollars in thousands) Troubled Debt Restructurings Construction, land development and other land loans - $ - $ - - $ - $ - Agriculture and agriculture real estate (includes farmland) - - - - - - 1-4 Family (includes home equity) - - - - - - Commercial real estate (includes multi-family residential) - - - 1 35 35 Commercial and industrial - - - 1 16 15 Consumer and other 1 10 9 - - - Total 1 $ 10 $ 9 2 $ 51 $ 50 As of June 30, 2015, there have been no defaults on any loans that were modified as troubled debt restructurings during the preceding six months. Default is determined at 90 or more days past due. The modifications primarily related to extending the amortization periods of the loans, which includes loans modified during bankruptcy. The Company did not grant principal reductions on any restructured loans. At June 30, 2015 and 2014, the Company had $661 thousand and $1.3 million, respectively, in outstanding troubled debt restructurings. For the six months ended June 30, 2015, the Company added one loan totaling $10 thousand as a new troubled debt restructuring, of which $9 thousand was still outstanding at June 30, 2015. These modifications did not have a material impact on the Company’s determination of the allowance for credit losses. |