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: March 31, December 31, (Dollars in thousands) Residential mortgage loans held for sale $ 23,717 $ 23,933 Commercial and industrial 1,700,015 1,692,246 Real estate: Construction, land development and other land loans 1,173,524 1,073,198 1-4 family residential (including home equity) 2,639,472 2,616,732 Commercial real estate (including multi-family residential) 3,229,706 3,131,083 Farmland 451,111 434,349 Agriculture 190,182 214,469 Consumer and other 246,681 252,579 Total loans held for investment 9,630,691 9,414,656 Total $ 9,654,408 $ 9,438,589 Concentrations of Credit. Foreign Loans. Related Party Loans. An analysis of activity with respect to these related party loans is as follows: March 31, December 31, (Dollars in thousands) Beginning balance on January 1 $ 4,063 $ 4,940 New loans - 428 Repayments and reclassified related loans (32 ) (1,305 ) Ending balance $ 4,031 $ 4,063 Non performing Assets and Non accrual 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: March 31, 2016 Loans Past Due and Still Accruing 30-89 Days 90 or More Total Past Nonaccrual Current Total (Dollars in thousands) Construction, land development and other land loans $ 9,051 $ - $ 9,051 $ 1,670 $ 1,162,803 $ 1,173,524 Agriculture and agriculture real estate (includes farmland) 1,971 887 2,858 5,691 632,744 641,293 1-4 family (includes home equity) (1) 5,786 181 5,967 3,586 2,653,636 2,663,189 Commercial real estate (includes multi-family residential) 7,629 - 7,629 9,299 3,212,778 3,229,706 Commercial and industrial 9,471 25 9,496 18,621 1,671,898 1,700,015 Consumer and other 246 - 246 227 246,208 246,681 Total $ 34,154 $ 1,093 $ 35,247 $ 39,094 $ 9,580,067 $ 9,654,408 December 31, 2015 Loans Past Due and Still Accruing 30-89 Days 90 or More Total Past Nonaccrual Current Total (Dollars in thousands) Construction, land development and other land loans $ 4,097 $ - $ 4,097 $ 134 $ 1,068,967 $ 1,073,198 Agriculture and agriculture real estate (includes farmland) 946 - 946 208 647,664 648,818 1-4 family (includes home equity) (1) 4,748 220 4,968 1,894 2,633,803 2,640,665 Commercial real estate (includes multi-family residential) 12,922 - 12,922 15,535 3,102,626 3,131,083 Commercial and industrial 4,793 394 5,187 21,692 1,665,367 1,692,246 Consumer and other 1,274 - 1,274 248 251,057 252,579 Total $ 28,780 $ 614 $ 29,394 $ 39,711 $ 9,369,484 $ 9,438,589 ________________ (1) Includes $23.7 million and $23.9 million of residential mortgage loans held for sale at March 31, 2016 and December 31, 2015, respectively. The following table presents information regarding nonperforming assets as of the dates indicated: March 31, December 31, (Dollars in thousands) Nonaccrual loans (1) $ 39,094 $ 39,711 Accruing loans 90 or more days past due 1,093 614 Total nonperforming loans 40,187 40,325 Repossessed assets 161 171 Other real estate 16,695 2,963 Total nonperforming assets $ 57,043 $ 43,459 Nonperforming assets to total loans and other real estate 0.59 % 0.46 % ________________ (1) Includes troubled debt restructurings of $593 thousand and $681 thousand as of March 31, 2016 and December 31, 2015, respectively. The Company had $57.0 million in nonperforming assets at March 31, 2016 compared with $43.5 million at December 31, 2015. This increase was primarily due to an agricultural loan, as well as other real estate obtained from the acquisition of Tradition Bancshares, Inc. (“Tradition”) and its wholly-owned subsidiary Tradition Bank. Nonperforming assets were 0.59% of total loans and other real estate at March 31, 2016 compared with 0.46% of total loans and other real estate at December 31, 2015. These low nonperforming assets to total loans and other real estate ratios are reflective of the Company’s conservative lending approach. If interest on nonaccrual loans had been accrued under the original loan terms, approximately $1.0 million and $910 thousand would have been recorded as income for the three months ended March 31, 2016 and 2015, 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. March 31, December 31, (Dollars in thousands) PCI loans: Outstanding balance $ 73,590 $ 79,802 Less: discount 34,054 39,976 Recorded investment $ 39,536 $ 39,826 Changes in the accretable yield for acquired PCI loans as of the three months ended March 31, 2016 and 2015 were as follows: Three Months Ended March 31, 2016 2015 (Dollars in thousands) Balance at beginning of period $ 5,664 $ 9,867 Additions 10,222 - Reclassifications from nonaccretable 5,120 7,291 Accretion (7,831 ) (9,288 ) Balance at March 31 $ 13,175 $ 7,870 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 . March 31, December 31, 2015 (Dollars in thousands) Non-PCI loans: Outstanding balance $ 1,506,292 $ 1,430,501 Less: discount 50,509 54,734 Recorded investment $ 1,455,783 $ 1,375,767 Changes in the discount accretion for Non-PCI loans for the three months ended March 31, 2016 and 2015 were as follows: Three Months Ended March 31, 2016 2015 (Dollars in thousands) Balance at beginning of period $ 54,734 $ 89,105 Additions 3,491 - Accretion charge-offs (1,053 ) (457 ) Accretion (6,663 ) (10,359 ) Balance at March 31 $ 50,509 $ 78,289 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. March 31, 2016 Recorded Unpaid Principal l Related Average (Dollars in thousands) With no related allowance recorded: Construction, land development and other land loans $ 19 $ 336 $ - $ 26 Agriculture and agriculture real estate (includes farmland) 5,517 12,520 - 2,768 1-4 family (includes home equity) 2,032 2,189 - 1,619 Commercial real estate (includes multi-family residential) 9,159 9,455 - 12,137 Commercial and industrial 769 1,050 - 1,062 Consumer and other 63 137 - 60 Total 17,559 25,687 - 17,672 With an allowance recorded: Construction, land development and other land loans 6 10 2 6 Agriculture and agriculture real estate (includes farmland) 174 192 37 181 1-4 family (includes home equity) 347 357 91 363 Commercial real estate (includes multi-family residential) - - - 131 Commercial and industrial 17,672 30,230 7,464 16,133 Consumer and other 164 205 27 172 Total 18,363 30,994 7,621 16,986 Total: Construction, land development and other land loans 25 346 2 32 Agriculture and agriculture real estate (includes farmland) 5,691 12,712 37 2,949 1-4 family (includes home equity) 2,379 2,546 91 1,982 Commercial real estate (includes multi-family residential) 9,159 9,455 - 12,268 Commercial and industrial 18,441 31,280 7,464 17,195 Consumer and other 227 342 27 232 $ 35,922 $ 56,681 $ 7,621 $ 34,658 December 31, 2015 Recorded Unpaid Related Average (Dollars in thousands) With no related allowance recorded: Construction, land development and other land loans $ 33 $ 346 $ - $ 142 Agriculture and agriculture real estate (includes farmland) 20 23 - 10 1-4 family (includes home equity) 1,206 1,365 - 1,458 Commercial real estate (includes multi-family residential) 15,115 15,398 - 10,104 Commercial and industrial 1,354 1,630 - 5,419 Consumer and other 58 131 - 4,101 Total 17,786 18,893 - 21,234 With an allowance recorded: Construction, land development and other land loans 7 11 2 141 Agriculture and agriculture real estate (includes farmland) 189 201 52 118 1-4 family (includes home equity) 379 386 93 902 Commercial real estate (includes multi-family residential) 262 1,857 262 162 Commercial and industrial 14,594 16,413 7,082 8,524 Consumer and other 181 220 44 208 Total 15,612 19,088 7,535 10,055 Total: Construction, land development and other land loans 40 357 2 283 Agriculture and agriculture real estate (includes farmland) 209 224 52 128 1-4 family (includes home equity) 1,585 1,751 93 2,360 Commercial real estate (includes multi-family residential) 15,377 17,255 262 10,266 Commercial and industrial 15,948 18,043 7,082 13,943 Consumer and other 239 351 44 4,309 $ 33,398 $ 37,981 $ 7,535 $ 31,289 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 March 31, 2016. Impaired loans include loans in risk grades 7, 8 and 9, as well as any PCI loan that has a specific reserve allocated to it. Construction, Land Other Land Loans Agriculture and Farmland) 1-4 Family Home Equity) (1) Commercial Real Estate (includes Multi- Family Residential) Commercial and Industrial Consumer and Other Total (Dollars in thousands) Grade 1 $ - $ 12,574 $ - $ - $ 61,558 $ 44,866 $ 118,998 Grade 2 4,362 5,717 24,925 10,538 26,929 6,266 78,737 Grade 3 1,111,986 546,180 2,559,272 2,966,130 1,273,305 188,378 8,645,251 Grade 4 47,479 62,053 61,050 182,947 195,173 636 549,338 Grade 5 3,795 7,435 1,315 19,820 21,348 6,246 59,959 Grade 6 2,783 1,249 7,874 21,190 94,816 63 127,975 Grade 7 25 5,691 2,321 9,090 15,588 226 32,941 Grade 8 - - 58 69 1,546 - 1,673 Grade 9 - - - - - - - PCI Loans (2) 3,094 394 6,374 19,922 9,752 - 39,536 Total $ 1,173,524 $ 641,293 $ 2,663,189 $ 3,229,706 $ 1,700,015 $ 246,681 $ 9,654,408 (1) Includes $23.7 million of residential mortgage loans held for sale at March 31, 2016. (2) Of the total PCI loans, $4.4 million were classified as substandard at March 31, 2016 which includes $1.3 million with specific reserves allocated to them. The following table presents risk grades and PCI loans by category of loan at December 31, 2015. Impaired loans include loans in risk grades 7, 8 and 9, as well as any PCI loan that has a specific reserve allocated to it. Construction, Agriculture and 1-4 Family Commercial - Commercial Consumer and Total (Dollars in thousands) Grade 1 $ - $ 12,733 $ - $ - $ 57,625 $ 44,389 $ 114,747 Grade 2 3,975 5,603 27,272 24,965 27,755 34,668 124,238 Grade 3 1,034,792 553,782 2,539,282 2,861,872 1,355,887 162,892 8,508,507 Grade 4 29,831 67,453 58,172 164,924 123,772 3,395 447,547 Grade 5 2,431 7,191 1,261 20,078 68,618 6,908 106,487 Grade 6 1,209 1,452 7,824 26,237 28,005 88 64,815 Grade 7 40 209 1,526 15,377 12,487 239 29,878 Grade 8 - - 59 - 2,485 - 2,544 Grade 9 - - - - - - - PCI Loans (2) 920 395 5,269 17,630 15,612 - 39,826 Total $ 1,073,198 $ 648,818 $ 2,640,665 $ 3,131,083 $ 1,692,246 $ 252,579 $ 9,438,589 (1) Includes $23.9 million of residential mortgage loans held for sale at December 31, 2015. (2) Of the total PCI loans, $7.3 million were classified as substandard at December 31, 2015, which includes $976 thousand with specific reserves allocated to them. 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 March 31, 2016, the allowance for credit losses totaled $83.7 million or 0.87% of total loans, including acquired loans with discounts. At December 31, 2015, the allowance for credit losses totaled $81.4 million or 0.86% 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 months ended March 31, 2016 and 2015 . Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Construction, Agriculture 1-4 Family Commercial Commercial Consumer and Other Total (Dollars in thousands) Allowance for credit losses: Three Months Ended Balance January 1, 2016 $ 14,882 $ 3,845 $ 14,891 $ 12,996 $ 33,409 $ 1,361 $ 81,384 Provision for credit losses (703 ) 6,689 (297 ) (546 ) 8,150 707 14,000 Charge-offs (7 ) (7,025 ) (49 ) (59 ) (6,277 ) (848 ) (14,265 ) Recoveries 193 63 19 - 1,881 439 2,595 Net charge-offs 186 (6,962 ) (30 ) (59 ) (4,396 ) (409 ) (11,670 ) Balance March 31, 2016 $ 14,365 $ 3,572 $ 14,564 $ 12,391 $ 37,163 $ 1,659 $ 83,714 Allowance for credit losses: Three Months Ended Balance January 1, 2015 $ 15,825 $ 3,722 $ 16,377 $ 12,744 $ 30,002 $ 2,092 $ 80,762 Provision for credit losses 1,178 (523 ) 487 (173 ) 586 (305 ) 1,250 Charge-offs (151 ) - (98 ) (43 ) (728 ) (729 ) (1,749 ) Recoveries 6 78 12 10 224 370 700 Net charge-offs (145 ) 78 (86 ) (33 ) (504 ) (359 ) (1,049 ) Balance March 31, 2015 $ 16,858 $ 3,277 $ 16,778 $ 12,538 $ 30,084 $ 1,428 $ 80,963 The following table details the amount of the allowance for credit losses allocated to each category of loan as of March 31, 2016, December 31, 2015 and March 31, 2015, detailed on the basis of the impairment methodology used by the Company. Construction, Agriculture 1-4 Family Commercial Commercial Consumer and Other Total (Dollars in thousands) Allowance for credit losses related to: March 31, 2016 Individually evaluated for impairment $ 2 $ 37 $ 91 $ - $ 7,464 $ 27 $ 7,621 Collectively evaluated for impairment 14,363 3,535 14,473 12,391 28,531 1,632 74,925 PCI loans - - - - 1,168 - 1,168 Total allowance for credit losses $ 14,365 $ 3,572 $ 14,564 $ 12,391 $ 37,163 $ 1,659 $ 83,714 December 31, 2015 Individually evaluated for impairment $ 2 $ 52 $ 93 $ 262 $ 7,082 $ 44 $ 7,535 Collectively evaluated for impairment 14,880 3,793 14,798 12,734 25,491 1,317 73,013 PCI loans - - - - 836 - 836 Total allowance for credit losses $ 14,882 $ 3,845 $ 14,891 $ 12,996 $ 33,409 $ 1,361 $ 81,384 March 31, 2015 Individually evaluated for impairment $ 221 $ 21 $ 242 $ 507 $ 2,396 $ 93 $ 3,480 Collectively evaluated for impairment 16,637 3,256 16,536 12,031 26,276 1,335 76,071 PCI loans - - - - 1,412 - 1,412 Total allowance for credit losses $ 16,858 $ 3,277 $ 16,778 $ 12,538 $ 30,084 $ 1,428 $ 80,963 The following table details the recorded investment in loans as of March 31, 2016, December 31, 2015 and March 31, 2015, excluding $23.7 million, $23.9 million and $10.6 million, respectively, of residential mortgage loans held for sale, related to each balance in the allowance for credit losses by category of loan. 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) Commercial and Industrial Consumer and Other Total (Dollars in thousands) Recorded investment in loans: March 31, 2016 Individually evaluated for impairment $ 25 $ 5,691 $ 2,379 $ 9,159 $ 18,441 $ 227 $ 35,922 Collectively evaluated for impairment 1,170,405 635,208 2,630,719 3,200,625 1,671,822 246,454 9,555,233 PCI loans 3,094 394 6,374 19,922 9,752 - 39,536 Total loans evaluated for impairment $ 1,173,524 $ 641,293 $ 2,639,472 $ 3,229,706 $ 1,700,015 $ 246,681 $ 9,630,691 December 31, 2015 Individually evaluated for impairment $ 40 $ 209 $ 1,585 $ 15,377 $ 15,948 $ 239 $ 33,398 Collectively evaluated for impairment 1,072,238 648,214 2,609,878 3,098,076 1,660,686 252,340 9,341,432 PCI loans 920 395 5,269 17,630 15,612 - 39,826 Total loans evaluated for impairment $ 1,073,198 $ 648,818 $ 2,616,732 $ 3,131,083 $ 1,692,246 $ 252,579 $ 9,414,656 March 31, 2015 Individually evaluated for impairment $ 521 $ 232 $ 2,603 $ 6,190 $ 11,019 $ 366 $ 20,931 Collectively evaluated for impairment 1,039,052 556,103 2,523,613 2,992,782 1,693,080 280,496 9,085,126 PCI loans 1,272 504 5,844 22,684 19,022 - 49,326 Total loans evaluated for impairment $ 1,040,845 $ 556,839 $ 2,532,060 $ 3,021,656 $ 1,723,121 $ 280,862 $ 9,155,383 Troubled Debt Restructurings. Receivables —Troubled Debt Restructurings by Creditors,” Three Months Ended March 31, 2016 2015 Number of Loans Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Loans Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded 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) - - - - - - Commercial and industrial - - - - - - Consumer and other - - - 1 10 10 Total - $ - $ - 1 $ 10 $ 10 As of March 31, 2016, there have been no defaults on any loans that were modified as troubled debt restructurings during the preceding twelve months. Default is determined at 90 or more days past due. For the three months ended March 31, 2016, the Company did not add any loans as new troubled debt restructurings. For the three months ended March 31, 2015, the Company added one loan totaling $10 thousand as a new troubled debt restructuring, all of which was still outstanding at March 31, 2015. 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. These modifications did not have a material impact on the Company’s determination of the allowance for credit losses |