Loans and Allowance for Credit Losses | 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES The loan portfolio consists of various types of loans and is categorized by major type as follows: June 30, 2019 December 31, 2018 (Dollars in thousands) Residential mortgage loans held for sale $ 20,315 $ 29,367 Commercial and industrial 1,525,628 1,483,571 Real estate: Construction, land development and other land loans 1,739,308 1,622,289 1-4 family residential (includes home equity) 2,692,963 2,677,542 Commercial real estate (includes multi-family residential) 3,551,668 3,538,557 Farmland 541,469 545,373 Agriculture 195,001 184,128 Consumer and other 321,023 289,486 Total loans held for investment 10,567,060 10,340,946 Total $ 10,587,375 $ 10,370,313 Concentrations of Credit. Most of the Company’s lending activity occurs within the states of Texas and Oklahoma. Commercial real estate loans, 1-4 family residential loans and construction, land development and other land loans make up 75.4% of the Company’s total loan portfolio at June 30, 2019. As of June 30, 2019 and December 31, 2018, there were no concentrations of loans related to any single industry in excess of 10% Related Party Loans. As of June 30, 2019 and December 31, 2018, loans outstanding to directors, officers and their affiliates totaled $1.8 million and $1.9 million, respectively. All transactions between the Company and such related parties are conducted in the ordinary course of business and made on the same terms and conditions as similar transactions with unaffiliated persons. An analysis of activity with respect to these related party loans is as follows: As of and for the six months ended June As of and for the year ended December (Dollars in thousands) Beginning balance on January 1 $ 1,923 $ 2,694 New loans — 5 Repayments (168 ) (776 ) Ending balance $ 1,755 $ 1,923 Nonperforming Assets and Nonaccrual and Past Due Loans. The Company has several procedures in place to assist it in maintaining the overall quality of its loan portfolio. The Company has established underwriting guidelines to be followed by its officers, including requiring appraisals on loans collateralized by real estate. The Company also monitors its delinquency levels for any negative or adverse trends. Nevertheless, the Company’s loan portfolio could become subject to increasing pressures from deteriorating borrower credit due to general economic conditions. 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. 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, 2019 Loans Past Due and Still Accruing 30-89 Days 90 or More Days Total Past Due Loans Nonaccrual Loans Current Loans Total Loans (Dollars in thousands) Construction, land development and other land loans $ 5,368 $ 1,153 $ 6,521 $ 659 $ 1,732,128 $ 1,739,308 Agriculture and agriculture real estate (includes farmland) 710 — 710 616 735,144 736,470 1-4 family (includes home equity) (1) 11,107 58 11,165 15,278 2,686,835 2,713,278 Commercial real estate (includes multi-family residential) 14,572 — 14,572 4,135 3,532,961 3,551,668 Commercial and industrial 4,102 383 4,485 16,561 1,504,582 1,525,628 Consumer and other 333 — 333 40 320,650 321,023 Total $ 36,192 $ 1,594 $ 37,786 $ 37,289 $ 10,512,300 $ 10,587,375 December 31, 2018 Loans Past Due and Still Accruing 30-89 Days 90 or More Days Total Past Due Loans Nonaccrual Loans Current Loans Total Loans (Dollars in thousands) Construction, land development and other land loans $ 6,363 $ 788 $ 7,151 $ 1,386 $ 1,613,752 $ 1,622,289 Agriculture and agriculture real estate (includes farmland) 705 — 705 256 728,540 729,501 1-4 family (includes home equity) (1) 10,479 2,995 13,474 4,515 2,688,920 2,706,909 Commercial real estate (includes multi-family residential) 9,063 — 9,063 2,727 3,526,767 3,538,557 Commercial and industrial 6,652 221 6,873 4,215 1,472,483 1,483,571 Consumer and other 1,012 — 1,012 48 288,426 289,486 Total $ 34,274 $ 4,004 $ 38,278 $ 13,147 $ 10,318,888 $ 10,370,313 (1) Includes $20.3 million and $29.4 million of residential mortgage loans held for sale at June 30, 2019 and December 31, 2018, respectively. The following table presents information regarding nonperforming assets as of the dates indicated: June 30, 2019 December 31, 2018 (Dollars in thousands) Nonaccrual loans (1) $ 37,289 $ 13,147 Accruing loans 90 or more days past due 1,594 4,004 Total nonperforming loans 38,883 17,151 Repossessed assets 670 — Other real estate 2,005 1,805 Total nonperforming assets $ 41,558 $ 18,956 Nonperforming assets to total loans and other real estate 0.39 % 0.18 % (1) Includes troubled debt restructurings of $14.3 million and $51 thousand as of June 30, 2019 and December 31, 2018, respectively. The Company had $41.6 million in nonperforming assets at June 30, 2019 compared with $19.0 million at December 31, 2018. Nonperforming assets were 0.39% of total loans and other real estate at June 30, 2019 compared with 0.18% of total loans and other real estate at December 31, 2018. If interest on nonaccrual loans had been accrued under the original loan terms, approximately $1.2 million and $951 thousand would have been recorded as income for the six months ended June 30, 2019 and 2018, respectively. The Company had $37.3 million in nonaccrual loans at June 30, 2019 compared with $20.4 million at June 30, 2018. Acquired Loans. Acquired loans were preliminarily recorded at fair value based on a discounted cash flow valuation methodology that considers, among other things, interest rates, projected default rates, loss given default, and recovery rates. During the valuation process, the Company identified Purchased Credit-Impaired (“PCI”) and Non-PCI loans in the acquired loan portfolios. Loans acquired with evidence of credit quality deterioration at acquisition for which it was probable that the Company would not be able to collect all contractual amounts due were accounted for as PCI. PCI loan identification considers the following factors: payment history and past due status, debt service coverage, loan grading, collateral values and other factors that may indicate deterioration of credit quality since origination. 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. The recorded investment in PCI loans included in the consolidated balance sheet and the related outstanding balance as of the dates indicated are presented in the table below. The outstanding balance represents the total amount owed as of June 30, 2019 and December 31, 2018. June 30, 2019 December 31, 2018 (Dollars in thousands) PCI loans: Outstanding balance $ 10,110 $ 11,419 Discount (2,165 ) (2,831 ) Recorded investment $ 7,945 $ 8,588 Changes in the accretable yield for acquired PCI loans for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (Dollars in thousands) Balance at beginning of period $ 1,234 $ 7,685 $ 1,534 $ 8,121 Reclassifications from nonaccretable 17 55 36 305 Accretion (347 ) (3,771 ) (666 ) (4,457 ) Balance at June 30, $ 904 $ 3,969 $ 904 $ 3,969 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. The recorded investment in Non-PCI loans included in the consolidated balance sheet and the related outstanding balance as of the dates indicated are presented in the table below. The outstanding balance represents the total amount owed as of June 30, 2019 and December 31, 2018. June 30, 2019 December 31, 2018 (Dollars in thousands) Non-PCI loans: Outstanding balance $ 467,645 $ 526,840 Discount (12,479 ) (14,833 ) Recorded investment $ 455,166 $ 512,007 Changes in the discount accretion for Non-PCI loans for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (Dollars in thousands) Balance at beginning of period $ 13,359 $ 18,885 $ 14,833 $ 20,533 Accretion charge-offs — (2 ) — (10 ) Accretion (880 ) (1,452 ) (2,354 ) (3,092 ) Balance at June 30, $ 12,479 $ 17,431 $ 12,479 $ 17,431 Impaired Loans. Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. 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, 2019 Recorded Investment Unpaid Contractual Principal Balance Related Allowance Average Recorded Investment (Dollars in thousands) With no related allowance recorded: Construction, land development and other land loans $ 269 $ 270 $ — $ 631 Agriculture and agriculture real estate (includes farmland) 326 326 — 291 1-4 family (includes home equity) 10,035 10,747 — 7,106 Commercial real estate (includes multi-family residential) 3,162 3,341 — 2,945 Commercial and industrial 15,406 17,610 — 9,138 Consumer and other 40 44 — 44 Total 29,238 32,338 — 20,155 With an allowance recorded: Construction, land development and other land loans 390 390 58 391 Agriculture and agriculture real estate (includes farmland) 290 290 160 145 1-4 family (includes home equity) 5,243 5,272 504 2,754 Commercial real estate (includes multi-family residential) 973 993 283 486 Commercial and industrial 1,155 1,171 329 1,241 Consumer and other — — — — Total 8,051 8,116 1,334 5,017 Total: Construction, land development and other land loans 659 660 58 1,022 Agriculture and agriculture real estate (includes farmland) 616 616 160 436 1-4 family (includes home equity) 15,278 16,019 504 9,860 Commercial real estate (includes multi-family residential) 4,135 4,334 283 3,431 Commercial and industrial 16,561 18,781 329 10,379 Consumer and other 40 44 — 44 $ 37,289 $ 40,454 $ 1,334 $ 25,172 December 31, 2018 Recorded Investment Unpaid Contractual Principal Balance Related Allowance Average Recorded Investment (Dollars in thousands) With no related allowance recorded: Construction, land development and other land loans $ 993 $ 995 $ — $ 788 Agriculture and agriculture real estate (includes farmland) 256 311 — 194 1-4 family (includes home equity) 4,177 4,903 — 4,048 Commercial real estate (includes multi-family residential) 2,727 2,848 — 2,475 Commercial and industrial 2,870 3,810 — 5,358 Consumer and other 48 76 — 135 Total 11,071 12,943 — 12,998 With an allowance recorded: Construction, land development and other land loans 391 391 58 195 Agriculture and agriculture real estate (includes farmland) — — — — 1-4 family (includes home equity) 266 289 56 729 Commercial real estate (includes multi-family residential) — — — 743 Commercial and industrial 1,328 1,332 571 3,740 Consumer and other — — — — Total 1,985 2,012 685 5,407 Total: Construction, land development and other land loans 1,384 1,386 58 983 Agriculture and agriculture real estate (includes farmland) 256 311 — 194 1-4 family (includes home equity) 4,443 5,192 56 4,777 Commercial real estate (includes multi-family residential) 2,727 2,848 — 3,218 Commercial and industrial 4,198 5,142 571 9,098 Consumer and other 48 76 — 135 $ 13,056 $ 14,955 $ 685 $ 18,405 Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio and methodology for calculating the allowance for credit losses, management assigns and tracks loan grades to be used as credit quality indicators. The following is a general description of the loan grades used: Grade 1— Credits in this category have risk potential that is virtually nonexistent. These loans may be secured by insured certificates of deposit, insured savings accounts, U.S. Government securities and highly rated municipal bonds. Grade 2— Credits in this category are of the highest quality. These borrowers represent top rated companies and individuals with unquestionable financial standing with excellent global cash flow coverage, net worth, liquidity and collateral coverage. Grade 3— Credits in this category are not immune from risk but are well protected by the collateral and paying capacity of the borrower. These loans may exhibit a minor unfavorable credit factor, but the overall credit is sufficiently strong to minimize the possibility of loss. Grade 4— Credits in this category are considered to be of acceptable credit quality with moderately greater risk than Grade 3 and receiving closer monitoring. Loans in this category have sources of repayment that remain sufficient to preclude a larger than normal probability of default and secondary sources are likewise currently of sufficient quantity, quality, and liquidity to protect the Company against loss of principal and interest. These borrowers have specific risk factors, but the overall strength of the credit is acceptable based on other mitigating credit and/or collateral factors and can repay the debt in the normal course of business. Grade 5— Credits in this category constitute an undue and unwarranted credit risk; however, the factors do not rise to a level of substandard. These credits have potential weaknesses and/or declining trends that, if not corrected, could expose the Company to risk at a future date. These loans are monitored on the Company ’s internally-generated watch list and evaluated on a quarterly basis. Grade 6— Credits in this category are considered “substandard” but “non-impaired” loans in accordance with regulatory guidelines. Loans in this category have well-defined weakness that, if not corrected, could make default of principal and interest possible. Loans in this category are still accruing interest and may be dependent upon secondary sources of repayment and/or collateral liquidation. Grade 7— Credits in this category are deemed “substandard” and “impaired” pursuant to regulatory guidelines. As such, the Company has determined that it is probable that less than 100% of the contractual principal and interest will be collected. These loans are individually evaluated for a specific reserve and will typically have the accrual of interest stopped. Grade 8— Credits in this category include “doubtful” loans in accordance with regulatory guidance. Such loans are no longer accruing interest and factors indicate a loss is imminent. These loans are also deemed “impaired.” While a specific reserve may be in place while the loan and collateral is being evaluated, these loans are typically charged down to an amount the Company estimates is collectible. Grade 9— Credits in this category are deemed a “loss” in accordance with regulatory guidelines and have been charged off or charged down. The Company may continue collection efforts and may have partial recovery in the future. The following table presents loans by risk grade and category of loan at June 30, 2019. 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 Development and Other Agriculture and Agriculture Real Estate (includes Farmland) 1-4 Family (includes Home (1) Commercial Real Estate (includes Multi-Family Commercial and Industrial Consumer and Other Total (Dollars in thousands) Grade 1 $ — $ 14,322 $ — $ — $ 55,562 $ 35,091 $ 104,975 Grade 2 1,215 3,877 15,430 21,640 12,312 56,519 110,993 Grade 3 1,587,922 647,171 2,600,773 2,892,964 1,102,365 200,582 9,031,777 Grade 4 136,083 64,025 67,445 557,501 265,415 24,325 1,114,794 Grade 5 5,684 5,091 6,486 56,772 61,476 2,827 138,336 Grade 6 7,315 1,029 3,750 15,719 11,814 1,639 41,266 Grade 7 659 326 15,278 4,135 16,543 40 36,981 Grade 8 — 290 — — 18 — 308 Grade 9 — — — — — — — PCI Loans 430 339 4,116 2,937 123 — 7,945 Total $ 1,739,308 $ 736,470 $ 2,713,278 $ 3,551,668 $ 1,525,628 $ 321,023 $ 10,587,375 (1) Includes $20.3 million of residential mortgage loans held for sale at June 30, 2019. The following table presents loans by risk grade and category of loan at December 31, 2018 . 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 Development and Other Agriculture and Agriculture Real Estate (includes Farmland) 1-4 Family (includes Home (1) Commercial Real Estate (includes Multi-Family Commercial and Industrial Consumer and Other Total (Dollars in thousands) Grade 1 $ — $ 15,725 $ — $ — $ 59,979 $ 37,135 $ 112,839 Grade 2 1,040 3,974 21,465 22,207 11,003 55,802 115,491 Grade 3 1,509,532 636,674 2,598,600 2,974,474 1,083,328 171,758 8,974,366 Grade 4 99,087 66,650 61,430 481,735 243,743 20,164 972,809 Grade 5 3,673 5,578 12,522 37,942 58,088 2,978 120,781 Grade 6 7,081 282 4,332 16,006 23,081 1,601 52,383 Grade 7 1,384 256 4,395 2,727 4,165 48 12,975 Grade 8 — — 48 — 33 — 81 Grade 9 — — — — — — — PCI Loans 492 362 4,117 3,466 151 — 8,588 Total $ 1,622,289 $ 729,501 $ 2,706,909 $ 3,538,557 $ 1,483,571 $ 289,486 $ 10,370,313 (1) Includes $29.4 million of residential mortgage loans held for sale at December 31, 2018. Allowance for Credit Losses. The allowance for credit losses is established through charges to earnings in the form of a provision for credit losses. Management has established an allowance for credit losses which it believes is adequate as of June 30, 2019 for estimated losses in the Company’s loan portfolio. The amount of the allowance for credit losses is affected by the following: (1) charge-offs of loans that occur when loans are deemed uncollectible and decrease the allowance, (2) recoveries on loans previously charged off that increase the allowance and (3) provisions for credit losses charged to earnings that increase the allowance. Based on an evaluation of the loan portfolio and consideration of the factors listed below, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. Although management believes it uses the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic conditions or the borrower’s performance differ from the assumptions used in making the initial determinations. The Company’s allowance for credit losses consists of two components: (1) a specific valuation allowance based on probable losses on specifically identified loans and (2) 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 agriculture 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 agriculture 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 addition, for each category, the Company considers secondary sources of income and the financial strength and credit history of the borrower and any guarantors. 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, other qualitative risk factors both internal and external to the Company and other relevant factors in accordance with ASC Topic 450, “ Contingencies. The following table details activity in the allowance for credit losses by category of loan for the three and six months ended June 30, 2019 and 2018. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. 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) Allowance for credit losses: Three Months Ended Balance March 31, 2019 $ 16,192 $ 3,284 $ 14,455 $ 11,590 $ 39,059 $ 1,511 $ 86,091 Provision for credit losses (299 ) 578 (61 ) 575 (710 ) 717 800 Charge-offs (19 ) (54 ) (16 ) — (125 ) (905 ) (1,119 ) Recoveries 12 8 5 1 953 255 1,234 Net charge-offs (7 ) (46 ) (11 ) 1 828 (650 ) 115 Balance June 30, 2019 $ 15,886 $ 3,816 $ 14,383 $ 12,166 $ 39,177 $ 1,578 $ 87,006 Six Months Ended Balance December 31, 2018 $ 15,582 $ 3,693 $ 14,135 $ 11,220 $ 40,223 $ 1,587 $ 86,440 Provision for credit losses 311 (1,109 ) 256 944 (155 ) 1,253 1,500 Charge-offs (63 ) (64 ) (22 ) — (2,082 ) (1,797 ) (4,028 ) Recoveries 56 1,296 14 2 1,191 535 3,094 Net charge-offs (7 ) 1,232 (8 ) 2 (891 ) (1,262 ) (934 ) Balance June 30, 2019 $ 15,886 $ 3,816 $ 14,383 $ 12,166 $ 39,177 $ 1,578 $ 87,006 Allowance for credit losses: Three Months Ended Balance March 31, 2018 $ 14,622 $ 3,304 $ 13,072 $ 10,853 $ 40,340 $ 1,409 $ 83,600 Provision for credit losses (173 ) 407 395 749 2,161 461 4,000 Charge-offs — — (120 ) (986 ) (1,194 ) (901 ) (3,201 ) Recoveries 1 45 6 — 147 366 565 Net charge-offs 1 45 (114 ) (986 ) (1,047 ) (535 ) (2,636 ) Balance June 30, 2018 $ 14,450 $ 3,756 $ 13,353 $ 10,616 $ 41,454 $ 1,335 $ 84,964 Six Months Ended Balance December 31, 2017 $ 14,815 $ 3,772 $ 14,490 $ 10,628 $ 38,810 $ 1,526 $ 84,041 Provision for credit losses (243 ) (122 ) (766 ) 1,476 11,707 948 13,000 Charge-offs (130 ) — (386 ) (1,489 ) (9,370 ) (1,911 ) (13,286 ) Recoveries 8 106 15 1 307 772 1,209 Net charge-offs (122 ) 106 (371 ) (1,488 ) (9,063 ) (1,139 ) (12,077 ) Balance June 30, 2018 $ 14,450 $ 3,756 $ 13,353 $ 10,616 $ 41,454 $ 1,335 $ 84,964 The following table details the amount of the allowance for credit losses allocated to each category of loan as of June 30, 2019, December 31, 2018 and June 30, 2018, on the basis of the impairment methodology used to determine the allowance for credit losses. 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) Allowance for credit losses related June 30, 2019 Individually evaluated for impairment $ 58 $ 160 $ 504 $ 283 $ 329 $ — $ 1,334 Collectively evaluated for impairment 15,828 3,656 13,879 11,883 38,848 1,578 85,672 PCI loans — — — — — — — Total allowance for credit losses $ 15,886 $ 3,816 $ 14,383 $ 12,166 $ 39,177 $ 1,578 $ 87,006 December 31, 2018 Individually evaluated for impairment $ 58 $ — $ 56 $ — $ 571 $ — $ 685 Collectively evaluated for impairment 15,524 3,693 14,079 11,220 39,652 1,587 85,755 PCI loans — — — — — — — Total allowance for credit losses $ 15,582 $ 3,693 $ 14,135 $ 11,220 $ 40,223 $ 1,587 $ 86,440 June 30, 2018 Individually evaluated for impairment $ — $ 25 $ 61 $ — $ 2,741 $ — $ 2,827 Collectively evaluated for impairment 14,450 3,731 13,292 10,616 38,713 1,335 82,137 PCI loans — — — — — — — Total allowance for credit losses $ 14,450 $ 3,756 $ 13,353 $ 10,616 $ 41,454 $ 1,335 $ 84,964 The following table details the recorded investment in loans by category of loan on the basis of the impairment methodology used to determine the allowance for credit losses as of June 30, 2019, December 31, 2018 and June 30, 2018, excluding $20.3 million, $29.4 million and $27.8 million, respectively, of residential mortgage loans held for sale. 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 June 30, 2019 Individually evaluated for impairment $ 659 $ 616 $ 15,278 $ 4,135 $ 16,561 $ 40 $ 37,289 Collectively evaluated for impairment 1,738,219 735,515 2,673,569 3,544,596 1,508,944 320,983 10,521,826 PCI loans 430 339 4,116 2,937 123 — 7,945 Total loans evaluated for impairment $ 1,739,308 $ 736,470 $ 2,692,963 $ 3,551,668 $ 1,525,628 $ 321,023 $ 10,567,060 December 31, 2018 Individually evaluated for impairment $ 1,384 $ 256 $ 4,443 $ 2,727 $ 4,198 $ 48 $ 13,056 Collectively evaluated for impairment 1,620,413 728,883 2,668,982 3,532,364 1,479,222 289,438 10,319,302 PCI loans 492 362 4,117 3,466 151 — 8,588 Total loans evaluated for impairment $ 1,622,289 $ 729,501 $ 2,677,542 $ 3,538,557 $ 1,483,571 $ 289,486 $ 10,340,946 June 30, 2018 Individually evaluated for impairment $ 508 $ 519 $ 4,665 $ 2,291 $ 12,111 $ 81 $ 20,175 Collectively evaluated for impairment 1,541,567 708,721 2,658,656 3,398,158 1,508,509 271,643 10,087,254 PCI loans 696 377 4,380 5,017 899 — 11,369 Total loans evaluated for impairment $ 1,542,771 $ 709,617 $ 2,667,701 $ 3,405,466 $ 1,521,519 $ 271,724 $ 10,118,798 Troubled Debt Restructurings. The restructuring of a loan is considered a “troubled debt restructuring” if both (1) the borrower is experiencing financial difficulties and (2) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Under ASC Topic 310-40 “ the Company evaluates all loan modifications to identify whether the restructuring constitutes a troubled debt restructuring. As of June 30, 2019 and 2018, the Company had $14.3 million and $208 thousand, respectively, in outstanding troubled debt restructurings. The following table presents information regarding the recorded investment of loans modified as troubled debt restructurings during the six months ended June 30, 2019 and 2018. Six Months Ended June 30, 2019 2018 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 1 14,783 14,258 2 198 162 Consumer and other — — — — — — Total 1 $ 14,783 $ 14,258 2 $ 198 $ 162 As of June 30, 2019, 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 six months ended June 30, 2019, the Company added one loan totaling $14.8 million as a new troubled debt restructuring, of which $14.3 million remained outstanding at June 30, 2019. For the six months ended June 30, 2018, the Company added two loans totaling $198 thousand as new troubled debt restructurings, of which $162 thousand remained outstanding at June 30, 2018. The modifications generally 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 the time of modification. These modifications did not have a material impact on the Company’s determination of the allowance for credit losses. |