Loans, Net and Allowance for Loan Losses | 3 Months Ended |
Mar. 31, 2014 |
Receivables [Abstract] | ' |
Loans, Net and Allowance for Loan Losses | ' |
Loans, Net and Allowance for Loan Losses |
Loans, net at March 31, 2014 and December 31, 2013, consisted of the following: |
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| | March 31, | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 270,608 | | | $ | 241,178 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 927,408 | | | 843,436 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial construction, land and land development | | 153,734 | | | 130,320 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Residential | | 360,152 | | | 338,654 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Single family interim construction | | 93,587 | | | 83,144 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Agricultural | | 41,642 | | | 40,558 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Consumer | | 45,906 | | | 45,762 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other | | 45 | | | 108 | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | 1,893,082 | | | 1,723,160 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Allowance for loan losses | | (14,841 | ) | | (13,960 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 1,878,241 | | | $ | 1,709,200 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. |
Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. The Company’s management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. These cash flows, however, may not be as expected and the value of collateral securing the loans may fluctuate. 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; however, some short term loans may be made on an unsecured basis. Additionally, our commercial loan portfolio includes loans made to customers in the energy industry, which is a complex, technical and cyclical industry. Experienced bankers with specialized energy lending experience originate our energy loans. Companies in this industry produce, extract, develop, exploit and explore for oil and natural gas. Loans are primarily collateralized with proven producing oil and gas reserves based on a technical evaluation of these reserves. |
Commercial real estate loans are subject to underwriting standards and processes similar to commercial 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 generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors the diversification of the portfolio on a quarterly basis by type and geographic location. Management also tracks the level of owner occupied property versus non owner occupied property. |
Land and commercial land development loans are underwritten using feasibility studies, independent appraisal reviews and financial analysis of the developers or property owners. Generally, borrowers must have a proven track record of success. Commercial construction loans are generally based upon estimates of cost and value of the completed project. These estimates may not be accurate. Commercial construction loans often involve the disbursement of substantial funds with the repayment dependent on the success of the ultimate project. Sources of repayment for these loans may be pre-committed permanent financing or sale of the developed property. The loans in this portfolio are geographically diverse and due to the increased risk are monitored closely by management and the board of directors on a quarterly basis. |
Residential real estate and single family interim construction loans are underwritten primarily based on borrowers’ credit scores, documented income and minimum collateral values. Relatively small loan amounts are spread across many individual borrowers, which minimizes risk in the residential portfolio. In addition, management evaluates trends in past dues and current economic factors on a regular basis. |
Agricultural loans are collateralized by real estate and/or non-real estate. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Loan-to-value ratios on loans secured by farmland generally do not exceed 80% and have amortization periods limited to twenty years. Agricultural non-real estate loans are generally comprised of term loans to fund the purchase of equipment, livestock and seasonal operating lines to grain farmers to plant and harvest corn and soybeans. Specific underwriting standards have been established for agricultural-related loans, including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. |
Agricultural loans carry significant credit risks as they involve larger balances concentrated with single borrowers or groups of related borrowers. In addition, repayment of such loans depends on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. Farming operations may be affected by adverse weather conditions such as drought, hail or floods that can severely limit crop yields. |
Consumer loans represent less than 3% of the outstanding total loan portfolio. Collateral consists primarily of automobiles and other personal assets. Credit score analysis is used to supplement the underwriting process. |
Most of the Company’s lending activity occurs within the State of Texas, primarily in the north and central Texas regions. The majority of the Company’s portfolio consists of commercial and residential real estate loans. As of March 31, 2014 and December 31, 2013, there were no concentrations of loans related to a single industry in excess of 10% of total loans. |
The allowance for loan losses is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio. |
The allowance is derived from the following two components: 1) allowances established on individual impaired loans, which are based on a review of the individual characteristics of each loan, including the customer’s ability to repay the loan, the underlying collateral values, and the industry in which the customer operates, and 2) allowances based on actual historical loss experience for the last three years for similar types of loans in the Company’s loan portfolio adjusted for primarily changes in the lending policies and procedures; collection, charge-off and recovery practices; nature and volume of the loan portfolio; volume and severity of nonperforming loans; existence and effect of any concentrations of credit and the level of such concentrations and current, national and local economic and business conditions. This second component also includes an unallocated allowance to cover uncertainties that could affect management’s estimate of probable losses. The unallocated allowance reflects the imprecision inherent in the underlying assumptions used in the methodologies for estimating this component. |
The Company’s management continually evaluates the allowance for loan losses determined from the allowances established on individual loans and the amounts determined from historical loss percentages adjusted for the qualitative factors above. Should any of the factors considered by management change, the Company’s estimate of loan losses could also change and would affect the level of future provision expense. While the calculation of the allowance for loan losses utilizes management’s best judgment and all the information available, the adequacy of the allowance for loan losses is dependent on a variety of factors beyond the Company’s control, including, among other things, the performance of the entire loan portfolio, the economy, changes in interest rates and the view of regulatory authorities towards loan classifications. |
In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations. |
Loans requiring an allocated loan loss provision are generally identified at the servicing officer level based on review of weekly past due reports and/or the loan officer’s communication with borrowers. In addition, past due loans are discussed at weekly officer loan committee meetings to determine if classification is warranted. The Company’s credit department has implemented an internal risk based loan review process to identity potential internally classified loans that supplements the annual independent external loan review. The external review generally covers all loans greater than $1.5 million. These reviews include analysis of borrower’s financial condition, payment histories and collateral values to determine if a loan should be internally classified. Generally, once classified, an impaired loan analysis is completed by the credit department to determine if the loan is impaired and the amount of allocated allowance required. |
The Texas economy, specifically the Company’s lending area of north and central Texas, has generally performed better and appears to be recovering faster than certain other parts of the country. However, Texas is not completely immune to the problems associated with the U.S. economy. The risk of loss associated with all segments of the loan portfolio continues to be impacted by the prolonged economic recovery. |
The economy and other risk factors are minimized by the Company’s underwriting standards, which include the following principles: 1) financial strength of the borrower including strong earnings, high net worth, significant liquidity and acceptable debt to worth ratio, 2) managerial business competence, 3) ability to repay, 4) loan to value, 5) projected cash flow and 6) guarantor financial statements as applicable. The following is a summary of the activity in the allowance for loan losses by loan class for the three months ended March 31, 2014 and 2013: |
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| Commercial | Commercial | Residential | Single-Family | Agricultural | Consumer | Other | Unallocated | Total | | | | | |
Real Estate, | Real Estate | Interim | | | | | |
Land and Land | | Construction | | | | | |
Development | | | | | | | |
Three months ended March 31, 2014 | | | | | | | | | | | | | | |
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Balance at the beginning of period | $ | 2,401 | | $ | 7,872 | | $ | 2,440 | | $ | 577 | | $ | 238 | | $ | 363 | | $ | — | | $ | 69 | | $ | 13,960 | | | | | | |
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Provision for loan losses | 578 | | 256 | | (163 | ) | (42 | ) | 6 | | (6 | ) | — | | 624 | | 1,253 | | | | | | |
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Charge-offs | (363 | ) | (21 | ) | (1 | ) | — | | — | | (14 | ) | — | | — | | (399 | ) | | | | | |
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Recoveries | 4 | | 10 | | 2 | | 1 | | — | | 10 | | — | | — | | 27 | | | | | | |
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Balance at end of period | $ | 2,620 | | $ | 8,117 | | $ | 2,278 | | $ | 536 | | $ | 244 | | $ | 353 | | $ | — | | $ | 693 | | $ | 14,841 | | | | | | |
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Three months ended March 31, 2013 | | | | | | | | | | | | | | |
Balance at the beginning of period | $ | 2,377 | | $ | 4,924 | | $ | 2,965 | | $ | 523 | | $ | 159 | | $ | 278 | | $ | — | | $ | 252 | | $ | 11,478 | | | | | | |
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Provision for loan losses | (280 | ) | 2,082 | | (548 | ) | (158 | ) | 73 | | 59 | | — | | (198 | ) | 1,030 | | | | | | |
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Charge-offs | — | | (531 | ) | — | | — | | — | | (12 | ) | — | | — | | (543 | ) | | | | | |
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Recoveries | 4 | | 3 | | 3 | | — | | — | | 9 | | — | | — | | 19 | | | | | | |
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Balance at end of period | $ | 2,101 | | $ | 6,478 | | $ | 2,420 | | $ | 365 | | $ | 232 | | $ | 334 | | $ | — | | $ | 54 | | $ | 11,984 | | | | | | |
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The following table details the amount of the allowance for loan losses and recorded investment in loans by class as of March 31, 2014 and December 31, 2013: |
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| Commercial | Commercial | Residential | Single-Family | Agricultural | Consumer | Other | Unallocated | Total | | | | | |
Real Estate, | Real Estate | Interim | | | | | |
Land and Land | | Construction | | | | | |
Development | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | |
Allowance for losses: | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 53 | | $ | 272 | | $ | 40 | | $ | — | | $ | — | | $ | 21 | | $ | — | | $ | — | | $ | 386 | | | | | | |
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Collectively evaluated for impairment | 2,567 | | 7,845 | | 2,238 | | 536 | | 244 | | 332 | | — | | 693 | | 14,455 | | | | | | |
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Loans acquired with deteriorated credit quality | — | | — | | — | | — | | — | | — | | — | | — | | — | | | | | | |
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Ending balance | $ | 2,620 | | $ | 8,117 | | $ | 2,278 | | $ | 536 | | $ | 244 | | $ | 353 | | $ | — | | $ | 693 | | $ | 14,841 | | | | | | |
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Loans: | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 251 | | $ | 7,562 | | $ | 3,232 | | $ | — | | $ | — | | $ | 57 | | $ | — | | $ | — | | $ | 11,102 | | | | | | |
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Collectively evaluated for impairment | 264,548 | | 1,067,232 | | 354,870 | | 93,587 | | 41,642 | | 45,840 | | 45 | | — | | 1,867,764 | | | | | | |
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Acquired with deteriorated credit quality | 5,809 | | 6,348 | | 2,050 | | — | | — | | 9 | | — | | — | | 14,216 | | | | | | |
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Ending balance | $ | 270,608 | | $ | 1,081,142 | | $ | 360,152 | | $ | 93,587 | | $ | 41,642 | | $ | 45,906 | | $ | 45 | | $ | — | | $ | 1,893,082 | | | | | | |
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31-Dec-13 | | | | | | | | | | | | | | |
Allowance for losses: | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 313 | | $ | 504 | | $ | 14 | | $ | — | | $ | — | | $ | 24 | | $ | — | | $ | — | | $ | 855 | | | | | | |
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Collectively evaluated for impairment | 2,088 | | 7,368 | | 2,426 | | 577 | | 238 | | 339 | | — | | 69 | | 13,105 | | | | | | |
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Loans acquired with deteriorated credit quality | — | | — | | — | | — | | — | | — | | — | | — | | — | | | | | | |
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Ending balance | $ | 2,401 | | $ | 7,872 | | $ | 2,440 | | $ | 577 | | $ | 238 | | $ | 363 | | $ | — | | $ | 69 | | $ | 13,960 | | | | | | |
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Loans: | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 501 | | $ | 8,013 | | $ | 3,182 | | $ | 170 | | $ | — | | $ | 68 | | $ | — | | $ | — | | $ | 11,934 | | | | | | |
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Collectively evaluated for impairment | 234,103 | | 959,254 | | 334,770 | | 82,974 | | 40,558 | | 45,682 | | 108 | | — | | 1,697,449 | | | | | | |
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Acquired with deteriorated credit quality | 6,574 | | 6,489 | | 702 | | — | | — | | 12 | | — | | — | | 13,777 | | | | | | |
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Ending balance | $ | 241,178 | | $ | 973,756 | | $ | 338,654 | | $ | 83,144 | | $ | 40,558 | | $ | 45,762 | | $ | 108 | | $ | — | | $ | 1,723,160 | | | | | | |
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Nonperforming loans by loan class at March 31, 2014 and December 31, 2013, are summarized as follows: |
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| | Commercial | | Commercial | | Residential Real Estate | | Single-Family | | Agricultural | | Consumer | | Other | | Total |
Real Estate, | Interim |
Land and Land | Construction |
Development | |
31-Mar-14 | | | | | | | | | | | | | | | | |
Nonaccrual loans | | $ | 52 | | | $ | 99 | | | $ | 1,918 | | | $ | — | | | $ | — | | | $ | 35 | | | $ | — | | | $ | 2,104 | |
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Loans past due 90 days and still accruing | | 600 | | | — | | | — | | | — | | | — | | | — | | | — | | | 600 | |
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Troubled debt restructurings (not included in nonaccrual or loans past due and still accruing) | | 99 | | | 5,031 | | | 1,273 | | | — | | | — | | | — | | | — | | | 6,403 | |
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| | $ | 751 | | | $ | 5,130 | | | $ | 3,191 | | | $ | — | | | $ | — | | | $ | 35 | | | $ | — | | | $ | 9,107 | |
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31-Dec-13 | | | | | | | | | | | | | | | | |
Nonaccrual loans | | $ | 357 | | | $ | 253 | | | $ | 1,852 | | | $ | 170 | | | $ | — | | | $ | 43 | | | $ | — | | | $ | 2,675 | |
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Loans past due 90 days and still accruing | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Troubled debt restructurings (not included in nonaccrual or loans past due and still accruing) | | 107 | | | 3,571 | | | 425 | | | — | | | — | | | 1 | | | — | | | 4,104 | |
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| | $ | 464 | | | $ | 3,824 | | | $ | 2,277 | | | $ | 170 | | | $ | — | | | $ | 44 | | | $ | — | | | $ | 6,779 | |
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The accrual of interest is discontinued on a loan when management believes after considering collection efforts and other factors that the borrower's financial condition is such that collection of interest is doubtful. All interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. Cash collections on nonaccrual loans are generally credited to the loan receivable balance, and no interest income is recognized on those loans until the principal balance has been collected. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. |
Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected. The Company has identified these loans through its normal loan review procedures. Impaired loans are measured based on 1) the present value of expected future cash flows discounted at the loans effective interest rate; 2) the loan's observable market price; or 3) the fair value of collateral if the loan is collateral dependent. Substantially all of the Company’s impaired loans are measured at the fair value of the collateral. In limited cases, the Company may use the other methods to determine the level of impairment of a loan if such loan is not collateral dependent. |
All commercial, real estate, agricultural loans and troubled debt restructurings are considered for individual impairment analysis. Smaller balance consumer loans are collectively evaluated for impairment. |
Impaired loans by loan class at March 31, 2014 and December 31, 2013, are summarized as follows: |
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| | Commercial | | Commercial | | Residential | | Single-Family | | Agricultural | | Consumer | | Other | | Total |
Real Estate, | Real Estate | Interim |
Land and Land | | Construction |
Development | | |
31-Mar-14 | | | | | | | | | | | | | | | | |
Recorded investment in impaired loans: | | | | | | | | | | | | | | | | |
Impaired loans with an allowance for loan losses | | $ | 93 | | | $ | 2,362 | | | $ | 102 | | | $ | — | | | $ | — | | | $ | 33 | | | $ | — | | | $ | 2,590 | |
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Impaired loans with no allowance for loan losses | | 158 | | | 5,200 | | | 3,130 | | | — | | | — | | | 24 | | | — | | | 8,512 | |
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Total | | $ | 251 | | | $ | 7,562 | | | $ | 3,232 | | | $ | — | | | $ | — | | | $ | 57 | | | $ | — | | | $ | 11,102 | |
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Unpaid principal balance of impaired loans | | $ | 252 | | | $ | 8,591 | | | $ | 3,270 | | | $ | — | | | $ | — | | | $ | 65 | | | $ | — | | | $ | 12,178 | |
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Allowance for loan losses on impaired loans | | $ | 53 | | | $ | 272 | | | $ | 40 | | | $ | — | | | $ | — | | | $ | 21 | | | $ | — | | | $ | 386 | |
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31-Dec-13 | | | | | | | | | | | | | | | | |
Recorded investment in impaired loans: | | | | | | | | | | | | | | | | |
Impaired loans with an allowance for loan losses | | $ | 401 | | | $ | 3,866 | | | $ | 1,135 | | | $ | — | | | $ | — | | | $ | 40 | | | $ | — | | | $ | 5,442 | |
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Impaired loans with no allowance for loan losses | | 100 | | | 4,147 | | | 2,047 | | | 170 | | | — | | | 28 | | | — | | | 6,492 | |
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Total | | $ | 501 | | | $ | 8,013 | | | $ | 3,182 | | | $ | 170 | | | $ | — | | | $ | 68 | | | $ | — | | | $ | 11,934 | |
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Unpaid principal balance of impaired loans | | $ | 501 | | | $ | 8,408 | | | $ | 3,216 | | | $ | 170 | | | $ | — | | | $ | 75 | | | $ | — | | | $ | 12,370 | |
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Allowance for loan losses on impaired loans | | $ | 313 | | | $ | 504 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | 24 | | | $ | — | | | $ | 855 | |
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For the three months ended March 31, 2014 | | | | | | | | | | | | | | | | |
Average recorded investment in impaired loans | | $ | 376 | | | $ | 7,788 | | | $ | 3,207 | | | $ | 85 | | | $ | — | | | $ | 63 | | | $ | — | | | $ | 11,519 | |
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Interest income recognized on impaired loans | | $ | 3 | | | $ | 107 | | | $ | 28 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 138 | |
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For the three months ended March 31, 2013 | | | | | | | | | | | | | | | | |
Average recorded investment in impaired loans | | $ | 774 | | | $ | 9,572 | | | $ | 3,476 | | | $ | — | | | $ | — | | | $ | 93 | | | $ | — | | | $ | 13,915 | |
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Interest income recognized on impaired loans | | $ | 9 | | | $ | 106 | | | $ | 46 | | | $ | — | | | $ | — | | | $ | 2 | | | $ | — | | | $ | 163 | |
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Certain impaired loans have adequate collateral and do not require a related allowance for loan loss. |
The Company will charge off that portion of any loan which management considers a loss. Commercial and real estate loans are generally considered for charge-off when exposure beyond collateral coverage is apparent and when no further collection of the loss portion is anticipated based on the borrower’s financial condition. |
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, extending amortization and other actions intended to minimize potential losses. |
A “troubled debt restructured” loan is identified as impaired and measured for credit impairment as of each reporting period in accordance with the guidance in Accounting Standards Codification (ASC) 310-10-35. The recorded investment in troubled debt restructurings, including those on nonaccrual, was $7,827 and $7,938 as of March 31, 2014 and December 31, 2013. |
Following is a summary of loans modified under troubled debt restructurings during the three months ended March 31, 2014 and 2013: |
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| | Commercial | | Commercial | | Residential | | Single-Family | | Agricultural | | Consumer | | Other | | Total |
Real Estate, | Real Estate | Interim |
Land and Land | | Construction |
Development | | |
Troubled debt restructurings during the three months ended March 31, 2014 | | | | | | | | | | | | | | | | |
Number of contracts | | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | 1 | |
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Pre-restructuring outstanding recorded investment | | $ | — | | | $ | 700 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 700 | |
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Post-restructuring outstanding recorded investment | | $ | — | | | $ | 700 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 700 | |
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Troubled debt restructurings during the three months ended March 31, 2013 | | | | | | | | | | | | | | | | |
Number of contracts | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Pre-restructuring outstanding recorded investment | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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Post-restructuring outstanding recorded investment | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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At March 31, 2014 and 2013, there were no loans modified under troubled debt restructurings during the previous twelve month period that subsequently defaulted during the three months ended March 31, 2014 and, 2013, respectively. At March, 31, 2014 and 2013, the Company had no commitments to lend additional funds to any borrowers with loans whose terms have been modified under troubled debt restructurings. |
Modifications primarily relate to extending the amortization periods of the loans and interest rate concessions. The majority of these loans were identified as impaired prior to restructuring; therefore, the modifications did not materially impact the Company’s determination of the allowance for loan losses. |
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The following table presents information regarding the aging of past due loans by loan class as of March 31, 2014 and December 31, 2013: |
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| | Loans | | Loans | | Total Past | | Current | | Total | | | | | | | | | | | | |
30-89 Days | 90 or More | Due Loans | Loans | Loans | | | | | | | | | | | | |
Past Due | Past Due | | | | | | | | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 455 | | | $ | 600 | | | $ | 1,055 | | | $ | 269,553 | | | $ | 270,608 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial real estate, land and land development | | 357 | | | — | | | 357 | | | 1,080,785 | | | 1,081,142 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Residential real estate | | 878 | | | 281 | | | 1,159 | | | 358,993 | | | 360,152 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Single-family interim construction | | — | | | — | | | — | | | 93,587 | | | 93,587 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Agricultural | | 119 | | | — | | | 119 | | | 41,523 | | | 41,642 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | 122 | | | — | | | 122 | | | 45,784 | | | 45,906 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other | | — | | | — | | | — | | | 45 | | | 45 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | $ | 1,931 | | | $ | 881 | | | $ | 2,812 | | | $ | 1,890,270 | | | $ | 1,893,082 | | | | | | | | | | | | | |
| | | | | | | | | | | |
31-Dec-13 | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 257 | | | $ | 357 | | | $ | 614 | | | $ | 240,564 | | | $ | 241,178 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Commercial real estate, land and land development | | 2,076 | | | 73 | | | 2,149 | | | 971,607 | | | 973,756 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Residential real estate | | 1,322 | | | 1,603 | | | 2,925 | | | 335,729 | | | 338,654 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Single-family interim construction | | — | | | 170 | | | 170 | | | 82,974 | | | 83,144 | | | | | | | | | | | | | |
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Agricultural | | 3 | | | — | | | 3 | | | 40,555 | | | 40,558 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Consumer | | 97 | | | 1 | | | 98 | | | 45,664 | | | 45,762 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other | | — | | | — | | | — | | | 108 | | | 108 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | $ | 3,755 | | | $ | 2,204 | | | $ | 5,959 | | | $ | 1,717,201 | | | $ | 1,723,160 | | | | | | | | | | | | | |
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The Company’s internal classified report is segregated into the following categories: 1) Pass/Watch, 2) Other Assets Especially Mentioned (OAEM), 3) Substandard and 4) Doubtful. The loans placed in the Pass/Watch category reflect the Company’s opinion that the loans reflect potential weakness that requires monitoring on a more frequent basis. The loans in the OAEM category reflect the Company’s opinion that the credit contains weaknesses which represent a greater degree of risk and warrant extra attention. These loans are reviewed monthly by officers and senior management to determine if a change in category is warranted. The loans placed in the Substandard category are considered to be potentially inadequately protected by the current debt service capacity of the borrower and/or the pledged collateral. These credits, even if apparently protected by collateral value, have shown weakness related to adverse financial, managerial, economic, market or political conditions, which may jeopardize repayment of principal and interest. There is possibility that some future loss could be sustained by the Company if such weakness is not corrected. The Doubtful category includes loans that are in default or principal exposure is probable. Substandard and Doubtful loans are individually evaluated to determine if they should be classified as impaired and an allowance is allocated if deemed necessary under ASC 310-10. |
The loans that are not impaired are included with the remaining “pass” credits in determining the portion of the allowance for loan loss based on historical loss experience and other qualitative factors. The portfolio is segmented into categories including: commercial loans, consumer loans, commercial real estate loans, residential real estate loans and agricultural loans. The adjusted historical loss percentage is applied to each category. Each category is then added together to determine the allowance allocated under ASC 450-20. |
A summary of loans by credit quality indicator by class as of March 31, 2014 and December 31, 2013, is as follows: |
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| | Pass | | Pass/ | | OAEM | | Substandard | | Doubtful | | Total | | | | | | | | |
(Rating 1-4) | Watch | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 259,802 | | | $ | 9,367 | | | $ | 1,099 | | | $ | 340 | | | $ | — | | | $ | 270,608 | | | | | | | | | |
| | | | | | | |
Commercial real estate, construction, land and land development | | 1,061,991 | | | 8,907 | | | 5,359 | | | 4,885 | | | — | | | 1,081,142 | | | | | | | | | |
| | | | | | | |
Residential real estate | | 349,393 | | | 6,404 | | | 296 | | | 4,059 | | | — | | | 360,152 | | | | | | | | | |
| | | | | | | |
Single-family interim construction | | 93,587 | | | — | | | — | | | — | | | — | | | 93,587 | | | | | | | | | |
| | | | | | | |
Agricultural | | 41,418 | | | 207 | | | — | | | 17 | | | — | | | 41,642 | | | | | | | | | |
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Consumer | | 45,766 | | | 60 | | | 14 | | | 66 | | | — | | | 45,906 | | | | | | | | | |
| | | | | | | |
Other | | 45 | | | — | | | — | | | — | | | — | | | 45 | | | | | | | | | |
| | | | | | | |
| | $ | 1,852,002 | | | $ | 24,945 | | | $ | 6,768 | | | $ | 9,367 | | | $ | — | | | $ | 1,893,082 | | | | | | | | | |
| | | | | | | |
31-Dec-13 | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 231,080 | | | $ | 7,199 | | | $ | 1,311 | | | $ | 1,453 | | | $ | 135 | | | $ | 241,178 | | | | | | | | | |
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Commercial real estate, construction, land and land development | | 952,863 | | | 10,697 | | | 2,982 | | | 7,214 | | | — | | | 973,756 | | | | | | | | | |
| | | | | | | |
Residential real estate | | 328,918 | | | 5,379 | | | 454 | | | 3,903 | | | — | | | 338,654 | | | | | | | | | |
| | | | | | | |
Single-family interim construction | | 83,144 | | | — | | | — | | | — | | | — | | | 83,144 | | | | | | | | | |
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Agricultural | | 40,328 | | | 210 | | | — | | | 20 | | | — | | | 40,558 | | | | | | | | | |
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Consumer | | 45,556 | | | 82 | | | 39 | | | 85 | | | — | | | 45,762 | | | | | | | | | |
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Other | | 108 | | | — | | | — | | | — | | | — | | | 108 | | | | | | | | | |
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| | $ | 1,681,997 | | | $ | 23,567 | | | $ | 4,786 | | | $ | 12,675 | | | $ | 135 | | | $ | 1,723,160 | | | | | | | | | |
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The Company has acquired certain loans which experienced credit deterioration since origination (purchased credit impaired (PCI) loans). Accretion on PCI loans is based on estimated future cash flows, regardless of contractual maturity. There are no PCI loans outstanding for acquisitions prior to 2012. |
The following table summarizes the outstanding balance and related carrying amount of purchased credit impaired loans by acquired bank as of the respective acquisition date for the acquisitions occurring in 2014 and 2013: |
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| | Acquisition Date | | | | | | | | | | | | | | | | | | | | | | | | |
| | 1-Jan-14 | | 30-Nov-13 | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Oak | | Collin Bank | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding balance | | $ | 3,583 | | | $ | 11,897 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Nonaccretable difference | | (519 | ) | | (1,810 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Accretable yield | | (182 | ) | | (408 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Carrying amount | | $ | 2,882 | | | $ | 9,679 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The carrying amount of all acquired PCI loans included in the consolidated balance sheet and the related outstanding balance at March 31, 2014 and December 31, 2013, were as follows: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding balance | $ | 17,783 | | | $ | 15,768 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Carrying amount | 14,216 | | | 13,777 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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At March 31, 2014 and December 31, 2013, there was no allocation established in the allowance for loan losses related to purchased credit impaired loans. |