Loans | Loans Loans were as follows: June 30, Percentage of Total December 31, Percentage of Total Commercial and industrial $ 4,604,269 36.8 % $ 4,344,000 36.3 % Energy: Production 1,040,506 8.3 971,767 8.1 Service 183,543 1.5 221,213 1.8 Other 185,563 1.5 193,081 1.7 Total energy 1,409,612 11.3 1,386,061 11.6 Commercial real estate: Commercial mortgages 3,620,885 28.9 3,481,157 29.1 Construction 1,050,837 8.4 1,043,261 8.7 Land 322,130 2.6 311,030 2.6 Total commercial real estate 4,993,852 39.9 4,835,448 40.4 Consumer real estate: Home equity loans 355,744 2.8 345,130 2.9 Home equity lines of credit 283,344 2.3 264,862 2.2 Other 351,985 2.8 326,793 2.7 Total consumer real estate 991,073 7.9 936,785 7.8 Total real estate 5,984,925 47.8 5,772,233 48.2 Consumer and other 513,532 4.1 473,098 3.9 Total loans $ 12,512,338 100.0 % $ 11,975,392 100.0 % Concentrations of Credit. Most of our lending activity occurs within the State of Texas, including the four largest metropolitan areas of Austin, Dallas/Ft. Worth, Houston and San Antonio, as well as other markets. The majority of our loan portfolio consists of commercial and industrial and commercial real estate loans. As of June 30, 2017 , there were no concentrations of loans related to any single industry in excess of 10% of total loans other than energy loans, which totaled 11.3% of total loans. Unfunded commitments to extend credit and standby letters of credit issued to customers in the energy industry totaled $1.1 billion and $42.9 million , respectively, as of June 30, 2017 . Foreign Loans. We have U.S. dollar denominated loans and commitments to borrowers in Mexico. The outstanding balance of these loans and the unfunded amounts available under these commitments were not significant at June 30, 2017 or December 31, 2016 . Non-Accrual and Past Due Loans. Non-accrual loans, segregated by class of loans, were as follows: June 30, December 31, Commercial and industrial $ 21,226 $ 31,475 Energy 55,464 57,571 Commercial real estate: Buildings, land and other 6,916 8,550 Construction — — Consumer real estate 2,543 2,130 Consumer and other 264 425 Total $ 86,413 $ 100,151 As of June 30, 2017 , non-accrual loans reported in the table above included $11.4 million related to loans that were restructured as “troubled debt restructurings” during 2017 . See the section captioned “Troubled Debt Restructurings” elsewhere in this note. Had non-accrual loans performed in accordance with their original contract terms, we would have recognized additional interest income, net of tax, of approximately $798 thousand and $1.6 million for the three and six months ended June 30, 2017 , compared to $936 thousand and $1.8 million for three and six months ended June 30, 2016 . An age analysis of past due loans (including both accruing and non-accruing loans), segregated by class of loans, as of June 30, 2017 was as follows: Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Current Loans Total Loans Accruing Loans 90 or More Days Past Due Commercial and industrial $ 24,320 $ 26,149 $ 50,469 $ 4,553,800 $ 4,604,269 $ 10,768 Energy 5,991 6,430 12,421 1,397,191 1,409,612 2,902 Commercial real estate: Buildings, land and other 21,157 4,166 25,323 3,917,692 3,943,015 944 Construction — — — 1,050,837 1,050,837 — Consumer real estate 4,693 2,022 6,715 984,358 991,073 739 Consumer and other 3,508 740 4,248 509,284 513,532 650 Total $ 59,669 $ 39,507 $ 99,176 $ 12,413,162 $ 12,512,338 $ 16,003 Impaired Loans. Impaired loans are set forth in the following table. No interest income was recognized on impaired loans subsequent to their classification as impaired. Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Total Recorded Investment Related Allowance June 30, 2017 Commercial and industrial $ 27,709 $ 14,777 $ 4,040 $ 18,817 $ 1,780 Energy 59,771 36,162 19,215 55,377 350 Commercial real estate: Buildings, land and other 9,729 5,478 — 5,478 — Construction — — — — — Consumer real estate 1,203 1,203 — 1,203 — Consumer and other — — — — — Total $ 98,412 $ 57,620 $ 23,255 $ 80,875 $ 2,130 Unpaid Contractual Recorded Investment Recorded Investment Total Related December 31, 2016 Commercial and industrial $ 40,288 $ 19,862 $ 9,047 $ 28,909 $ 5,436 Energy 60,522 27,759 29,804 57,563 3,750 Commercial real estate: Buildings, land and other 11,369 6,866 — 6,866 — Construction — — — — — Consumer real estate 977 655 — 655 — Consumer and other 32 30 — 30 — Total $ 113,188 $ 55,172 $ 38,851 $ 94,023 $ 9,186 The average recorded investment in impaired loans was as follows: Three Months Ended Six Months Ended 2017 2016 2017 2016 Commercial and industrial $ 21,347 $ 24,866 $ 23,867 $ 24,197 Energy 67,008 78,359 63,860 59,286 Commercial real estate: Buildings, land and other 5,966 20,533 6,266 24,497 Construction — 648 — 622 Consumer real estate 1,376 443 1,135 457 Consumer and other 12 27 18 18 Total $ 95,709 $ 124,876 $ 95,146 $ 109,077 Troubled Debt Restructurings . Troubled debt restructurings during the six months ended June 30, 2017 and June 30, 2016 are set forth in the following table. Six Months Ended Six Months Ended Balance at Restructure Balance at Period-End Balance at Restructure Balance at Period-End Commercial and industrial $ 784 $ 643 $ 510 $ 505 Energy 12,959 12,458 62,546 20,795 Commercial real estate: Buildings, land and other — — 1,456 1,456 Construction — — 243 224 $ 13,743 $ 13,101 $ 64,755 $ 22,980 Loan modifications are typically related to extending amortization periods, converting loans to interest only for a limited period of time, deferral of interest payments, waiver of certain covenants, consolidating notes and/or reducing collateral or interest rates. The modifications during the reported periods did not significantly impact our determination of the allowance for loan losses. As of June 30, 2017 , there were no loans restructured during the last year that were in excess of 90 days past due. During the six months ended June 30, 2017 , we recognized charge-offs totaling $10.0 million related to loans restructured during the third and fourth quarters of 2016. During the six months ended June 30, 2016 , we recognized a charge-off of $9.5 million related to a loan restructured during the first quarter of 2016. The loan was subsequently sold with proceeds from the sale totaling $30.5 million . Credit Quality Indicators. As part of the on-going monitoring of the credit quality of our loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk grade of commercial loans, (ii) the level of classified commercial loans, (iii) the delinquency status of consumer loans (see details above), (iv) net charge-offs, (v) non-performing loans (see details above) and (vi) the general economic conditions in the State of Texas. We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of 1 to 14. A description of the general characteristics of the 14 risk grades is set forth in our 2016 Form 10-K. In monitoring credit quality trends in the context of assessing the appropriate level of the allowance for loan losses, we monitor portfolio credit quality by the weighted-average risk grade of each class of commercial loan. Individual relationship managers review updated financial information for all pass grade loans to reassess the risk grade on at least an annual basis. When a loan has a risk grade of 9, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” where a significant risk-modifying action is anticipated in the near term. When a loan has a risk grade of 10 or higher, a special assets officer monitors the loan on an on-going basis. The following tables present weighted-average risk grades for all commercial loans by class. June 30, 2017 December 31, 2016 Weighted Loans Weighted Loans Commercial and industrial: Risk grades 1-8 6.00 $ 4,146,261 6.01 $ 3,989,722 Risk grade 9 9.00 222,108 9.00 106,988 Risk grade 10 10.00 78,696 10.00 115,420 Risk grade 11 11.00 135,978 11.00 100,245 Risk grade 12 12.00 19,446 12.00 25,939 Risk grade 13 13.00 1,780 13.00 5,686 Total 6.39 $ 4,604,269 6.35 $ 4,344,000 Energy Risk grades 1-8 6.32 $ 1,024,927 6.34 $ 854,688 Risk grade 9 9.00 43,415 9.00 78,524 Risk grade 10 10.00 115,913 10.00 150,872 Risk grade 11 11.00 169,893 11.00 244,406 Risk grade 12 12.00 55,114 12.00 53,821 Risk grade 13 13.00 350 13.00 3,750 Total 7.49 $ 1,409,612 7.95 $ 1,386,061 Commercial real estate: Buildings, land and other Risk grades 1-8 6.69 $ 3,590,525 6.67 $ 3,463,064 Risk grade 9 9.00 123,492 9.00 109,110 Risk grade 10 10.00 148,718 10.00 145,067 Risk grade 11 11.00 73,364 11.00 66,396 Risk grade 12 12.00 6,916 12.00 8,550 Risk grade 13 13.00 — 13.00 — Total 6.97 $ 3,943,015 6.95 $ 3,792,187 Construction Risk grades 1-8 7.03 $ 1,019,355 6.97 $ 1,023,194 Risk grade 9 9.00 22,632 9.00 15,829 Risk grade 10 10.00 5,116 10.00 2,889 Risk grade 11 11.00 3,734 11.00 1,349 Risk grade 12 12.00 — 12.00 — Risk grade 13 13.00 — 13.00 — Total 7.10 $ 1,050,837 7.01 $ 1,043,261 Net (charge-offs)/recoveries, segregated by class of loans, were as follows: Three Months Ended Six Months Ended 2017 2016 2017 2016 Commercial and industrial $ (4,861 ) $ (3,966 ) $ (7,590 ) $ (5,098 ) Energy (6,236 ) (16,747 ) (10,461 ) (17,758 ) Commercial real estate: Buildings, land and other 460 481 502 542 Construction 3 2 6 9 Consumer real estate 111 74 207 173 Consumer and other (1,401 ) (1,199 ) (2,529 ) (1,702 ) Total $ (11,924 ) $ (21,355 ) $ (19,865 ) $ (23,834 ) In assessing the general economic conditions in the State of Texas, management monitors and tracks the Texas Leading Index (“TLI”), which is produced by the Federal Reserve Bank of Dallas. The TLI, the components of which are more fully described in our 2016 Form 10-K, totaled 124.7 at May 31, 2017 (most recent date available) and 123.1 at December 31, 2016 . A higher TLI value implies more favorable economic conditions. Allowance for Loan Losses . The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of inherent losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. Our allowance for loan loss methodology, which is more fully described in our 2016 Form 10-K, follows the accounting guidance set forth in U.S. generally accepted accounting principles and the Interagency Policy Statement on the Allowance for Loan and Lease Losses, which was jointly issued by U.S. bank regulatory agencies. The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss and recovery experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. The following table presents details of the allowance for loan losses allocated to each portfolio segment as of June 30, 2017 and December 31, 2016 and detailed on the basis of the impairment evaluation methodology we used: Commercial and Industrial Energy Commercial Real Estate Consumer Real Estate Consumer and Other Total June 30, 2017 Historical valuation allowances $ 28,504 $ 32,452 $ 17,975 $ 2,416 $ 5,455 $ 86,802 Specific valuation allowances 1,780 350 — — — 2,130 General valuation allowances 8,418 5,934 4,724 2,032 137 21,245 Macroeconomic valuation allowances 10,204 15,541 10,303 1,087 2,246 39,381 Total $ 48,906 $ 54,277 $ 33,002 $ 5,535 $ 7,838 $ 149,558 Allocated to loans: Individually evaluated $ 1,780 $ 350 $ — $ — $ — $ 2,130 Collectively evaluated 47,126 53,927 33,002 5,535 7,838 147,428 Total $ 48,906 $ 54,277 $ 33,002 $ 5,535 $ 7,838 $ 149,558 December 31, 2016 Historical valuation allowances $ 33,251 $ 34,626 $ 16,976 $ 2,225 $ 4,585 $ 91,663 Specific valuation allowances 5,436 3,750 — — — 9,186 General valuation allowances 6,708 3,769 5,004 1,506 (144 ) 16,843 Macroeconomic valuation allowances 7,520 18,508 8,233 507 585 35,353 Total $ 52,915 $ 60,653 $ 30,213 $ 4,238 $ 5,026 $ 153,045 Allocated to loans: Individually evaluated $ 5,436 $ 3,750 $ — $ — $ — $ 9,186 Collectively evaluated 47,479 56,903 30,213 4,238 5,026 143,859 Total $ 52,915 $ 60,653 $ 30,213 $ 4,238 $ 5,026 $ 153,045 Our recorded investment in loans as of June 30, 2017 and December 31, 2016 related to each balance in the allowance for loan losses by portfolio segment and detailed on the basis of the impairment methodology we used was as follows: Commercial and Industrial Energy Commercial Consumer Consumer Total June 30, 2017 Individually evaluated $ 18,817 $ 55,377 $ 5,478 $ 1,203 $ — $ 80,875 Collectively evaluated 4,585,452 1,354,235 4,988,374 989,870 513,532 12,431,463 Total $ 4,604,269 $ 1,409,612 $ 4,993,852 $ 991,073 $ 513,532 $ 12,512,338 December 31, 2016 Individually evaluated $ 28,909 $ 57,563 $ 6,866 $ 655 $ 30 $ 94,023 Collectively evaluated 4,315,091 1,328,498 4,828,582 936,130 473,068 11,881,369 Total $ 4,344,000 $ 1,386,061 $ 4,835,448 $ 936,785 $ 473,098 $ 11,975,392 The following table details activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2017 and 2016 . Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Commercial and Industrial Energy Commercial Real Estate Consumer Real Estate Consumer and Other Total Three months ended: June 30, 2017 Beginning balance $ 45,583 $ 61,793 $ 34,009 $ 4,823 $ 6,848 $ 153,056 Provision for loan losses 8,184 (1,280 ) (1,470 ) 601 2,391 8,426 Charge-offs (5,579 ) (6,317 ) (14 ) (2 ) (3,623 ) (15,535 ) Recoveries 718 81 477 113 2,222 3,611 Net charge-offs (4,861 ) (6,236 ) 463 111 (1,401 ) (11,924 ) Ending balance $ 48,906 $ 54,277 $ 33,002 $ 5,535 $ 7,838 $ 149,558 June 30, 2016 Beginning balance $ 45,084 $ 84,973 $ 23,587 $ 3,786 $ 4,450 $ 161,880 Provision for loan losses 6,460 (1,887 ) 2,993 75 1,548 9,189 Charge-offs (4,857 ) (16,749 ) (19 ) (23 ) (3,252 ) (24,900 ) Recoveries 891 2 502 97 2,053 3,545 Net charge-offs (3,966 ) (16,747 ) 483 74 (1,199 ) (21,355 ) Ending balance $ 47,578 $ 66,339 $ 27,063 $ 3,935 $ 4,799 $ 149,714 Six months ended: June 30, 2017 Beginning balance $ 52,915 $ 60,653 $ 30,213 $ 4,238 $ 5,026 $ 153,045 Provision for loan losses 3,581 4,085 2,281 1,090 5,341 16,378 Charge-offs (9,106 ) (10,595 ) (14 ) (13 ) (7,171 ) (26,899 ) Recoveries 1,516 134 522 220 4,642 7,034 Net charge-offs (7,590 ) (10,461 ) 508 207 (2,529 ) (19,865 ) Ending balance $ 48,906 $ 54,277 $ 33,002 $ 5,535 $ 7,838 $ 149,558 June 30, 2016 Beginning balance $ 42,993 $ 54,696 $ 24,313 $ 4,659 $ 9,198 $ 135,859 Provision for loan losses 9,683 29,401 2,199 (897 ) (2,697 ) 37,689 Charge-offs (6,718 ) (17,760 ) (47 ) (177 ) (5,976 ) (30,678 ) Recoveries 1,620 2 598 350 4,274 6,844 Net charge-offs (5,098 ) (17,758 ) 551 173 (1,702 ) (23,834 ) Ending balance $ 47,578 $ 66,339 $ 27,063 $ 3,935 $ 4,799 $ 149,714 |