Loans | Loans Loans were as follows: March 31, Percentage of Total December 31, Percentage of Total Commercial and industrial $ 4,876,523 36.5 % $ 4,792,388 36.4 % Energy: Production 1,125,321 8.4 1,182,326 9.0 Service 192,115 1.4 171,795 1.3 Other 129,552 0.9 144,972 1.1 Total energy 1,446,988 10.7 1,499,093 11.4 Commercial real estate: Commercial mortgages 4,060,946 30.4 3,887,742 29.6 Construction 1,076,785 8.1 1,066,696 8.1 Land 317,189 2.4 331,986 2.5 Total commercial real estate 5,454,920 40.9 5,286,424 40.2 Consumer real estate: Home equity loans 355,715 2.7 355,342 2.7 Home equity lines of credit 295,677 2.2 291,950 2.2 Other 388,271 2.9 376,002 2.9 Total consumer real estate 1,039,663 7.8 1,023,294 7.8 Total real estate 6,494,583 48.7 6,309,718 48.0 Consumer and other 545,935 4.1 544,466 4.2 Total loans $ 13,364,029 100.0 % $ 13,145,665 100.0 % 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 March 31, 2018 , there were no concentrations of loans related to any single industry in excess of 10% of total loans other than energy loans, which totaled 10.7% of total loans. Unfunded commitments to extend credit and standby letters of credit issued to customers in the energy industry totaled $1.2 billion and $44.8 million , respectively, as of March 31, 2018 . 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 March 31, 2018 or December 31, 2017 . Related Party Loans . In the ordinary course of business, we have granted loans to certain directors, executive officers and their affiliates (collectively referred to as “related parties”). Such loans totaled $180.7 million at March 31, 2018 and $166.4 million at December 31, 2017 Non-Accrual and Past Due Loans. Non-accrual loans, segregated by class of loans, were as follows: March 31, December 31, Commercial and industrial $ 17,314 $ 46,186 Energy 93,097 94,302 Commercial real estate: Buildings, land and other 10,858 7,589 Construction — — Consumer real estate 1,878 2,109 Consumer and other 5 128 Total $ 123,152 $ 150,314 As of March 31, 2018 , non-accrual loans reported in the table above included $2.2 million related to loans that were restructured as “troubled debt restructurings” during 2018 . 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 $1.5 million for the three months ended March 31, 2018 , compared to $851 thousand for three months ended March 31, 2017 . An age analysis of past due loans (including both accruing and non-accruing loans), segregated by class of loans, as of March 31, 2018 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 $ 25,701 $ 23,946 $ 49,647 $ 4,826,876 $ 4,876,523 $ 10,357 Energy 24,404 4,207 28,611 1,418,377 1,446,988 3,137 Commercial real estate: Buildings, land and other 36,130 5,470 41,600 4,336,535 4,378,135 3,889 Construction 9,497 — 9,497 1,067,288 1,076,785 — Consumer real estate 8,225 3,164 11,389 1,028,274 1,039,663 1,680 Consumer and other 7,486 218 7,704 538,231 545,935 213 Total $ 111,443 $ 37,005 $ 148,448 $ 13,215,581 $ 13,364,029 $ 19,276 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 March 31, 2018 Commercial and industrial $ 38,136 $ 1,802 $ 13,430 $ 15,232 $ 7,930 Energy 123,351 41,569 63,502 105,071 14,772 Commercial real estate: Buildings, land and other 13,078 7,577 2,047 9,624 708 Construction — — — — — Consumer real estate 1,427 1,427 — 1,427 — Consumer and other — — — — — Total $ 175,992 $ 52,375 $ 78,979 $ 131,354 $ 23,410 December 31, 2017 Commercial and industrial $ 60,781 $ 28,038 $ 15,722 $ 43,760 $ 7,553 Energy 99,606 33,080 61,162 94,242 13,267 Commercial real estate: Buildings, land and other 10,795 6,394 — 6,394 — Construction — — — — — Consumer real estate 1,214 1,214 — 1,214 — Consumer and other — — — — — Total $ 172,396 $ 68,726 $ 76,884 $ 145,610 $ 20,820 The average recorded investment in impaired loans was as follows: Three Months Ended 2018 2017 Commercial and industrial $ 29,496 $ 26,393 Energy 99,657 68,101 Commercial real estate: Buildings, land and other 8,009 6,660 Construction — — Consumer real estate 1,321 1,102 Consumer and other — 27 Total $ 138,483 $ 102,283 Troubled Debt Restructurings . Troubled debt restructurings during the three months ended March 31, 2018 and March 31, 2017 are set forth in the following table. Three Months Ended Three Months Ended Balance at Restructure Balance at Period-End Balance at Restructure Balance at Period-End Commercial and industrial $ 2,203 $ 2,171 $ — $ — Energy 13,708 12,058 11,262 11,212 $ 15,911 $ 14,229 $ 11,262 $ 11,212 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. Additional information related to restructured loans was as follows: March 31, 2018 March 31, 2017 Restructured loans past due in excess of 90 days at period-end: Number of loans — 1 Dollar amount of loans $ — $ 747 Restructured loans on non-accrual status at period end 2,171 11,212 Charge-offs of restructured loans: Recognized in connection with restructuring — — Recognized on previously restructured loans 1,650 2,000 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 2017 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. March 31, 2018 December 31, 2017 Weighted Loans Weighted Loans Commercial and industrial: Risk grades 1-8 6.05 $ 4,505,491 6.06 $ 4,378,839 Risk grade 9 9.00 151,084 9.00 170,285 Risk grade 10 10.00 121,457 10.00 99,260 Risk grade 11 11.00 81,148 11.00 97,818 Risk grade 12 12.00 9,412 12.00 38,633 Risk grade 13 13.00 7,931 13.00 7,553 Total 6.35 $ 4,876,523 6.41 $ 4,792,388 Energy Risk grades 1-8 6.12 $ 1,173,702 6.01 $ 1,199,207 Risk grade 9 9.00 50,364 9.00 50,427 Risk grade 10 10.00 37,670 10.00 64,282 Risk grade 11 11.00 92,155 11.00 90,875 Risk grade 12 12.00 78,325 12.00 81,035 Risk grade 13 13.00 14,772 13.00 13,267 Total 7.02 $ 1,446,988 6.97 $ 1,499,093 Commercial real estate: Buildings, land and other Risk grades 1-8 6.77 $ 4,051,952 6.75 $ 3,868,659 Risk grade 9 9.00 124,048 9.00 151,487 Risk grade 10 10.00 120,399 10.00 129,391 Risk grade 11 11.00 70,878 11.00 62,602 Risk grade 12 12.00 10,150 12.00 7,589 Risk grade 13 13.00 708 13.00 — Total 7.00 $ 4,378,135 7.00 $ 4,219,728 Construction Risk grades 1-8 7.16 $ 1,040,071 7.11 $ 1,019,635 Risk grade 9 9.00 15,541 9.00 18,042 Risk grade 10 10.00 17,361 10.00 23,393 Risk grade 11 11.00 3,812 11.00 5,626 Risk grade 12 12.00 — 12.00 — Risk grade 13 13.00 — 13.00 — Total 7.25 $ 1,076,785 7.23 $ 1,066,696 Net (charge-offs)/recoveries, segregated by class of loans, were as follows: Three Months Ended 2018 2017 Commercial and industrial $ (7,675 ) $ (2,729 ) Energy (2,849 ) (4,225 ) Commercial real estate: Buildings, land and other 81 42 Construction 2 3 Consumer real estate (526 ) 96 Consumer and other (1,457 ) (1,128 ) Total $ (12,424 ) $ (7,941 ) 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 2017 Form 10-K, totaled 131.5 at February 28, 2018 (most recent date available) and 129.6 at December 31, 2017 . 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 2017 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 March 31, 2018 and December 31, 2017 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 March 31, 2018 Historical valuation allowances $ 26,658 $ 12,266 $ 19,870 $ 2,470 $ 6,729 $ 67,993 Specific valuation allowances 7,930 14,772 708 — — 23,410 General valuation allowances 8,053 8,015 4,025 1,601 (95 ) 21,599 Macroeconomic valuation allowances 15,092 3,986 13,871 2,278 1,656 36,883 Total $ 57,733 $ 39,039 $ 38,474 $ 6,349 $ 8,290 $ 149,885 Allocated to loans: Individually evaluated $ 7,930 $ 14,772 $ 708 $ — $ — $ 23,410 Collectively evaluated 49,803 24,267 37,766 6,349 8,290 126,475 Total $ 57,733 $ 39,039 $ 38,474 $ 6,349 $ 8,290 $ 149,885 December 31, 2017 Historical valuation allowances $ 26,401 $ 22,073 $ 18,931 $ 2,473 $ 5,603 $ 75,481 Specific valuation allowances 7,553 13,267 — — — 20,820 General valuation allowances 9,112 7,964 4,165 2,133 (91 ) 23,283 Macroeconomic valuation allowances 16,548 8,224 7,852 1,051 2,105 35,780 Total $ 59,614 $ 51,528 $ 30,948 $ 5,657 $ 7,617 $ 155,364 Allocated to loans: Individually evaluated $ 7,553 $ 13,267 $ — $ — $ — $ 20,820 Collectively evaluated 52,061 38,261 30,948 5,657 7,617 134,544 Total $ 59,614 $ 51,528 $ 30,948 $ 5,657 $ 7,617 $ 155,364 Our recorded investment in loans as of March 31, 2018 and December 31, 2017 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 March 31, 2018 Individually evaluated $ 15,232 $ 105,071 $ 9,624 $ 1,427 $ — $ 131,354 Collectively evaluated 4,861,291 1,341,917 5,445,296 1,038,236 545,935 13,232,675 Total $ 4,876,523 $ 1,446,988 $ 5,454,920 $ 1,039,663 $ 545,935 $ 13,364,029 December 31, 2017 Individually evaluated $ 43,760 $ 94,242 $ 6,394 $ 1,214 $ — $ 145,610 Collectively evaluated 4,748,628 1,404,851 5,280,030 1,022,080 544,466 13,000,055 Total $ 4,792,388 $ 1,499,093 $ 5,286,424 $ 1,023,294 $ 544,466 $ 13,145,665 The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2018 and 2017 . 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: March 31, 2018 Beginning balance $ 59,614 $ 51,528 $ 30,948 $ 5,657 $ 7,617 $ 155,364 Provision for loan losses 5,794 (9,640 ) 7,443 1,218 2,130 6,945 Charge-offs (9,252 ) (2,850 ) (5 ) (719 ) (3,972 ) (16,798 ) Recoveries 1,577 1 88 193 2,515 4,374 Net charge-offs (7,675 ) (2,849 ) 83 (526 ) (1,457 ) (12,424 ) Ending balance $ 57,733 $ 39,039 $ 38,474 $ 6,349 $ 8,290 $ 149,885 March 31, 2017 Beginning balance $ 52,915 $ 60,653 $ 30,213 $ 4,238 $ 5,026 $ 153,045 Provision for loan losses (4,603 ) 5,365 3,751 489 2,950 7,952 Charge-offs (3,527 ) (4,278 ) — (11 ) (3,548 ) (11,364 ) Recoveries 798 53 45 107 2,420 3,423 Net charge-offs (2,729 ) (4,225 ) 45 96 (1,128 ) (7,941 ) Ending balance $ 45,583 $ 61,793 $ 34,009 $ 4,823 $ 6,848 $ 153,056 |