Loans | Loans Loans were as follows: September 30, Percentage of Total December 31, Percentage of Total Commercial and industrial $ 5,179,780 35.4 % $ 5,111,957 36.3 % Energy: Production 1,282,180 8.7 1,309,314 9.3 Service 189,350 1.3 168,775 1.2 Other 75,388 0.5 124,509 0.9 Total energy 1,546,918 10.5 1,602,598 11.4 Commercial real estate: Commercial mortgages 4,555,171 31.1 4,121,966 29.2 Construction 1,370,206 9.4 1,267,717 9.0 Land 290,706 2.0 306,755 2.2 Total commercial real estate 6,216,083 42.5 5,696,438 40.4 Consumer real estate: Home equity loans 363,224 2.5 353,924 2.5 Home equity lines of credit 350,461 2.4 337,168 2.4 Other 458,618 3.1 427,898 3.0 Total consumer real estate 1,172,303 8.0 1,118,990 7.9 Total real estate 7,388,386 50.5 6,815,428 48.3 Consumer and other 519,844 3.6 569,750 4.0 Total loans $ 14,634,928 100.0 % $ 14,099,733 100.0 % 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 September 30, 2019 , there were no concentrations of loans related to any single industry in excess of 10% of total loans other than energy loans, which totaled 10.5% of total loans. Unfunded commitments to extend credit and standby letters of credit issued to customers in the energy industry totaled $1.3 billion and $66.1 million , respectively, as of September 30, 2019 . 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 September 30, 2019 or December 31, 2018 . 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 $326.1 million at September 30, 2019 and $256.1 million at December 31, 2018 . Non-Accrual and Past Due Loans. Non-accrual loans, segregated by class of loans, were as follows: September 30, December 31, Commercial and industrial $ 13,929 $ 9,239 Energy 70,883 46,932 Commercial real estate: Buildings, land and other 9,240 15,268 Construction 697 — Consumer real estate 527 892 Consumer and other 2,170 1,408 Total $ 97,446 $ 73,739 Had non-accrual loans performed in accordance with their original contract terms, we would have recognized additional interest income, net of tax, of approximately $0.9 million and $3.0 million for the three and nine months ended September 30, 2019 , compared to $1.3 million and $4.2 million for the three and nine months ended September 30, 2018 . An age analysis of past due loans (including both accruing and non-accruing loans), segregated by class of loans, as of September 30, 2019 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 $ 39,540 $ 13,622 $ 53,162 $ 5,126,618 $ 5,179,780 $ 3,574 Energy 3,350 21,836 25,186 1,521,732 1,546,918 530 Commercial real estate: Buildings, land and other 29,147 8,279 37,426 4,808,451 4,845,877 6,513 Construction 1,412 1,471 2,883 1,367,323 1,370,206 774 Consumer real estate 8,305 2,443 10,748 1,161,555 1,172,303 2,150 Consumer and other 7,815 2,419 10,234 509,610 519,844 855 Total $ 89,569 $ 50,070 $ 139,639 $ 14,495,289 $ 14,634,928 $ 14,396 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 September 30, 2019 Commercial and industrial $ 15,020 $ 4,874 $ 7,280 $ 12,154 $ 5,785 Energy 88,531 4,777 65,800 70,577 19,722 Commercial real estate: Buildings, land and other 9,553 3,864 5,015 8,879 1,483 Construction 697 697 — 697 — Consumer real estate 293 293 — 293 — Consumer and other 2,171 — 2,170 2,170 2,170 Total $ 116,265 $ 14,505 $ 80,265 $ 94,770 $ 29,160 December 31, 2018 Commercial and industrial $ 9,094 $ 2,842 $ 4,287 $ 7,129 $ 2,558 Energy 67,900 6,817 39,890 46,707 9,671 Commercial real estate: Buildings, land and other 15,774 2,168 12,517 14,685 2,599 Construction — — — — — Consumer real estate 293 293 — 293 — Consumer and other 1,475 — 1,407 1,407 1,407 Total $ 94,536 $ 12,120 $ 58,101 $ 70,221 $ 16,235 The average recorded investment in impaired loans was as follows: Three Months Ended Nine Months Ended 2019 2018 2019 2018 Commercial and industrial $ 14,438 $ 13,447 $ 12,552 $ 21,025 Energy 55,195 78,772 50,642 82,640 Commercial real estate: Buildings, land and other 9,418 14,306 14,961 12,328 Construction 349 — 277 — Consumer real estate 293 671 541 807 Consumer and other 1,795 1,073 1,605 805 Total $ 81,488 $ 108,269 $ 80,578 $ 117,605 Troubled Debt Restructurings . Troubled debt restructurings during the nine months ended September 30, 2019 and September 30, 2018 are set forth in the following table. Nine Months Ended Nine Months Ended Balance at Restructure Balance at Period-End Balance at Restructure Balance at Period-End Commercial and industrial $ 3,845 $ 2,188 $ 2,203 $ — Energy — — 13,708 — Commercial real estate: Buildings, land and other 9,456 9,494 — — Consumer real estate 124 123 — — $ 13,425 $ 11,805 $ 15,911 $ — 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 as of or for the three months ended September 30, 2019 and September 30, 2018 is set forth in the following table. September 30, 2019 September 30, 2018 Restructured loans past due in excess of 90 days at period-end: Number of loans 4 — Dollar amount of loans $ 3,244 $ — Restructured loans on non-accrual status at period end 5,645 — Charge-offs of restructured loans: Recognized in connection with restructuring 1,500 — Recognized on previously restructured loans — 4,650 Proceeds from sale of restructured loans — 15,750 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 2018 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. September 30, 2019 December 31, 2018 Weighted Loans Weighted Loans Commercial and industrial: Risk grades 1-8 6.19 $ 4,856,712 6.12 $ 4,862,275 Risk grade 9 9.00 165,195 9.00 112,431 Risk grade 10 10.00 75,276 10.00 58,328 Risk grade 11 11.00 68,668 11.00 69,684 Risk grade 12 12.00 8,144 12.00 6,681 Risk grade 13 13.00 5,785 13.00 2,558 Total 6.42 $ 5,179,780 6.30 $ 5,111,957 Energy Risk grades 1-8 5.85 $ 1,379,566 5.76 $ 1,451,673 Risk grade 9 9.00 80,170 9.00 35,565 Risk grade 10 10.00 1,105 10.00 43,001 Risk grade 11 11.00 15,194 11.00 25,427 Risk grade 12 12.00 51,161 12.00 37,261 Risk grade 13 13.00 19,722 13.00 9,671 Total 6.36 $ 1,546,918 6.22 $ 1,602,598 Commercial real estate: Buildings, land and other Risk grades 1-8 6.78 $ 4,528,963 6.76 $ 4,143,264 Risk grade 9 9.00 117,739 9.00 109,660 Risk grade 10 10.00 97,083 10.00 62,353 Risk grade 11 11.00 92,852 11.00 98,176 Risk grade 12 12.00 7,757 12.00 12,669 Risk grade 13 13.00 1,483 13.00 2,599 Total 6.99 $ 4,845,877 6.98 $ 4,428,721 Construction Risk grades 1-8 7.19 $ 1,314,076 7.13 $ 1,177,260 Risk grade 9 9.00 31,506 9.00 60,754 Risk grade 10 10.00 21,686 10.00 24,877 Risk grade 11 11.00 2,241 11.00 4,826 Risk grade 12 12.00 697 12.00 — Risk grade 13 13.00 — 13.00 — Total 7.28 $ 1,370,206 7.29 $ 1,267,717 Net (charge-offs)/recoveries, segregated by class of loans, were as follows: Three Months Ended Nine Months Ended 2019 2018 2019 2018 Commercial and industrial $ (1,520 ) $ (7,807 ) $ (5,912 ) $ (19,030 ) Energy (1,260 ) (5,347 ) (3,184 ) (10,272 ) Commercial real estate: Buildings, land and other 38 33 (466 ) (288 ) Construction 8 3 14 11 Consumer real estate (103 ) (388 ) (2,078 ) (1,078 ) Consumer and other (3,534 ) (1,792 ) (9,351 ) (4,975 ) Total $ (6,371 ) $ (15,298 ) $ (20,977 ) $ (35,632 ) 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 2018 Form 10-K, totaled 128.1 at September 30, 2019 and 126.4 at December 31, 2018 . 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 2018 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 September 30, 2019 and December 31, 2018 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 September 30, 2019 Historical valuation allowances $ 28,872 $ 7,422 $ 22,051 $ 2,641 $ 7,545 $ 68,531 Specific valuation allowances 5,785 19,722 1,483 — 2,170 29,160 General valuation allowances 10,866 4,120 4,349 1,172 (325 ) 20,182 Macroeconomic valuation allowances 7,144 2,082 7,470 1,071 919 18,686 Total $ 52,667 $ 33,346 $ 35,353 $ 4,884 $ 10,309 $ 136,559 Allocated to loans: Individually evaluated $ 5,785 $ 19,722 $ 1,483 $ — $ 2,170 $ 29,160 Collectively evaluated 46,882 13,624 33,870 4,884 8,139 107,399 Total $ 52,667 $ 33,346 $ 35,353 $ 4,884 $ 10,309 $ 136,559 December 31, 2018 Historical valuation allowances $ 25,351 $ 9,697 $ 20,817 $ 2,688 $ 6,845 $ 65,398 Specific valuation allowances 2,558 9,671 2,599 — 1,407 16,235 General valuation allowances 10,062 6,014 4,366 1,671 (13 ) 22,100 Macroeconomic valuation allowances 10,609 3,670 10,995 1,744 1,381 28,399 Total $ 48,580 $ 29,052 $ 38,777 $ 6,103 $ 9,620 $ 132,132 Allocated to loans: Individually evaluated $ 2,558 $ 9,671 $ 2,599 $ — $ 1,407 $ 16,235 Collectively evaluated 46,022 19,381 36,178 6,103 8,213 115,897 Total $ 48,580 $ 29,052 $ 38,777 $ 6,103 $ 9,620 $ 132,132 Our recorded investment in loans as of September 30, 2019 and December 31, 2018 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 September 30, 2019 Individually evaluated $ 12,154 $ 70,577 $ 9,576 $ 293 $ 2,170 $ 94,770 Collectively evaluated 5,167,626 1,476,341 6,206,507 1,172,010 517,674 14,540,158 Total $ 5,179,780 $ 1,546,918 $ 6,216,083 $ 1,172,303 $ 519,844 $ 14,634,928 December 31, 2018 Individually evaluated $ 7,129 $ 46,707 $ 14,685 $ 293 $ 1,407 $ 70,221 Collectively evaluated 5,104,828 1,555,891 5,681,753 1,118,697 568,343 14,029,512 Total $ 5,111,957 $ 1,602,598 $ 5,696,438 $ 1,118,990 $ 569,750 $ 14,099,733 The following table details activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 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. Commercial and Industrial Energy Commercial Real Estate Consumer Real Estate Consumer and Other Total Three months ended: September 30, 2019 Beginning balance $ 57,714 $ 25,818 $ 35,914 $ 5,637 $ 9,846 $ 134,929 Provision for loan losses (3,527 ) 8,788 (607 ) (650 ) 3,997 8,001 Charge-offs (2,705 ) (2,000 ) — (557 ) (6,357 ) (11,619 ) Recoveries 1,185 740 46 454 2,823 5,248 Net charge-offs (1,520 ) (1,260 ) 46 (103 ) (3,534 ) (6,371 ) Ending balance $ 52,667 $ 33,346 $ 35,353 $ 4,884 $ 10,309 $ 136,559 September 30, 2018 Beginning balance $ 57,713 $ 37,313 $ 38,918 $ 6,336 $ 9,946 $ 150,226 Provision for loan losses 1,085 (521 ) 250 246 1,590 2,650 Charge-offs (8,491 ) (5,400 ) — (431 ) (4,274 ) (18,596 ) Recoveries 684 53 36 43 2,482 3,298 Net charge-offs (7,807 ) (5,347 ) 36 (388 ) (1,792 ) (15,298 ) Ending balance $ 50,991 $ 31,445 $ 39,204 $ 6,194 $ 9,744 $ 137,578 Nine months ended: September 30, 2019 Beginning balance $ 48,580 $ 29,052 $ 38,777 $ 6,103 $ 9,620 $ 132,132 Provision for loan losses 9,999 7,478 (2,972 ) 859 10,040 25,404 Charge-offs (8,782 ) (4,000 ) (617 ) (2,936 ) (17,157 ) (33,492 ) Recoveries 2,870 816 165 858 7,806 12,515 Net charge-offs (5,912 ) (3,184 ) (452 ) (2,078 ) (9,351 ) (20,977 ) Ending balance $ 52,667 $ 33,346 $ 35,353 $ 4,884 $ 10,309 $ 136,559 September 30, 2018 Beginning balance $ 59,614 $ 51,528 $ 30,948 $ 5,657 $ 7,617 $ 155,364 Provision for loan losses 10,407 (9,811 ) 8,533 1,615 7,102 17,846 Charge-offs (21,896 ) (10,939 ) (619 ) (1,632 ) (12,240 ) (47,326 ) Recoveries 2,866 667 342 554 7,265 11,694 Net charge-offs (19,030 ) (10,272 ) (277 ) (1,078 ) (4,975 ) (35,632 ) Ending balance $ 50,991 $ 31,445 $ 39,204 $ 6,194 $ 9,744 $ 137,578 |