Loans Held for Investment and Allowance for Loan Losses | 3. LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR LOAN LOSSES: Loans held-for-investment December 31, 2019 2018 Commercial $ 856,326 $ 844,953 Agricultural 103,640 96,677 Real estate 2,823,372 2,639,346 Consumer 411,631 372,660 Total loans held-for-investment $ 4,194,969 $ 3,953,636 The Company’s non-accrual December 31, 2019 2018 Non-accrual $ 24,582 $ 27,534 Loans still accruing and past due 90 days or more 153 1,008 Troubled debt restructured loans** 26 513 Total $ 24,761 $ 29,055 * Includes $251,000 and $827,000, respectively, of purchased credit impaired loans as of December 31, 2019 and 2018. ** Our troubled debt restructured loans of $4,791,000 and $3,840,000, whose interest collection, after considering economic and business conditions and collection efforts, is doubtful are included in non-accrual The Company’s recorded investment in impaired loans and the related valuation allowance are as follows (dollars in thousands): December 31, 2019 December 31, 2018 Recorded Investment Valuation Allowance Recorded Investment Valuation Allowance $ 24,582 $ 3,228 $ 27,534 $ 4,069 The Company had $25,770,000 and $29,632,000 in non-accrual, December 31, 2019 2018 Commercial $ 3,093 $ 9,334 Agricultural 1,376 759 Real Estate 19,787 16,714 Consumer 326 727 Total $ 24,582 $ 27,534 No significant additional funds are committed to be advanced in connection with impaired loans as of December 31, 2019. The Company’s impaired loans and related allowance as of December 31, 2019 and 2018 are summarized in the following tables by class of financing receivables (in thousands). No interest income was recognized on impaired loans subsequent to their classification as impaired. December 31, 2019 Unpaid Principal Balance Recorded Recorded Total Related 12 Month Commercial $ 4,511 $ 630 $ 2,463 $ 3,093 $ 1,042 $ 3,488 Agricultural 1,603 658 718 1,376 235 1,644 Real Estate 27,366 7,081 12,706 19,787 1,950 21,726 Consumer 469 — 326 326 1 449 Total $ 33,949 $ 8,369 $ 16,213 $ 24,582 $ 3,228 $ 27,307 * Includes $251,000 of purchased credit impaired loans. December 31, 2018 Unpaid Principal Balance Recorded Recorded Total Related 12 Month Commercial $ 10,808 $ 6,728 $ 2,606 $ 9,334 $ 1,133 $ 7,986 Agricultural 799 213 546 759 170 842 Real Estate 24,072 6,699 10,015 16,714 2,409 16,042 Consumer 935 101 626 727 357 914 Total $ 36,614 $ 13,741 $ 13,793 $ 27,534 $ 4,069 $ 25,784 * Includes $827,000 of purchased credit impaired loans. The Company recognized interest income on impaired loans prior to being recognized as impaired of approximately $750,000, $948,000 and $624,000 during the years ended December 31, 2019, 2018 and 2017, respectively. From a credit risk standpoint, the Company rates its loans in one of four categories: (i) pass, (ii) special mention, (iii) substandard or (iv) doubtful. Loans rated as loss are charged-off. The ratings of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on our credits as part of our on-going Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly. Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed. Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on non-accrual. The following summarizes the Company’s internal ratings of its loans held-for-investment December 31, 201 9 Pass Special Substandard Doubtful Total Commercial $ 825,775 $ 20,971 $ 9,580 $ — $ 856,326 Agricultural 101,614 64 1,962 — 103,640 Real Estate 2,717,227 42,036 64,109 — 2,823,372 Consumer 409,698 300 1,633 — 411,631 Total $ 4,054,314 $ 63,371 $ 77,284 $ — $ 4,194,969 December 31, 2018 Pass Special Substandard Doubtful Total Commercial $ 804,584 $ 23,392 $ 16,977 $ — $ 844,953 Agricultural 92,864 46 3,767 — 96,677 Real Estate 2,559,379 26,626 53,341 — 2,639,346 Consumer 370,510 315 1,835 — 372,660 Total $ 3,827,337 $ 50,379 $ 75,920 $ — $ 3,953,636 At December 31, 2019 and 2018, the Company’s past due loans are as follows (dollars in thousands): December 31, 2019 15-59 Past 60-89 Past Greater 90 Total Past Due Total Current Total Loans Total 90 Commercial $ 3,257 $ 557 $ 722 $ 4,536 $ 851,790 $ 856,326 $ 112 Agricultural 183 44 400 627 103,013 103,640 — Real Estate 12,890 288 195 13,373 2,809,999 2,823,372 — Consumer 572 151 45 768 410,863 411,631 41 Total $ 16,902 $ 1,040 $ 1,362 $ 19,304 $ 4,175,665 $ 4,194,969 $ 153 December 31, 2018 15-59 Past 60-89 Past Greater 90 Total Past Due Total Current Total Loans Total 90 Commercial $ 3,546 $ 682 $ 677 $ 4,905 $ 840,048 $ 844,953 $ — Agricultural 791 19 26 836 95,841 96,677 — Real Estate 13,185 881 2,020 16,086 2,623,260 2,639,346 960 Consumer 782 263 54 1,099 371,561 372,660 48 Total $ 18,304 $ 1,845 $ 2,777 $ 22,926 $ 3,930,710 $ 3,953,636 $ 1,008 * The The following table details the allowance for loan losses at December 31, 2019 and 2018 by portfolio segment (in thousands). There were no allowances for purchased credit impaired loans at December 31, 2019 or 2018. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. December 31, 2019 Commercial Agricultural Real Estate Consumer Total Loans individually evaluated for impairment $ 1,042 $ 235 $ 1,950 $ 1 $ 3,228 Loan collectively evaluated for impairment 11,080 971 32,024 5,196 49,271 Total $ 12,122 $ 1,206 $ 33,974 $ 5,197 $ 52,499 December 31, 2018 Commercial Agricultural Real Estate Consumer Total Loans individually evaluated for impairment $ 1,133 $ 170 $ 2,409 $ 357 $ 4,069 Loan collectively evaluated for impairment 10,815 1,276 29,933 5,109 47,133 Total $ 11,948 $ 1,446 $ 32,342 $ 5,466 $ 51,202 Changes in the allowance for loan losses for the years ended December 31, 2019 and 2018 are summarized as follows (in thousands): December 31, 2019 Commercial Agricultural Real Estate Consumer Total Beginning balance $ 11,948 $ 1,446 $ 32,342 $ 5,466 $ 51,202 Provision for loan losses 398 (79 ) 2,520 126 2,965 Recoveries 1,364 158 404 532 2,458 Charge-offs (1,588 ) (319 ) (1,292 ) (927 ) (4,126 ) Ending balance $ 12,122 $ 1,206 $ 33,974 $ 5,197 $ 52,499 December 31, 2018 Commercial Agricultural Real Estate Consumer Total Beginning balance $ 10,865 $ 1,305 $ 29,896 $ 6,090 $ 48,156 Provision for loan losses 1,662 126 3,463 414 5,665 Recoveries 839 15 462 512 1,828 Charge-offs (1,418 ) — (1,479 ) (1,550 ) (4,447 ) Ending balance $ 11,948 $ 1,446 $ 32,342 $ 5,466 $ 51,202 The Company’s recorded investment in loans as of December 31, 2019 and 2018 related to the balance in the allowance for loan losses on the basis of the Company’s impairment methodology was as follows (in thousands). Purchased credit impaired loans of $251,000 and $827,000, respectively, at December 31, 2019 and 2018 are included in loans individually evaluated for impairment. December 31, 2019 Commercial Agricultural Real Estate Consumer Total Loans individually evaluated for impairment $ 3,093 $ 1,376 $ 19,787 $ 326 $ 24,582 Loan collectively evaluated for impairment 853,233 102,264 2,803,585 411,305 4,170,387 Total $ 856,326 $ 103,640 $ 2,823,372 $ 411,631 $ 4,194,969 December 31, 2018 Commercial Agricultural Real Estate Consumer Total Loans individually evaluated for impairment $ 9,334 $ 759 $ 16,714 $ 727 $ 27,534 Loan collectively evaluated for impairment 835,619 95,918 2,622,632 371,933 3,926,102 Total $ 844,953 $ 96,677 $ 2,639,346 $ 372,660 $ 3,953,636 The Company’s loans that were modified in the years ended December 31, 2019 and 2018, and considered troubled debt restructurings are as follows (dollars in thousands): Year Ended December 31, 2019 Year Ended December 31, 2018 Number Pre-Modification Recorded Investment Post- Modification Recorded Investment Number Pre-Modification Recorded Post- Commercial 7 $ 551 $ 551 4 $ 864 $ 864 Agricultural 11 812 812 1 4 4 Real Estate 7 1,397 1,397 5 643 643 Consumer — — — 8 209 209 Total 25 $ 2,760 $ 2,760 18 $ 1,720 $ 1,720 The balances below provide information as to how the loans were modified as troubled debt restructured loans during the years ended December 31, 2019 and 2018 (dollars in thousands): Year Ended December 31, 2019 Year Ended December 31, 2018 Adjusted Extended Combined Adjusted Extended Combined Commercial $ — $ 389 $ 162 $ — $ 529 $ 335 Agricultural — 354 458 — — 4 Real Estate — 494 903 — 280 363 Consumer — — — — — 209 Total $ — $ 1,237 $ 1,523 $ — $ 809 $ 911 During the years ended December 31, 2019 and 2018, certain loans were modified as a troubled debt restructured loans within the previous 12 months and for which there was a payment default. A default for purposes of this disclosure is a troubled debt restructured loan in which the borrower is 90 days past or more due or results in the foreclosure and repossession of the applicable collateral. The loans with payment default are as follows (dollars in thousands): Year Ended December 31, 2019 Year Ended December 31, 2018 Number Balance Number Balance Commercial — $ — 1 $ 491 Agriculture 7 267 — — Real Estate — — — — Consumer — — — — Total 7 $ 267 1 $ 491 As of December 31, 2019, the Company has no commitments to lend additional funds to loan customers whose terms have been modified in troubled debt restructurings. An analysis of the changes in loans to officers, directors, principal shareholders, or associates of such persons for the year ended December 31, 2019 (determined as of each respective year-end) Beginning Additional Payments Ending Year ended December 31, 2019 $ 67,394 $ 92,031 $ 74,061 $ 85,364 In the opinion of management, those loans are on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with unaffiliated persons. Our subsidiary bank has established a line of credit with the Federal Home Loan Bank of Dallas (FHLB) to provide liquidity and meet pledging requirements for those customers eligible to have securities pledged to secure certain uninsured deposits. At December 31, 2019, $2,663,321,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit. At December 31, 2019, there were no amounts outstanding under this line of credit. |