10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34737

LEGACYTEXAS FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Maryland	27-2176993
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5851 Legacy Circle, Plano, Texas	75024
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (972) 578-5000

Securities registered pursuant to Section 12(b) of the Act:

	Name of Each Exchange on Which
Title of Each Class	Registered
Common Stock, par value $0.01 per share	Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

The aggregate market value of the voting and non-voting common equity held by nonaffiliates of the Registrant was $1,785.9 million as of June 30, 2017, the last business day of the Registrant’s most recently completed second fiscal quarter. Solely for the purpose of this computation, it has been assumed that executive officers and directors of the Registrant are “affiliates”.

There were issued and outstanding 48,199,611 shares of the Registrant’s common stock as of February 6, 2018.

DOCUMENTS INCORPORATED BY REFERENCE:

Document	Part of Form 10-K
Portions of the definitive Proxy Statement to be used in conjunction with the Registrant’s Annual Meeting of Shareholders to be held on May 21, 2018.	Part III

LEGACYTEXAS FINANCIAL GROUP, INC.

FORM 10-K

December 31, 2017

INDEX

	Page
PART I	4
Item 1 Business	4
Item 1A Risk Factors	26
Item 1B Unresolved Staff Comments	36
Item 2 Properties	36
Item 3 Legal Proceedings	37
Item 4 Mine Safety Disclosures	37
PART II	37
Item 5 Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	37
Item 6 Selected Financial Data	40
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 7A Quantitative and Qualitative Disclosures about Market Risk	57
Item 8 Financial Statements and Supplementary Data	60
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	115
Item 9A Controls and Procedures	115
Item 9B Other Information	116
PART III	117
Item 10 Directors, Executive Officers and Corporate Governance	117
Item 11 Executive Compensation	117
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	117
Item 13 Certain Relationships and Related Transactions, and Director Independence	117
Item 14 Principal Accountant Fees and Services	117
PART IV	118
Item 15 Exhibits, Financial Statement Schedules	118
Signatures	121

PART I

Item 1. Business

The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned “Special Note Regarding Forward-Looking Statements” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and other cautionary statements set forth elsewhere in this report.

General

LegacyTexas Financial Group, Inc. is a Maryland corporation and LegacyTexas Bank is its wholly owned principal operating subsidiary. Unless the context otherwise requires, references in this document to the “Company” refer to LegacyTexas Financial Group, Inc. and references to the “Bank” refer to LegacyTexas Bank, the Company's wholly owned operating subsidiary. References to “we,” “us,” and “our” mean LegacyTexas Financial Group, Inc. and/or LegacyTexas Bank, as the context requires.

Regulators of the Bank are the Texas Department of Banking (“TDOB”) and the Board of Governors of the Federal Reserve System (“FRB”) with back-up oversight by the Federal Deposit Insurance Corporation ("FDIC.") The Bank is a Federal Reserve member bank required to have certain reserves and stock set by the FRB and a member of the Federal Home Loan Bank of Dallas, one of the 12 regional banks in the Federal Home Loan Bank System (“FHLB”). The Company is regulated by the FRB.

Business Strategies

Our principal business consists of attracting retail deposits from the general public and the business community and investing those funds, along with borrowed funds, in commercial real estate loans, secured and unsecured commercial and industrial loans, as well as permanent loans secured by first and second mortgages on one- to four-family residences and consumer loans. Additionally, the Warehouse Purchase Program allows mortgage banking company customers to close one- to four-family real estate loans in their own name and manage its cash flow needs until the loans are sold to investors. Our operating revenues are derived principally from interest earned on interest-earning assets, including loans and investment securities, and service charges and fees on deposits and other account services. Our primary sources of funds are deposits, FHLB advances and other borrowings, and payments received on loans and securities. We offer a variety of deposit accounts that provide a wide range of interest rates and terms, generally including savings, money market, certificate of deposit and demand accounts.

Our principal objective is to be an independent, commercially-oriented, customer-focused financial services company, providing outstanding service and innovative products in our primary market area of North Texas. Our Board of Directors adopted a strategy designed to maintain growth and profitability, a strong capital position and high asset quality. This strategy primarily involves:

• A strong focus on growth, both organically and through selective acquisitions

We are a commercial bank that is focused on meeting the needs of businesses and consumers in the North Texas area by organically growing our loan portfolio while maintaining sound asset quality. We intend to fund loan growth with a low-cost deposit base, which includes increasing our non-interest-bearing demand deposits, especially in the commercial sector, and using our wide array of Treasury Management services to serve as a catalyst for deposit growth. We will also continue to pursue selective acquisitions that will enhance our commercial business model.

•An emphasis on the total customer relationship while diversifying income sources and practicing prudent and focused expense management

We offer both commercial and retail customers a wide range of products and services that provide us with diversification of revenue sources and help us to solidify customer relationships. Our focus on commercial loan growth will positively impact interest income, and increasing our non-interest-bearing demand deposit base will help fund loans at a low cost. We aim to know our customers and their businesses better than our competition, provide effective ideas and solutions for their financial needs, and execute the delivery of these products and services in an efficient and professional manner. We plan to balance non-interest income growth through our relationship-driven approach with prudent and focused core expense management.

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•Maintain sound asset quality

We believe that asset quality is a key to long-term financial success. We seek to maintain sound asset quality by moderating credit risk and adhering to prudent lending practices, which have historically resulted in low charge-off ratios. As we continue to grow and diversify our loan portfolio, we plan to adhere to sound credit management principles.

•Strategic capital deployment

We plan to maintain strong capital levels while increasing shareholder returns. Our current capital position provides us with the ability to pursue robust organic growth as well as acquisitions that will advance our business strategy.

Market Areas

We are headquartered in Plano, Texas, and currently operate 44 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. Based on the most recent branch deposit data provided by the FDIC (as of June 2017), we ranked first in deposit share in Collin County, with 18.60% of total deposits, and seventh in the Dallas/Fort Worth Metropolitan Statistical Area, with 2.46% of total deposits.

Our market area includes a diverse population of management, professional and sales personnel, office employees, manufacturing and transportation workers, service industry workers, government employees and self-employed individuals. The population includes a skilled work force with a wide range of education levels and ethnic backgrounds. Major employment sectors include transportation, financial services, health and social services, telecommunications, manufacturing, education, retail trades, and professional services. There are 22 companies headquartered in the Dallas/Fort Worth Metroplex which are on the 2017 Fortune 500 list, including Exxon Mobil, AT&T, American Airlines Group, Kimberly-Clark, Dr. Pepper Snapple Group, Texas Instruments, J.C. Penney, Dean Foods and Southwest Airlines.

For December 2017, the Dallas/Fort Worth Metroplex reported an unemployment rate (not seasonally adjusted) of 3.1%, compared to the national average of 3.9% (source is Bureau of Labor Statistics Local Area Unemployment Statistics Unemployment Rates for Metropolitan Areas, using the Dallas-Fort Worth-Arlington, Texas Metropolitan Statistical Area).

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Lending Activities

The following table presents information concerning the composition of our loan portfolio in dollar amounts and in percentages (before deductions for deferred fees and discounts and allowances for loan losses) as of the dates indicated.

	December 31,
	2017					2016					2015					2014					2013
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Loans held for investment:
Commercial real estate	$	3,019,339		45.41	%	$	2,670,455		44.03	%	$	2,177,543		42.98	%	$	1,265,868		48.07	%	$	1,091,200		53.23	%
Commercial and industrial	2,093,307			31.48		1,971,160			32.50		1,612,669			31.83		781,824			29.69		439,430			21.43
Construction and land	277,864			4.18		294,894			4.86		269,708			5.32		21,298			0.81		30,247			1.48
Consumer real estate	1,213,434			18.25		1,074,923			17.72		936,757			18.49		524,199			19.90		441,226			21.53
Other consumer	45,506			0.68		53,991			0.89		69,830			1.38		40,491			1.53		47,799			2.33
Gross loans held for investment, excluding Warehouse Purchase Program	6,649,450			100.00	%	6,065,423			100.00	%	5,066,507			100.00	%	2,633,680			100.00	%	2,049,902			100.00	%
Net of:
Deferred costs (fees) and discounts, net	6,380					(2,251		)			(1,860		)			(2,927		)			(1,267		)
Allowance for loan losses	(71,301		)			(64,576		)			(47,093		)			(25,549		)			(19,358		)
Net loans held for investment, excluding Warehouse Purchase Program	6,584,529					5,998,596					5,017,554					2,605,204					2,029,277
Warehouse Purchase Program	1,154,588					1,055,341					1,043,719					786,416					673,470
Total loans held for investment, net	$	7,739,117				$	7,053,937				$	6,061,273				$	3,391,620				$	2,702,747
Loans held for sale	$	16,707				$	21,279				$	22,535				$	—				$	—

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The following table shows the composition of our loan portfolio by fixed and adjustable rate as of the dates indicated.

	December 31,
	2017					2016					2015					2014					2013
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Fixed rate loans:
Commercial real estate	$	1,829,829		27.52	%	$	1,638,656		27.02	%	$	1,188,884		23.47	%	$	728,168		27.65	%	$	564,312		27.53	%
Commercial and industrial	241,897			3.64		212,456			3.50		664,057			13.11		67,592			2.57		76,002			3.70
Construction and land	58,575			0.88		57,287			0.94		85,099			1.68		5,764			0.22		8,948			0.44
Consumer real estate	657,876			9.89		589,051			9.71		508,295			10.03		337,109			12.80		326,122			15.91
Other consumer	37,888			0.57		45,942			0.76		58,259			1.15		32,257			1.22		38,705			1.89
Total fixed rate loans	2,826,065			42.50		2,543,392			41.93		2,504,594			49.44		1,170,890			44.46		1,014,089			49.47
Adjustable rate loans:
Commercial real estate	1,189,510			17.89		1,031,799			17.01		988,659			19.51		537,700			20.42		526,888			25.70
Commercial and industrial	1,851,410			27.84		1,758,704			29.00		948,612			18.72		714,232			27.12		363,428			17.73
Construction and land	219,289			3.30		237,607			3.92		184,609			3.64		15,534			0.59		21,299			1.04
Consumer real estate	555,558			8.36		485,872			8.01		428,462			8.46		187,090			7.10		115,104			5.62
Other consumer	7,618			0.11		8,049			0.13		11,571			0.23		8,234			0.31		9,094			0.44
Total adjustable rate loans	3,823,385			57.50		3,522,031			58.07		2,561,913			50.56		1,462,790			55.54		1,035,813			50.53
Gross loans held for investment, excluding Warehouse Purchase Program	6,649,450			100.00	%	6,065,423			100.00	%	5,066,507			100.00	%	2,633,680			100.00	%	2,049,902			100.00	%
Net of:
Deferred costs (fees) and discounts, net	6,380					(2,251		)			(1,860		)			(2,927		)			(1,267		)
Allowance for loan losses	(71,301		)			(64,576		)			(47,093		)			(25,549		)			(19,358		)
Net loans held for investment, excluding Warehouse Purchase Program	6,584,529					5,998,596					5,017,554					2,605,204					2,029,277
Warehouse Purchase Program:
Fixed rate loans	—			—	%	—			—	%	—			—	%	4,147			0.53	%	234			0.03	%
Adjustable rate loans	1,154,588			100.00		1,055,341			100.00		1,043,719			100.00		782,269			99.47		673,236			99.97
Total Warehouse Purchase Program	1,154,588			100.00	%	1,055,341			100.00	%	1,043,719			100.00	%	786,416			100.00	%	673,470			100.00	%
Loans held for investment, net	$	7,739,117				$	7,053,937				$	6,061,273				$	3,391,620				$	2,702,747
Loans held for sale	$	16,707				$	21,279				$	22,535				$	—				$	—

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The following schedules illustrate the contractual maturity and repricing information for the commercial and industrial and the construction and land portions of our loan portfolio at December 31, 2017. Loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. Purchased credit impaired loans are reported at their contractual interest rate. The schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.

	Due During Years Ending December 31,
(Dollars in thousands)	2018 1		2019 - 2022		2023 and following		Total
Commercial and industrial	$	729,367	$	1,276,549	$	87,391	$	2,093,307
Construction and land	210,857		39,337		27,670		277,864

¹Includes demand loans and loans having no stated maturity

(Dollars in thousands)	Maturities after One Year
Loans with fixed interest rates	$	174,953
Loans with floating or adjustable interest rates	1,255,994

Lending Authority. Our Chief Credit Officer can approve cash secured loans up to $4.0 million, loans secured by other collateral up to $3.5 million and unsecured loans up to $2.0 million, while our Chief Executive Officer can approve cash secured loans up to $4.0 million, loans secured by other collateral up to $3.5 million and unsecured loans up to $3.0 million. The Senior Loan Committee has authority to approve loans over these signature authority amounts. At December 31, 2017, under federal regulation, the maximum amount we could lend to any one borrower and the borrower's related entities was approximately $216.9 million.

Commercial Real Estate Lending. The current focus of commercial real estate lending is direct relationships with investor-owned commercial projects primarily with experienced regional owners of three commercial product types: office, retail and multifamily. The office and retail secured projects are occupied by local, regional and national tenants, while the primarily Class B multifamily secured projects are occupied by individuals unlikely to become single family homeowners. Although we finance other project types (industrial, self-storage facilities, mixed use, etc.), these other projects do not constitute a significant concentration of the commercial real estate portfolio.Our commercial real estate projects are primarily located in Texas,with the majority of the projects being located in major metropolitan markets, such as Dallas, Fort Worth and Houston.

Our reliance on loan structures that emphasize upfront equity rather than back-end guaranty of payment provides multiple benefits to us, most driven by the lower initial loan balance. For example, the lower loan balance typically drives the initial loan to value ratio of each project well below regulatory requirements for commercial projects. This lower ratio also provides a cushion in case appraised values drop as a result of reduced occupancy, reduced cash flow, or increased capitalization rates. The low loan balance also aids in achieving a higher debt yield ratio (net operating income to loan amount), and a higher debt service coverage ratio (net operating income to debt service requirement), both important metrics for us. Escrows for taxes and insurance are typically maintained for loans in this portfolio, as well as funds for tenant improvement, leasing commissions, or capital expenditures as needed. Regular financial information is gathered so we can stay apprised of the financial status of the project. Although a guaranty of payment is not utilized on these transactions, we do require annual statements on the sponsors in order to ascertain liquidity and to identify other projects likely to cause financial hardship to our borrower.

This portfolio also includes a smaller portion of commercial real estate loans to owner occupied businesses. These loans are typically characterized by higher loan to value ratios than our other commercial real estate loans, but generally come with an unlimited guaranty of payment from the company owner(s). At December 31, 2017, the commercial real estate lending portfolio totaled $3.02 billion.

Commercial and Industrial Lending. Our commercial and industrial portfolio totaled $2.09 billion at December 31, 2017, with borrowers that are typically located in Texas, but often provide their products and services regionally or nationally. Loans are generally secured by a pledge of business assets such as accounts receivable, inventory, equipment, or vehicles, with the objective of reducing loan balances more quickly than the decline in useful life or value of the asset. The likelihood of loans being paid depends on the success of the business itself, and economic conditions can play a large role in the long-term viability of a company. We generally obtain personal guarantees for privately held companies.

Financial information on these borrowers is required at regular intervals, with company information required on monthly or quarterly terms, and annual personal financial statements required on owner/guarantors. Covenants are included in

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loan structure with the most common being leverage, liquidity and debt service covenants and generally include debt to tangible net worth or minimum tangible net worth, minimum current and liquidity ratios, and minimum Earnings Before Interest, Taxes, Depreciation, and Amortizations (EBITDA).

Energy loans, which are reported as commercial and industrial loans, totaled $531.7 million at December 31, 2017, representing approximately 8.0% of total loans held for investment (excluding Warehouse Purchase Program loans) and 25.4% of total commercial and industrial loans. In May 2013, we formed our Energy Finance group, which is comprised of a group of seasoned lenders, executives and credit risk professionals with more than 100 years of combined Texas energy experience, to focus on providing loans to private and public oil and gas companies throughout the United States. The group also offers the Bank's full array of commercial services, including Treasury Management and letters of credit, to its customers. Substantially all of the loans in the Energy portfolio are reserve based loans, secured by deeds of trust on properties containing proven oil and natural gas reserves. In addition to the reserve based energy loans, we have loans categorized as "Midstream and Other," which are typically related to the transmission of oil and natural gas and would only be indirectly impacted from declining commodity prices. At December 31, 2017, "Midstream and Other" loans had a total outstanding balance of $15.4 million. The energy lending portfolio continues to be an important part of our commercial business strategy.

Construction and Land Lending. The Company's 2015 merger with LegacyTexas Group, Inc. added a construction and land portfolio, which totaled $277.9 million at December 31, 2017. This portfolio is primarily made up of commercial entities constructing both commercial and residential projects in the Dallas Fort Worth area, totaling $250.2 million at December 31, 2017. Our requirements for commercial construction lending is predicated on dealing with reputable project developers, and financially capable contractors, on projects with good equity and significant pre-leasing. Requirements for builders of single family residential projects are similar, with additional controls over the amount of exposure to custom, speculative and model units being built, both financed by us and by competing institutions. Additionally, through the mortgage division acquired from LegacyTexas Group, Inc., we also originate one-time close residential construction loans to individuals for the construction and acquisition of personal residences. At December 31, 2017, we had $27.7 million in outstanding balances on residential construction loans to individuals, which generally provide for the payment of interest only during the construction phase, which is typically up to 12 months.

Consumer Real Estate Lending. Our consumer real estate lending portfolio, which totaled $1.21 billion at December 31, 2017, consists of one- to four-family real estate and home equity/home improvement loans. We primarily originate loans secured by first mortgages on owner-occupied, one- to four-family residences in our market area. All of the one- to four-family loans we originate are funded by us and either sold into the secondary market on a servicing released basis or retained in our portfolio. See “Loan Originations, Purchases, Sales, Repayments and Servicing” for more information. Sales of one- to four-family real estate loans can increase liquidity, provide funds for additional lending activities, and generate income. In 2017, we recognized $7.3 million in net gains on the sale of mortgage loans, which includes the gain recognized on $195.0 million of one- to four-family mortgage loans that were sold or committed for sale in 2017, fair value changes on mortgage derivatives and mortgage fees collected.

We underwrite one- to four-family owner-occupied loans based on the applicant’s ability to repay. This includes evaluating their employment, credit history and the value of the subject property. Properties securing our one- to four-family loans are appraised by independent fee appraisers who are selected in accordance with industry and regulatory standards. We require our borrowers to obtain title and hazard insurance, and flood insurance, if necessary.

We also originate consumer home equity and home improvement loans. All of our home equity loans are secured by Texas real estate. Under Texas law, home equity borrowers are allowed to borrow a maximum of 80% (combined LTV of the first lien, if any, plus the home equity loan) of the fair market value of their primary residence. The same 80% combined LTV maximum applies to home equity lines of credit, with the home equity line further limited to 50% of the fair market value of the home. As a result, our home equity loans and home equity lines of credit have low LTV ratios compared to similar loans in most other states. Home equity lines of credit are originated with an adjustable rate of interest based on the Wall Street Journal Prime (“Prime”) rate of interest plus a margin. Home equity lines of credit have up to a ten year draw period and amounts may be re-borrowed after payment at any time during the draw period. While the rate of interest continues to float, once the draw period has lapsed, the payment amount is calculated on a ten year period based on the loan balance at that time. For home improvement loans, borrowers are allowed to borrow a maximum of 90% of the fair market value of their primary residence.

Other Consumer Lending. We offer a variety of secured and unsecured consumer loans, including new and used automobile loans, recreational vehicle loans and loans secured by savings deposits. We originate these loans primarily in our market areas. At December 31, 2017, our other consumer loan portfolio totaled $45.5 million.

Warehouse Purchase Program. The Warehouse Purchase Program, which we initiated in July 2008, allows unaffiliated mortgage originators to close one- to four-family real estate loans in their own name and manage their cash flow

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needs until the loans are sold to investors. Although not bound by any legally binding commitment, when a purchase decision is made, we purchase a 100% participation interest in the mortgage loans originated by our mortgage banking company customers. The mortgage banking company customer closes mortgage loans consistent with underwriting standards established by both the Bank and approved investors and, once all pertinent documents are received, the participation interest is delivered by the Bank to the investor selected by the originator and approved by us.

The unaffiliated mortgage originating customers are located across the U.S. and originate loans primarily through traditional retail and/ or wholesale business models. These customers are strategically targeted for their experienced management teams and thoroughly analyzed to ensure long-term and profitable business models. By using this approach, we believe that this type of lending carries a lower risk profile than other one- to four-family mortgage loans held for investment in our portfolio, due to the short-term nature (averaging less than 30 days) of the exposure and the additional strength offered by the mortgage originator sponsorship.

At December 31, 2017, Warehouse Purchase Program maximum aggregate outstanding purchases ranged in size from $2.0 million to $100.0 million. The maximum aggregate outstanding purchases are priced using a combined base rate and a risk premium set for both product type (Prime, Jumbo, etc.) and age of the loan. The typical maximum aggregate outstanding purchase facility includes the payment guaranty of company owners holding significant ownership positions, along with non-interest-bearing compensating balance deposits in line with the maximum aggregate outstanding purchase limit. Typical covenants include minimum tangible net worth, maximum leverage and minimum liquidity. As loans age, the Company requires loan curtailments to reduce our risk involving loans that are not purchased by investors on a timely basis.

At December 31, 2017, the Bank had 45 mortgage banking company customers with a maximum aggregate exposure of $1.90 billion and an actual aggregate outstanding balance of $1.15 billion. The average mortgage loan being purchased by the Bank reflects a blend of both Conforming and Government loan characteristics, including an average loan to value ratio (LTV) of 81%, an average credit score of 717 and an average loan size of $270,000. These characteristics illustrate the low risk profile of loans purchased under the Warehouse Purchase Program. To date, we have not experienced a loss on any Warehouse Purchase Program loan.

Loan Originations, Purchases, Sales, Repayments and Servicing

We attempt to meet the needs of the markets we serve by originating thoroughly analyzed and documented loans to both businesses and consumers. These loans typically involve a direct relationship with the borrower, owner(s), and management of the borrowing entity in an attempt to better identify borrower needs and better identify risks to us that must be mitigated in the loan structure.

It is not unusual for a loan request to be so large as to exceed our house limit for transaction size, or for us to have an existing concentration to a particular borrower or industry, such that a smaller loan size is preferred. In these instances we will solicit one or more financial partners to take a portion of a transaction by way of purchasing a participation in the loan. The participation agreement outlines the relationship between the Bank and the participant with regard to borrower access, loan servicing, and loan documents. The participant ends up having an indirect relationship with the borrower through the Bank; essentially becoming a “silent partner” in the transaction. The participant's transactional involvement is typically limited to only that provided by the Bank as “agent” in the transaction, and the participation interest is sold without recourse.

When a participation arrangement is unacceptable to the financial partner and a direct relationship with the borrower is the only structure acceptable, a syndication arrangement may be formed. In a syndication arrangement, the financial partner has a direct relationship with the borrower and has its own documents, with terms that mirror those of the other banks in the syndication group. Just like in a participation, the financial partner shares pro-rata in collateral, but because syndication partners are essentially equal in rights and responsibilities, there is usually a designated partner responsible for administering the flow of funds and information between the parties. The Bank has entered into the sale of both participations and syndications of loans to commercial real estate and commercial and industrial borrowers in an attempt to meet our borrowers' needs and stay within our own risk tolerances. During 2017, we sold $274.4 million in participations and syndications.

We have also entered into the purchase of both participation and syndication transactions as a means of assisting our financial partners who may have encountered excess loan exposure to their own borrowers. The rights and remedies of these purchases are essentially the same as outlined above for the sale of a participation or syndication. A participation purchased would give the Bank little to no access to our financial partner's borrower and we would have to accept the terms outlined and documents used for that borrower. During 2017, we purchased $226.3 million in participations and syndications.

We also sell whole residential real estate loans originated by our mortgage division to private investors, such as other banks and mortgage companies, generally subject to a provision for repurchase upon breach of representation, warranty or covenant. These loans are generally sold, on a servicing-released basis, for cash in amounts equal to the unpaid principal

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amount of the loans plus a servicing release premium. The sale amounts generally produce gains to us. In 2017, our mortgage division sold $199.7 million of residential real estate loans to investors.

Asset Quality

An accurate assessment of asset quality is essential to our long-term health. Failure to identify deterioration in our largest asset category, loans, could result in a shortfall of loan loss reserves needed for loans requiring charge-off, and a charge against capital would be required. Credit analysts, loan officers, and lending managers are charged with not only proper risk analysis before loans are made, but also after they are booked and performing as expected. The goal is to identify the proper risk status and take actions appropriate with that risk. We have a risk rating system and a loss reserve methodology for each category of loan that includes Pass, Special Mention, Substandard, Doubtful, and Loss. We also regularly engage the services of third party firms to perform an independent assessment of individual loan risk grades and the processes for risk identification.

We have a variety of monitoring tools that serve as indicators of potential borrower weakness and early warning signs of possible risk grade deterioration. For example, a borrower's inability to provide ongoing loan documentation, meet loan covenants, maintain positive balances in deposit accounts, and make loan payments as scheduled are all signs of potential deterioration in a borrower's financial condition and the need for a review of the asset risk grade. Borrowers who are unable to meet original loan terms and require concessions that we would not ordinarily grant are automatically downgraded and examined for the need for additional reserves to cover specific impairment. Loans are reviewed regularly to ensure that they are properly graded, structured to meet the borrower's cash flow capability, and considered in our calculation of the allowance for loan losses.

Delinquent Loans. The following table sets forth our loan delinquencies by type, by amount and by percentage of type at December 31, 2017. There were no past due Warehouse Purchase Program loans at December 31, 2017.

	Loans Delinquent For:										Total Loans Delinquent 30 Days or More
	30-89 Days					90 Days and Over
	Number	Amount		Percent of Loan Category		Number	Amount		Percent of Loan Category		Number	Amount		Percent of Loan Category
	(Dollars in thousands)
Commercial real estate	4	$	9,414	0.31	%	1	$	250	0.01	%	5	$	9,664	0.32	%
Commercial and industrial	20	1,202		0.06		6	7,350		0.35		26	8,552		0.41
Construction and land	4	9,354		3.37		—	—		—		4	9,354		3.37
Consumer real estate	165	19,364		1.60		13	1,367		0.11		178	20,731		1.71
Other consumer	45	925		2.03		1	2		—		46	927		2.03
Total loans	238	$	40,259	0.61	%	21	$	8,969	0.13	%	259	$	49,228	0.74	%

Non-performing Assets. The table below sets forth the amounts and categories of non-performing assets in our loan portfolio. Loans are placed on nonaccrual status when the collection of principal and/or interest becomes doubtful or other factors involving the loan warrant placing the loan on nonaccrual status. Loans that are past due 30 days or greater are considered delinquent. Interest income on loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Consumer loans are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. At December 31, 2017, we had $82.6 million in nonaccrual loans that were not past due, but where the collection of all principal and interest is considered doubtful.

All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Troubled debt restructurings, also referred to as "TDRs" herein, which are accounted for under Accounting Standards Codification ("ASC") 310-40, are loans which have renegotiated loan terms to assist borrowers who are unable to meet the original terms of their loans. Such modifications to loan terms may include a below market interest rate, a reduction in principal, or a longer term to maturity. All TDRs are initially classified as nonaccrual loans, regardless of whether the loan was performing at the time it was restructured. Once a TDR has performed according to its modified terms for six months and the

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collection of future principal and interest under the revised terms is deemed probable, the Bank will consider placing the loan back on accrual status. At December 31, 2017, we had $18.1 million in TDRs, of which $768,000 were accruing interest and $17.3 million were classified as nonaccrual.

	Years Ended December 31,
	2017			2016			2015			2014			2013
	(Dollars in thousands)
Nonaccrual loans: 1
Commercial real estate	$	4,134		$	5,195		$	11,418		$	6,703		$	7,604
Commercial and industrial	84,003			86,664			16,877			5,778			5,141
Construction and land	—			11,385			33			149			—
Consumer real estate	6,190			7,987			9,781			10,591			8,812
Other consumer	76			158			107			286			567
Total non-performing loans	94,403			111,389			38,216			23,507			22,124
Foreclosed assets:
Commercial real estate	6,694			10,638			4,784			551			102
Construction and land	859			194			1,802			—			172
Consumer real estate	192			—			106			—			204
Other consumer	687			6			—			—			2
Total foreclosed assets	8,432			10,838			6,692			551			480
Total non-performing assets	$	102,835		$	122,227		$	44,908		$	24,058		$	22,604
Total non-performing assets as a percentage of total assets 2	1.13		%	1.46		%	0.58		%	0.58		%	0.64		%
Total non-performing loans as a percentage of total loans held for investment, excluding Warehouse Purchase Program loans 2	1.42		%	1.84		%	0.75		%	0.89		%	1.08		%
Performing troubled debt restructurings:
Commercial real estate	$	145		$	154		$	161		$	702		$	—
Commercial and industrial	2			—			30			153			185
Construction and land	—			—			—			—			2
Consumer real estate	600			269			368			204			737
Other consumer	21			31			46			39			47
Total	$	768		$	454		$	605		$	1,098		$	971

¹  There were no non-performing or TDR warehouse lines of credit or Warehouse Purchase Program loans for the periods presented.

²  Purchased credit impaired (PCI) loans, which were acquired in 2012 through the Highlands Bancshares, Inc. ("Highlands") acquisition and in 2015 through the LegacyTexas acquisition, are not considered non-performing loans, and therefore are not included in the numerator of the non-performing loans to total loans ratio, but are included in total loans, which is reflected in the denominator. Loans past due over 90 days that were still accruing interest totaled $0, $141,000, $111,000, $612,000 and $266,000 for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, respectively, and consisted entirely of PCI loans.

For the year ended December 31, 2017, gross interest income which would have been recorded had the nonaccrual loans been current in accordance with their original terms throughout the entire year amounted to $4.2 million. No interest income on these loans was recorded for the year ended December 31, 2017.

Classified Assets. Loans and other assets, such as debt and equity securities, considered by management to be of lesser quality, are classified as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses of those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts,

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conditions and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

We regularly review the problem assets in our portfolio to determine the appropriate classification. The aggregate amount of classified assets at the dates indicated was as follows:

	At December 31,
	2017			2016
	(Dollars in thousands)
Doubtful	$	1,134		$	2,880
Substandard	112,632			136,815
Total classified loans	113,766			139,695
Foreclosed assets	8,432			10,838
Total classified assets	$	122,198		$	150,533
Classified assets as a percentage of equity	12.73		%	17.00		%
Classified assets as a percentage of assets	1.34			1.80
Classified assets as a percentage of total loans held for investment, excluding Warehouse Purchase Program loans	1.84			2.48

Substandard loans at December 31, 2017decreased by $24.2 million from December 31, 2016, which was primarily related to the resolution of an $11.5 million construction and land relationship with a residential home builder. After various lots and completed homes were liquidated by the borrower, the Company foreclosed on the remaining partially completed homes in the 2017 period. Additionally, in 2017, substandard loans declined by $7.3 million due to the resolution of an $11.4 million relationship with a borrower within the corporate healthcare finance portfolio. When establishing our allowance for loan losses, all portfolio and general economic factors are considered, including the level of criticized assets and the level of commodity prices. Please see “Comparison of Financial Condition at December 31, 2017, and December 31, 2016 — Allowance for Loan Losses” contained in Item 7 of this report for more information.

We had $15.4 million of potential problem loans at December 31, 2017, considered "other loans of concern," that are currently performing and do not meet the criteria for impairment, but where there is the distinct possibility that we could sustain some loss if credit deficiencies are not corrected. These possible credit problems may result in the future inclusion of these loans in the non-performing asset categories and were classified as "substandard" but were still accruing interest and were not considered impaired at December 31, 2017 (excluding PCI loans). Other loans of concern, which were performing at December 31, 2017, have been considered in management's analysis of potential loan losses.

Allowance for Loan Losses. The allowance for loan losses is maintained to cover losses that are estimated in accordance with US GAAP. It is our estimate of credit losses inherent in our loan portfolio at each balance sheet date. Our methodology for analyzing the allowance for loan losses consists of general and specific components. For the general component, we stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and apply a loss ratio to these groups of loans to estimate the credit losses in the loan portfolio. We use both historical loss ratios and qualitative loss factors assigned to major loan collateral types to establish general component loss allocations. Qualitative loss factors are based on management's judgment of company, market, industry or business specific data and external economic indicators, which may not yet be reflected in the historical loss ratios, and that could impact our specific loan portfolios. The Allowance for Loan Loss Committee sets and adjusts qualitative loss factors by regularly reviewing changes in underlying loan composition and the seasonality of specific portfolios. The Allowance for Loan Loss Committee also considers credit quality and trends relating to delinquency, non-performing and classified loans within our loan portfolio when evaluating qualitative loss factors. Additionally, the Allowance for Loan Loss Committee adjusts qualitative factors to account for the potential impact of external economic factors, including the unemployment rate, vacancy, capitalization rates, commodity prices and other pertinent economic data specific to our primary market area and lending portfolios.

For the specific component, the allowance for loan losses includes loans where management has concerns about the borrower's ability to repay and on individually analyzed loans found to be impaired. Management evaluates current information and events regarding a borrower's ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according to the contractual terms of the loan agreement, is in doubt. If an impaired loan is collateral-dependent, the fair value of the collateral, less the estimated cost to sell, is used to determine the amount of impairment. If an impaired loan is not collateral-dependent, the impairment amount is determined using the negative difference, if any, between the estimated discounted cash flows and the loan amount due. For impaired loans, the amount of the

13

impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral or until the basis is collected. Impairment losses are reflected in the allowance for loan losses through a charge to the provision for credit losses. Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal.

At December 31, 2017, $91.2 million in loans were individually impaired, with $10.5 million of the allowance for loan losses allocated to impaired loans at period-end (these figures do not include PCI loans). Please see “Comparison of Financial Condition at December 31, 2017, and December 31, 2016 — Loans” contained in Item 7 and Note 5 of the Notes to Consolidated Financial Statements contained in Item 8 of this report for more information.

At December 31, 2017, our allowance for loan losses was $71.3 million, or 1.07% of total loans held for investment, excluding the Warehouse Purchase Program loans. Assessing the allowance for loan losses is inherently subjective, as it requires making material estimates, including the amount and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. In the opinion of management, the allowance, when taken as a whole, reflects estimated credit losses in our loan portfolio. See Notes 1 and 5 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Our banking regulators periodically review our allowance for loan losses. These entities may require us to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their review. Any increase in our allowance for loan losses or loan charge‑offs as required by these authorities may have a material adverse effect on our financial condition and results of operations. Further, the Financial Accounting Standards Board has adopted a new accounting standard that will be effective for our fiscal year beginning on January 1, 2020. This standard, referred to as Current Expected Credit Loss, or CECL, will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. This will change the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and may greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan losses. It may also result in even small changes to future forecasts having a significant impact on the allowance, which could make the allowance more volatile, and regulators may impose additional capital buffers to absorb this volatility.

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The following table sets forth an analysis of our allowance for loan losses.

	Years Ended December 31,
	2017			2016			2015			2014			2013
	(Dollars in thousands)
Balance at beginning of period	$	64,576		$	47,093		$	25,549		$	19,358		$	18,051
Charge-offs:1
Commercial real estate	16			79			167			—			806
Commercial and industrial	32,846			7,746			3,129			568			607
Construction and land	418			—			—			51			31
Consumer real estate	96			107			321			237			416
Other consumer	1,366			927			1,090			605			621
Total charge-offs	34,742			8,859			4,707			1,461			2,481
Recoveries:1
Commercial real estate	205			21			29			435			—
Commercial and industrial	405			472			246			94			124
Construction and land	75			—			—			1			—
Consumer real estate	42			109			85			38			77
Other consumer	640			340			426			363			388
Total recoveries	1,367			942			786			931			589
Net charge-offs	33,375			7,917			3,921			530			1,892
Provision expense	40,100			25,400			25,465			6,721			3,199
Balance at end of period	$	71,301		$	64,576		$	47,093		$	25,549		$	19,358
Ratio of net charge-offs during the period to
average loans outstanding during the period	0.46		%	0.12		%	0.08		%	0.02		%	0.08		%
Ratio of net charge-offs during the period to
average non-performing assets	29.66		%	9.47		%	11.37		%	2.27		%	7.32		%
Allowance as a percentage of non-performing loans2	75.53		%	57.97		%	123.23		%	108.69		%	87.50		%
Allowance as a percentage of total loans, excluding
Warehouse Purchase Program (end of period) 2	1.07		%	1.06		%	0.93		%	0.97		%	0.94		%

¹  There was no net charge-off activity on Warehouse Purchase Program loans during the periods presented.

²  PCI loans, which were acquired in 2012 through the Highlands acquisition and in 2015 through the LegacyTexas acquisition, are not considered non-performing loans, and therefore are not included in the numerator of the non-performing loans to total loans ratio, but are included in total loans, which is reflected in the denominator. PCI loans had a carrying value of $3.6 million, $7.0 million, $12.0 million, $6.6 million and $7.4 million for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, respectively.

The distribution of our allowance for losses on loans at the dates indicated is summarized below.

	December 31,
	2017				2016				2015				2014				2013
	Allocated Allowance		% 1		Allocated Allowance		% 1		Allocated Allowance		% 1		Allocated Allowance		% 1		Allocated Allowance		% 1
	(Dollars in thousands)
Commercial real estate	$	21,587	45.41	%	$	18,303	44.03	%	$	14,123	42.98	%	$	11,830	48.07	%	$	10,944	53.23	%
Commercial and industrial	39,005		31.48		35,464		32.50		24,975		31.83		9,068		29.69		4,536		21.43
Construction and land	4,644		4.18		5,075		4.86		3,013		5.32		174		0.81		212		1.48
Consumer real estate	4,838		18.25		4,484		17.72		3,992		18.49		4,069		19.90		3,280		21.53
Other consumer	1,227		0.68		1,250		0.89		990		1.38		408		1.53		386		2.33
Total	$	71,301	100.00	%	$	64,576	100.00	%	$	47,093	100.00	%	$	25,549	100.00	%	$	19,358	100.00	%

¹ Loans outstanding as a percentage of total loans held for investment, excluding Warehouse Purchase Program loans.

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Investment Activities

We have broad investment authority, except for corporate equity securities, which are generally limited to stock in subsidiaries, certain housing projects and bank service companies. Debt securities are categorized by law and bank regulation into various types, with each type subject to different permitted investment levels calculated as percentages of capital, except for government and government-related obligations, which may be invested in without limit.

The Chief Financial Officer delegates the basic responsibility for the management of our investment portfolio to the Vice President/Assistant Treasurer, subject to the direction and guidance of the Asset/Liability Management Committee. The Vice President/Assistant Treasurer considers various factors when making decisions, including the marketability, duration, maturity and tax consequences of the proposed investment. The amount, mix, and maturity structure of investments will be affected by various market conditions, including the current and anticipated slope of the yield curve, the level of interest rates, the trend of new deposit inflows, and the anticipated demand for funds via deposit withdrawals and loan originations and purchases.

The general objectives of our investment portfolio are to provide liquidity when loan demand is high, to assist in maintaining earnings when loan demand is low and to optimize earnings while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk and interest rate risk. Our investment securities currently consist primarily of agency collateralized mortgage obligations, agency mortgage-backed securities, Small Business Administration securitized loan pools consisting of only the U.S. government guaranteed portion, and Texas entity municipal bonds. These securities are of industry investment grade and possess acceptable credit risk. For more information, please see Note 4 of the Notes to Consolidated Financial Statements contained in Item 8 of this report and “Asset/Liability Management” contained in Item 7A of this report. We also have restricted securities, which totaled $64.8 million at December 31, 2017 and primarily consisted of Federal Home Loan Bank stock and Federal Reserve stock and is carried on the balance sheet at cost.

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The following table sets forth the composition of our securities portfolio and other investments at the dates indicated. At December 31, 2017, our securities portfolio did not contain securities of any issuer with an aggregate book value in excess of 10% of our equity capital, excluding those issued by the United States Government or its agencies or United States Government Sponsored Enterprises.

	December 31,
	2017				2016				2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale:
Agency residential mortgage-backed securities	$	191,216	$	189,466	$	220,744	$	218,551	$	224,582	$	223,848
Agency commercial mortgage-backed securities	9,360		9,235		9,422		9,347		9,483		9,417
Agency collateralized mortgage obligations	187,637		184,216		87,959		86,529		22,430		22,314
US government and agency securities	1,590		1,671		2,150		2,251		14,906		15,054
Municipal bonds	35,196		35,129		38,417		37,837		40,512		41,075
Total available for sale	424,999		419,717		358,692		354,515		311,913		311,708
Held to maturity:
Agency residential mortgage-backed securities	57,334		57,304		74,881		75,211		87,935		89,488
Agency commercial mortgage-backed securities	27,435		27,926		28,023		28,693		24,848		25,697
Agency collateralized mortgage obligations	27,112		27,278		40,707		41,371		59,174		60,206
Municipal bonds	61,628		62,418		66,776		67,706		68,476		71,811
Total held to maturity	173,509		174,926		210,387		212,981		240,433		247,202
Total investment securities	598,508		594,643		569,079		567,496		552,346		558,910
FHLB stock and other restricted securities, at cost	64,790		64,790		43,266		43,266		63,075		63,075
Total securities	$	663,298	$	659,433	$	612,345	$	610,762	$	615,421	$	621,985

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The composition and contractual maturities of the investment securities portfolio as of December 31, 2017, excluding FHLB stock and other restricted securities, are indicated in the following table. Prepayment options exist for the US government and agency securities, agency collateralized mortgage obligations and agency mortgage-backed securities. In addition, many of the municipal bonds are callable prior to maturity. The weighted average yield is prospective and based on amortized cost.

	1 year or less				After 1 to 5 years				After 5 to 10 years				After 10 years				Total Securities
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Fair Value
	(Dollars in thousands)
Available for sale:
Agency residential mortgage-backed securities	$	—	—	%	$	9,682	1.26	%	$	47,511	1.89	%	$	134,023	2.11	%	$	191,216	2.01	%	$	189,466
Agency commercial mortgage-backed securities	—		—		9,360		1.86		—		—		—		—		9,360		1.86		9,235
Agency residential collateralized mortgage obligations	—		—		—		—		8,055		2.43		179,582		2.39		187,637		2.39		184,216
US government and agency securities	90		2.12		—		—		1,500		3.37		—		—		1,590		3.30		1,671
Municipal bonds	1,436		1.40		12,843		2.21		15,163		2.61		5,754		2.94		35,196		2.47		35,129
Total available for sale	1,526		1.44		31,885		1.82		72,229		2.14		319,359		2.28		424,999		2.22		419,717
Held to maturity:
Agency residential mortgage-backed securities	98		4.05		11,105		2.87		21,973		2.78		24,158		2.17		57,334		2.54		57,304
Agency commercial mortgage-backed securities	—		—		14,574		3.12		12,861		2.49		—		—		27,435		2.82		27,926
Agency residential collateralized mortgage obligations	96		3.61		1,336		4.26		25,311		2.82		369		(2.56	)	27,112		2.82		27,278
Municipal bonds	1,365		5.26		10,699		5.37		44,059		4.72		5,505		3.64		61,628		4.75		62,418
Total held to maturity	1,559		5.08		37,714		3.73		104,204		3.57		30,032		2.39		173,509		3.42		174,926
Total investment securities	$	3,085	3.28	%	$	69,599	2.85	%	$	176,433	2.99	%	$	349,391	2.29	%	$	598,508	2.56	%	$	594,643

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Sources of Funds

General. Our sources of funds are deposits, borrowings, payments of principal and interest on loans and investments, sales of loans and funds provided from operations.

Deposits. The Bank's deposit base is our primary source of funding and consists of core deposits from the communities served by our branch and office locations. We offer a variety of deposit accounts with a competitive range of interest rates and terms to both consumers and businesses. Deposits include interest-bearing and non-interest-bearing demand accounts, savings, money market, certificates of deposit and individual retirement accounts. These accounts earn interest at rates established by management based on competitive market factors, management's desire to increase certain product types or maturities, and in keeping with our asset/liability, liquidity and profitability objectives. Competitive products, competitive pricing and high touch customer service are important to attracting and retaining these deposits.

We have historically been an active bidder for public fund deposits within the state of Texas. This strategy has been refined to one which will seek to attract future public funds primarily in the direct markets that we serve and only at rates that are consistent with our strategy of providing a low cost source of core funding for the Bank. At December 31, 2017 and 2016, our public fund deposits totaled $972.2 million and $1.00 billion, respectively. At December 31, 2017, $757.5 million of the $972.2 million in public funds were time deposits, $212.2 million of such time deposits had a maturity date over 12 months. Additionally, public funds at December 31, 2017 included $121.1 million in money market, $87.4 million in interest-bearing demand and $6.2 million in non-interest-bearing demand deposits.

We provide an avenue for large depositors to maintain full FDIC insurance coverage for all deposits up to $50 million or $75 million, depending on product. Under an agreement with Promontory Interfinancial Network, we participate in the Certificate of Deposit Account Registry Service (CDARS®) and the Insured Cash Sweep (ICS) money market product. These are deposit-matching programs which distribute excess balances on deposit with the Bank across other participating banks. In return, those participating financial institutions place their excess customer deposits with the Bank in a reciprocal amount. These products are designed to enhance our ability to attract and retain customers and increase deposits by providing additional FDIC insurance for large deposits. We also participate in the ICS One-Way Buy program, which allows the Bank to buy cost-effective wholesale funding on customizable terms. Due to the nature of the placement of the funds, CDARS® and ICS deposits are classified as “brokered deposits” by regulatory agencies. At December 31, 2017 and 2016, we had $400.7 million and $355.5 million, respectively, in aggregate CDARS® and ICS deposits.

The following table sets forth the dollar amount of deposits in the various types of deposit programs offered at the dates indicated.

	December 31,
	2017				2016				2015
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Transaction and Savings Deposits:
Non-interest-bearing demand	$	1,635,622	24.17	%	$	1,383,951	21.74	%	$	1,170,272	22.38	%
Interest-bearing demand	1,029,375		15.21		903,314		14.19		819,350		15.68
Savings and money market	2,735,296		40.42		2,710,307		42.58		2,209,698		42.28
Total non-certificates	5,400,293		79.80		4,997,572		78.51		4,199,320		80.34
Certificates:
0.00-1.99%	1,299,530		19.20		1,356,657		21.31		1,006,050		19.25
2.00-3.99%	67,860		1.00		11,226		0.18		21,317		0.41
4.00-5.99%	—		—		21		—		20		—
6.00% and over	—		—		—		—		4		—
Total certificates	1,367,390		20.20		1,367,904		21.49		1,027,391		19.66
Total deposits	$	6,767,683	100.00	%	$	6,365,476	100.00	%	$	5,226,711	100.00	%

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The following table shows rate and maturity information for our certificates of deposit at December 31, 2017.

	0.00-1.99%			2.00-3.99%			Total			Percent of Total
	(Dollars in thousands)
Certificates maturing in quarter ending:
March 31, 2018	$	243,772		$	—		$	243,772		17.83	%
June 30, 2018	236,304			33			236,337			17.28
September 30, 2018	236,566			1			236,567			17.30
December 31, 2018	143,426			—			143,426			10.49
March 31, 2019	178,083			—			178,083			13.02
June 30, 2019	96,076			34,026			130,102			9.52
September 30, 2019	43,763			4,000			47,763			3.49
December 31, 2019	16,589			11,150			27,739			2.03
Thereafter	104,951			18,650			123,601			9.04
Total	$	1,299,530		$	67,860		$	1,367,390		100.00	%
Percent of Total	95.04		%	4.96		%	100.00		%

The following table indicates the amount of our certificates of deposit by time remaining until maturity as of December 31, 2017.

	Maturity
	3 Months or less		Over 3 to 6 Months		Over 6 to 12 Months		Over 12 Months		Total
	(Dollars in thousands)
Certificates less than $100,000	$	23,975	$	23,378	$	30,527	$	49,782	$	127,662
Certificates of $100,000 or more	65,640		89,104		82,163		245,323		482,230
Public funds¹	154,157		123,855		267,303		212,183		757,498
Total certificates	$	243,772	$	236,337	$	379,993	$	507,288	$	1,367,390

¹Deposits from governmental and other public entities

Borrowings. Although deposits are our primary source of funds, we may utilize borrowings to manage interest rate risk or as a cost-effective source of funds when they can be invested at a positive interest rate spread for additional capacity to fund loan demand according to our asset/liability management goals. We also fund a portion of our Warehouse Purchase Program with short-term FHLB advances. Our borrowings consist primarily of advances from the FHLB of Dallas, repurchase agreements and subordinated debt.

We may obtain advances from the FHLB of Dallas upon the security of certain loans and securities. These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features. At December 31, 2017, we had $1.04 billion in FHLB advances outstanding and the ability to borrow an additional $2.08 billion. In addition to FHLB advances, we may also use the discount window at the FRB or fed funds purchased from correspondent banks as a source of short-term funding. We did not have an outstanding balance with the FRB discount window or fed funds purchased from correspondent banks at December 31, 2017. See Note 11 of the Notes to Consolidated Financial Statements contained in Item 8 of this report for more information about our borrowings.

The following table sets forth the maximum month-end balance and daily average balance of FHLB advances, repurchase agreements, subordinated debt and other borrowings for the periods indicated.

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	Years Ended December 31,
	2017		2016		2015
	(Dollars in thousands)
Maximum balance:
FHLB advances	$	1,151,682	$	1,609,438	$	1,439,904
Repurchase agreements	87,607		86,691		89,772
Subordinated debt and other borrowings	134,522		134,103		85,290
Average balance outstanding:
FHLB advances	$	881,279	$	1,113,550	$	914,077
Repurchase agreements	76,974		69,153		75,271
Subordinated debt and other borrowings	134,294		104,639		24,931

The following table sets forth certain information as to FHLB advances, repurchase agreements, subordinated debt and other borrowings at the dates indicated.

	At December 31,
	2017			2016			2015
	(Dollars in thousands)
FHLB advances at end of period	$	1,043,163		$	833,682		$	1,439,904
Repurchase agreements at end of period	84,676			86,691			83,269
Subordinated debt and other borrowings at end of period	134,522			134,032			84,992
Weighted average rate of FHLB advances during the period	1.10		%	0.64		%	0.72		%
Weighted average rate of FHLB advances at end of period	1.51		%	0.71		%	0.51		%
Weighted average rate of repurchase agreements during the period	1.64		%	1.22		%	1.18		%
Weighted average rate of repurchase agreements at end of period	1.73		%	0.98		%	1.08		%
Weighted average rate of subordinated debt and other borrowings during the period	5.82		%	5.77		%	4.21		%
Weighted average rate of subordinated debt and other borrowings at end of period	5.26		%	5.20		%	4.95		%

How We Are Regulated

Set forth below is a brief description of certain laws and regulations that are applicable to the Company and the Bank. This description, as well as other descriptions of laws and regulations contained in this Form 10-K, is not complete and is qualified in its entirety by reference to the applicable laws and regulations.

Legislation is introduced from time to time in the United States Congress that may affect our operations. In addition, the regulations governing the Company and the Bank may be amended from time to time by the TDOB, the FRB, the FDIC, the Consumer Financial Protection Bureau ( the “CFPB”), the Securities and Exchange Commission (the “SEC”), or other agencies, as appropriate. Any legislative or regulatory changes in the future could adversely affect our operations and financial condition.

Regulators of the Bank are the TDOB and the FRB with back-up oversight by the FDIC. The Bank is required by the FRB to maintain a certain level of reserves and to own stock issued by the Federal Reserve Bank of Dallas. The Bank is a member of the Federal Home Loan Bank of Dallas, one of the 12 regional banks in the Federal Home Loan Bank System.

The Company. The Company is a bank holding company which has elected to be and qualified as a financial holding company; accordingly it is required to register and file reports with the FRB and is subject to regulation and examination by the FRB, including requirements that the Company serve as a source of financial and managerial strength for its FDIC-insured subsidiaries, particularly when such a subsidiary is in financial distress. In addition, the FRB has enforcement authority over the Company and any of its non-bank subsidiaries. The Company’s direct activities and those of its non-bank subsidiaries are subject to FRB regulation and generally must be closely related to banking, as determined by the FRB. The Company must obtain FRB approval to acquire substantially all the assets of another bank or bank holding company or to merge with another bank holding company. In addition, the Company must obtain FRB authorization to control more than 5% of the shares of any other bank or bank holding company and may not own more than 5% of any other entity engaged in activities not permitted for the Company. The FRB imposes capital requirements on the Company. See “- Regulatory Capital Requirements” below.

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LegacyTexas Bank. The Bank is subject to regulation, examination and supervision by the FRB and the TDOB. The FRB oversees the Bank’s compliance with operations under federal law, regulations and policies, including consumer protection laws. The FRB extensively regulates many aspects of the Bank’s operations including branching, dividends, interest and fees collected, anti-money laundering activities, confidentiality of customer information, debit card operations, corporate governance, mergers and purchase and assumption transactions, insurance activities, securities investments, real estate investments, trust operations, lending activities, subsidiary operations and required capital levels. It also regulates the Bank’s transactions with affiliates (including the Company) and loans to insiders. This regulation and supervision primarily is intended for the protection of depositors and not for the purpose of protecting shareholders.

As a result of examinations, the FRB can require a supervised bank to establish additional reserves for loan losses, which decreases net income. The FRB and the other federal banking agencies have adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits. Any institution which fails to comply with these standards must submit a compliance plan. The FRB also has extensive enforcement authority over all Federal Reserve member banks and their management, employees and affiliates. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the FRB. Except under certain circumstances, public disclosure of final enforcement actions by the FRB is required.

The Bank is also regulated by the TDOB, whose authority to regulate, examine and supervise the bank is generally the same as that of the FRB described above. As a Texas-chartered bank, the Bank has the powers provided under Texas law, which are generally at least as broad as those of a national bank. The Bank is subject to assessments by the TDOB. In 2017, the Bank’s assessments from the TDOB totaled $676,000.

FDIC Regulation and Insurance of Accounts. Deposits are insured up to applicable limits by the FDIC, and such insurance is backed by the full faith and credit of the United States Government. The basic deposit insurance level is generally $250,000, as specified in FDIC regulations. The Bank's deposit insurance premiums for the year ended December 31, 2017 were $3.9 million.

In accordance with the Dodd-Frank Act, the FDIC insurance premium is based on an institution’s total assets minus its Tier 1 capital, instead of based on its deposits. An institution’s premiums are determined based on its capital, supervisory ratings and other factors. Premium rates generally may increase if the FDIC deposit insurance fund is strained due to the cost of bank failures and the number of troubled banks. In addition, if the Bank experiences financial distress or operates in an unsafe or unsound manner, its deposit premiums may increase.

The FDIC may conduct examinations and some supervision of, require reporting by and exercise back-up enforcement authority over FDIC-insured institutions. It also may prohibit an institution from engaging in any activity that it determines by regulation or order to pose a serious risk to the deposit insurance fund and may terminate the Bank's deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Regulatory Capital Requirements. Effective January 1, 2015 (with some changes transitioned into full effectiveness over a number of years), the Company and the Bank became subject to new capital regulations adopted by the FRB and the other federal banking agencies, which created a new required ratio for common equity Tier 1 (“CET1”) capital, increased the minimum leverage and Tier 1 capital ratios, changed the risk-weightings of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios, and changed what qualifies as capital for purposes of meeting the capital requirements.

Under these new capital regulations, the minimum capital ratios are: (1) a CET1 capital ratio of 4.5% of risk-weighted assets; (2) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (3) a total capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio (the ratio of Tier 1 capital to average total adjusted assets) of 4.0%.  CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests; all subject to applicable regulatory adjustments and deductions. Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital.

A number of changes in what constitutes regulatory capital compared to the rules in effect prior to January 1, 2015 are subject to transition periods.  These changes include the phasing-out of certain instruments as qualifying capital.  Mortgage servicing rights and deferred tax assets over designated percentages of CET1 are deducted from capital.  In addition, Tier 1 capital includes AOCI, which includes all unrealized gains and losses on available for sale debt and equity securities.  However,

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because of our asset size, we were eligible for the permanent one-time option to exclude unrealized gains and losses on available for sale debt and equity securities in our capital calculations.  We elected this option.

For purposes of determining risk-based capital, assets and certain off-balance sheet items are risk-weighted from 0% to 1,250%, depending on the risk characteristics of the asset or item. The new regulations make certain changes in the risk-weighting of assets to better reflect credit risk and other risk exposure compared to the earlier capital rules. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days past due or otherwise in nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital.

In addition to the minimum CET1, Tier 1 and total risk-based capital ratios, the Company and the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.  The capital conservation buffer requirement became effective on January 1, 2016 when a buffer greater than 0.625% of risk-weighted assets was required, which increases each year until the buffer requirement is fully implemented on January 1, 2019.

Under the FRB’s prompt corrective action standards, in order to be considered well-capitalized, the Bank must have a ratio of CET1 capital to risk-weighted assets of 6.5%, a ratio of Tier 1 capital to risk-weighted assets of 8%, a ratio of total capital to risk-weighted assets of 10%, and a leverage ratio of 5%; and must not be subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. In order to be considered adequately capitalized, an institution must have the minimum capital ratios described above. As of December 31, 2017, the Bank was “well-capitalized.” An institution that is not well-capitalized is subject to certain restrictions on brokered deposits and interest rates on deposits.

The federal banking regulators are required to take prompt corrective action if an institution fails to qualify as at least adequately capitalized.  All institutions, regardless of their capital levels, are restricted from making any capital distribution or paying any management fees that would cause the institution to fail the requirements to qualify as adequately capitalized.  An institution that is not at least adequately capitalized is: (i) subject to increased monitoring by the appropriate federal banking regulator; (ii) required to submit an acceptable capital restoration plan (including certain guarantees by any company controlling the institution) within 45 days; (iii) subject to asset growth limits; and (iv) required to obtain prior regulatory approval for acquisitions, branching and new lines of business. Additional restrictions and appointment of a receiver or conservator, can apply, depending on the institution's capital level.  The FRB has jurisdiction over the Bank for purposes of prompt corrective action.  When the FDIC as receiver liquidates an institution, the claims of depositors and the FDIC as their successor (for deposits covered by FDIC insurance) have priority over other unsecured claims against the institution, including claims of stockholders.

The federal banking agencies take into consideration concentrations of credit risk and risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital, which is evaluated through examinations. Under their regulations, the federal banking agencies also consider interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the evaluation of a bank's capital adequacy. The banking agencies have issued guidance on evaluating interest rate risk.

The capital regulations for bank holding companies parallel the capital regulations for banks.  To be considered "well capitalized," a bank holding company must have, on a consolidated basis, a total risk-based capital ratio of 10.0% or greater and a Tier 1 risk-based capital ratio of 6.0% or greater and must not be subject to an individual order, directive or agreement under which the FRB requires it to maintain a specific capital level.  As of December 31, 2017, the Company was "well capitalized." For information on the Company’s regulatory capital ratios, see “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources.” We believe that the Company and the Bank will remain well-capitalized under the new capital rules, and will meet the capital conservation buffer requirement.

Limitations on Dividends and Other Capital Distributions. On an ongoing basis, the Company’s major source of funds consists of dividends or capital distributions from our wholly owned bank subsidiary, as well as $125.0 million of fixed-to-floating rate subordinated notes issued by the Company. The ability of a subsidiary bank to pay dividends depends on its earnings and capital levels and may be limited by its regulators' directives or orders. A bank generally must obtain regulatory approval of a dividend if the total dividends declared during the current year, including the proposed dividend, exceed net income for the current year and retained net income for the prior two years. It has been the Bank’s policy to maintain a strong capital position, so in times of financial or economic distress the Bank will be less likely to pay dividends to the Company. Our

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banking subsidiary's net income for the two years ended December 31, 2017 totaled $199.9 million and the amount paid to the Company during that two year period totaled $35.0 million. See Note 16 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

The ability of the Company to pay dividends to its stockholders is dependent on the receipt of dividends from its bank subsidiary. Under Maryland law, the Company cannot pay cash dividends if it would render the Company unable to pay its debts (unless they are paid from recent earnings) or become insolvent.

The FRB has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the FRB’s view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The FRB also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, a bank holding company may be prohibited from paying any dividends if the holding company’s bank subsidiary is not adequately capitalized. See “Regulatory Capital Requirements” above regarding restrictions on payment of dividends by the Company and the Bank in the event of an inadequate capital conservation buffer.

A bank holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order, or any condition imposed by, or written agreement with, the FRB. This notification requirement does not apply to any company that meets the well capitalized standard for bank holding companies, is well-managed, and is not subject to any unresolved supervisory issues.

Federal Securities Laws. The common stock of the Company is registered with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Therefore, the Company is subject to the reporting, information disclosure, proxy solicitation, insider trading limits and other requirements imposed on public companies by the SEC under the Exchange Act. This includes limits on sales of stock by certain insiders and the filing of insider ownership reports with the SEC. The SEC and Nasdaq have adopted regulations under the Sarbanes-Oxley Act of 2002 and the Dodd Frank Act that apply to the Company as a Nasdaq-traded, public company, which seek to improve corporate governance, provide enhanced penalties for financial reporting improprieties and improve the reliability of disclosures in SEC filings.

Subsidiary and Other Activities

LegacyTexas Bank is authorized to invest in various types of subsidiaries. At December 31, 2017, the Bank operated one subsidiary, LegacyTexas Title Co.

Competition

The Texas market for banking services is highly competitive. Texas’ largest banking organizations are headquartered outside of Texas and are controlled by out-of-state organizations. We also compete with other providers of financial services, such as credit unions, consumer finance companies, insurance companies and commercial finance and leasing companies. We believe that many middle market companies and successful professionals and entrepreneurs are interested in banking with a company headquartered in, and with decision-making authority based in, Texas and with established Texas bankers who have the expertise to act as trusted advisors to the customer with regard to its banking needs. We believe our bank can offer customers more responsive and personalized service. We believe that, if we service these customers properly, we will be able to establish long-term relationships and provide multiple products to our customers, thereby enhancing our profitability.

Executive Officers of the Company

Officers are elected annually to serve for a one year term. As of the date of this report, our executive officers were as follows:

Kevin J. Hanigan. Mr. Hanigan, age 61, is a Director and the Chief Executive Officer of the Company and the Bank, positions he has held since the completion of the Highlands Bank acquisition with and into the Company in April 2012. Prior to joining the Company, Mr. Hanigan was the Chairman and Chief Executive Officer of Highlands Bank, serving in those roles since 2010. Prior to joining Highlands Bank, Mr. Hanigan was employed by Guaranty Bank starting in 1996, serving in numerous capacities including Chief Lending Officer, Executive in charge of Retail Banking, and finally as Chairman and Chief Executive Officer of Guaranty Bank and its parent company, Guaranty Financial Group, Inc. Mr. Hanigan began his career with Bank of the Southwest in Houston in June 1980. Mr. Hanigan earned his undergraduate degree and Master of

24

Business Administration from Arizona State University. With over 37 years of experience working in the banking industry in Texas and serving as chief executive officer of several institutions, Mr. Hanigan brings outstanding leadership skills and a deep understanding of the local banking market and issues facing the banking industry.

Scott A. Almy. Mr. Almy, age 51, serves as Executive Vice President, Chief Operating Officer, Chief Risk Officer and General Counsel of the Company and the Bank, where he oversees the credit, loan administration, risk, compliance, audit, information technology, human resources and legal functions of the Company. He has more than 25 years of bank regulatory expertise. Prior to joining the Company in July 2012, Mr. Almy was the managing member of a private law firm in Dallas, where he focused on regulatory and transactional matters affecting banks, bank holding companies and other financial firms. Prior to that, he spent 15 years at Guaranty Financial Group, Inc. serving as general counsel and secretary for the company and its subsidiary, Guaranty Bank. Mr. Almy holds a J.D. from the Texas Tech University School of Law and a B.B.A. from Texas A&M University. He also completed the Executive Education Program in Advanced Risk Management at the Wharton School, University of Pennsylvania.

J. Mays Davenport. Mr. Davenport, age 49, serves as Executive Vice President and Chief Financial Officer of the Company and the Bank, positions he has held since the completion of the merger with LegacyTexas Group, Inc. in January 2015. Mr. Davenport oversees the Finance and Treasury functions of the Company, and also serves as a Director of LegacyTexas Title. Prior to joining the Company, Mr. Davenport served as Executive Vice President of the wholly owned subsidiary of LegacyTexas Group, Inc. since December 2004. Mr. Davenport is a licensed Certified Public Accountant in the State of Texas and has been serving the Texas banking community for over twenty years, including fourteen years in the practice of public accountancy with Arthur Andersen, Grant Thornton, Fisk & Robinson and RSM McGladrey LLP. Mr. Davenport is a Magna Cum Laude graduate of Texas A&M University with a B.B.A. in Finance and Accounting.

Charles D. Eikenberg. Mr. Eikenberg, age 63, serves as Executive Vice President of Community Banking for the Company and the Bank, where he oversees the community banking, administrative operations and marketing functions of the Company. He has over 35 years of experience as a Texas banker, primarily focused on consumer and retail banking. Mr. Eikenberg joined the Company as head of Community Banking in 2012 when the Company merged with Highlands Bank, where he served as Chief Retail Officer. Prior to joining Highlands, Mr. Eikenberg served as Senior Executive Vice President, Retail Banking at Guaranty Bank from 2006 to 2010. Prior to Guaranty he was with Bank One/Chase since 1990, serving in numerous senior positions for retail credit, investments and branch distribution. Mr. Eikenberg holds an M.B.A. from the University of Houston and a Bachelors Degree from Baylor University.

Thomas S. Swiley. Mr. Swiley, age 68, has served as Executive Vice President and Chief Lending Officer of the Company and the Bank since July 2012. Mr. Swiley oversees the Corporate Banking, Commercial Banking, Entrepreneurial Banking, Commercial Real Estate and Warehouse Lending Divisions of the Company, along with the Treasury Management Sales function. Mr. Swiley's extensive Texas banking career spans over thirty-five years, and includes six years as President, and President and Chief Operating Officer of Bank of Texas, N.A. He has also held various executive positions with other commercial banks, primarily with Bank of America and its predecessors. Mr. Swiley holds both a M.B.A. and B.B.A. from Southern Methodist University and is also a graduate of the Southwestern Graduate School of Banking.

Kevin Hanigan, Scott Almy and Charles Eikenberg all served as executive officers of Guaranty Bank and its holding company, Guaranty Financial Group, Inc., which filed for bankruptcy in August 2009.

Employees

At December 31, 2017, we had a total of 836 full-time employees and 33 part-time employees. Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good.

Internet Website

We maintain a website with the address legacytexasfinancialgroup.com. The information contained on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. Other than an investor’s own Internet access charges, we make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we have electronically filed such material with, or furnished such material to, the SEC.

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Item 1A. Risk Factors

An investment in our common stock is not an insured deposit and is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included and incorporated by reference in this report. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, capital levels, cash flows, liquidity, results of operations and prospects. The market price of our common stock could decline significantly due to any of these identified or other risks, and you could lose some or all of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. This report is qualified in its entirety by these risk factors.

Risks Related To Our Business

If economic conditions deteriorate in the state of Texas, the value of our collateral and borrowers' ability to repay loans may decline.

Substantially all of our loans are located in the state of Texas. Our financial results may be adversely affected by changes in prevailing economic conditions, including decreases in real estate values, changes in interest rates which may cause a decrease in interest rate spreads, declines in oil and gas prices, adverse employment conditions, the monetary and fiscal policies of the federal government and other significant external events. Decreases in real estate values in the state of Texas could adversely affect the value of property used as collateral for some of our loans. As a result, the market value of the real estate underlying the loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans. In the event that we are required to foreclose on a property securing a loan, we may not recover funds in an amount equal to the remaining loan balance. Consequently, we would sustain loan losses and potentially incur a higher provision for credit losses, which would have an adverse impact on earnings. In addition, if oil prices were to experience a sustained decline, jobs related to the exploration, production and delivery of oil and gas may decline. Adverse changes in the Texas economy may have a negative effect on the ability of borrowers to make timely repayments of their loans, which would also have an adverse impact on earnings.

Our loan portfolio, and specifically our energy lending portfolio, could be impacted by declines in the prices of oil and natural gas, as well as other factors.

Reserve-based energy loans, which are reported as commercial and industrial loans, totaled $531.7 million at December 31, 2017, representing approximately 8.0% of total loans (excluding Warehouse Purchase Program loans). As a result, the factors that impact the energy sector will have a greater effect on us than on more broadly diversified financial institutions. Companies with exposure to the energy sector, whether directly or indirectly, are subject to volatile fluctuations in price and supply of oil and gas, and can be impacted by governmental regulations, international politics and conflicts, including the lifting or imposition of sanctions on Iran, Russia or other oil producing countries, hostilities in the Middle East, terrorist attacks, the success of exploration projects, reduced demand as a result of increases in energy efficiency and energy conservation, natural disasters, clean-up and litigation costs associated with environmental damage and extensive regulation.

Although the vast majority of the loans in the Energy portfolio are reserve based loans, secured by deeds of trust on properties containing both oil and natural gas reserves, approximately $15.4 million of the loans managed by the Energy Finance group are not secured by oil and gas reserves and are categorized as “Midstream and Other” loans. Loans in this category are typically related to the transmission of oil and natural gas and would only be indirectly impacted from declining commodity prices. Reserve based loans are typically less sensitive to declines in commodity prices than loans to companies that service the oil and gas industry, because once production is initiated in a well, it is generally not halted until reserves are gone, whereas companies that service the energy industry typically feel an immediate impact to large drops in oil prices since drilling and exploration is slowed immediately. With reserve based loans, the value of our collateral decreases as oil and natural gas prices decline.

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In the fourth quarter of 2015, the Company increased qualitative reserve factors applied to the energy loan portfolio due to the impact of pressure on the price of oil, and the Company has continued to apply elevated reserve amounts to the energy portfolio through 2016 and 2017 due to sustained economic and regulatory uncertainty surrounding energy loans. The allowance for loan losses allocated to energy loans at December 31, 2017 totaled $20.7 million, up $1.5 million from $19.2 million at December 31, 2016. During 2017, in an effort to reduce world supply and increase oil and gas prices, members of the Organization of Petroleum Exporting Countries’ ("OPEC") and several other oil producing nations agreed to limit oil production and have indicated an intention to continue these efforts in 2018; however, there are no assurances that setting these types of production caps will support higher prices for oil and gas or that actual production will be limited. Previous agreements have been broken by nations and there is no firm mechanism for enforcement. In addition, those efforts by OPEC and other oil producing nations to reduce demand have been blunted by a massive boom in production by U.S. shale operators, who have become much more efficient. Sustained low oil and gas prices, or further declines in oil and gas pricing, could lead to additional risk rating downgrades, loan loss reserves, or losses.

Further, the economy in Texas as a whole could be negatively impacted if there are a high number of jobs lost related to a decline in oil production in the state, or if the impact of lower oil prices negatively affect other industries. Major regulatory shifts, such as those that may result as a consequence of environmental regulations, that create significant expense to oil and gas processing or recovery, could be one reason for a decline in oil production in Texas. In addition, subsidies created to fund alternative energy could make these other forms of energy more competitively priced and thus decrease the demand for oil and gas. A decline in the Texas economy related to oil production decline could impact our loan portfolios outside of the energy portfolio, if borrowers experience unemployment or loss of income and are unable to make payments on their loans.

Our loan portfolio possesses increased risk due to our percentage of commercial real estate and commercial and industrial loans.

Over the last several years, through organic growth and acquisitions, we have been re-balancing our loan portfolio by increasing our commercial lending to diversify our loan mix and improve the yield on our assets, and we anticipate that trend to continue. The credit risk related to these types of loans is considered to be greater than the risk related to our previous target asset of one- to four- family residential loans because the repayment of commercial real estate loans and commercial and industrial loans typically is dependent on the successful operation and income stream of the borrowers' business and the real estate securing the loans as collateral, both of which can be significantly affected by economic conditions. Additionally, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans.  If loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could require us to increase our provision for credit losses and adversely affect our financial condition and results of our operation.

Several of our borrowers have more than one commercial real estate loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Finally, if we foreclose on a commercial real estate loan, our holding period for the collateral, if any, typically is longer than for one- to four-family residential property because there are fewer potential purchasers of the collateral. Since we plan to continue to increase our originations of these loans, it may be necessary to increase the level of our allowance for loan losses due to the increased risk characteristics associated with these types of loans. Any increase to our allowance for loan losses would adversely affect our earnings. Any delinquent payments or the failure to repay these loans would hurt our earnings.

Our Warehouse Purchase Program balances can fluctuate widely.

Because Warehouse Purchase Program balances are contingent upon residential mortgage lending activity, changes in the residential real estate market nationwide can lead to wide fluctuations of balances in this product, materially impacting both interest and non-interest income. Additionally, Warehouse Purchase Program period-end balances are generally higher than the average balance during the period due to increased mortgage activity that occurs at the end of a month, which can significantly impact the Company's reported capital ratios.

Changes in interest rates could adversely affect our results of operations and financial condition.

As with most financial institutions, our results of operations depend substantially on our net interest income, which is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.  Interest rates, which remain largely at historically low levels, are highly sensitive to many factors that are beyond our control such as general economic conditions and policies of the federal government, in particular the Federal Open Market Committee. In an attempt to help the overall

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economy, the FRB has kept interest rates low through its targeted Fed Funds rate. During 2017, the FRB increased the Fed Funds rate three times, each time by 25 basis points, and has indicated that further increases are likely during 2018, subject to economic conditions. As the FRB increases the Fed Funds rate, overall interest rates will likely rise, which may negatively impact the U.S. economic recovery. Further, changes in monetary policy, including changes in interest rates, could influence (i) the amount of interest we receive on loans and securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, (iv) the fair value of our assets and liabilities, and (v) the reinvestment risk associated with a reduced duration of our mortgage-backed securities portfolio as borrowers refinance to reduce borrowing costs. When interest-bearing liabilities reprice or mature more quickly than interest-earning assets, an increase in interest rates generally would tend to result in a decrease in net interest income.

Although management believes it has implemented an effective asset and liability management strategy to manage the potential effects of changes in interest rates, including the use of adjustable rate and/or short-term assets, and FHLB advances or longer term repurchase agreements, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of our operation and/or our strategies may not always be successful in managing the risk associated with changes in interest rates.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. We rely on a number of different sources in order to meet our potential liquidity demands. Our primary sources of liquidity are increases in deposit accounts, cash flows from loan payments and our securities portfolio. Borrowings also provide us with a source of funds to meet liquidity demands. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically, or the financial services industry or economy in general. Factors that could detrimentally impact our access to liquidity sources include adverse regulatory action against us or a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations or deterioration in credit markets.

At December 31, 2017, public funds totaled $972.2 million, representing 14.37% of our total deposits. Public funds are bank deposits of state and local municipalities. These deposits are required to be secured by certain investment grade securities (including letters of credit from the FHLB) to ensure repayment, which on the one hand tends to reduce our contingent liquidity risk by making these funds somewhat less credit sensitive, but on the other hand reduces standby liquidity by restricting the potential liquidity of the pledged collateral. Although these funds historically have been a relatively stable source of funds for us, availability depends on the individual municipality's fiscal policies and cash flow needs.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.

We are required by regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate that our capital resources will satisfy our capital requirements for the foreseeable future. We may at some point need to raise additional capital to support continued growth or losses, both internally and through acquisitions. Any capital we obtain may result in the dilution of the interests of existing holders of our common stock.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time (which are outside our control) and on our financial condition and performance. Accordingly, we cannot make assurances of our ability to raise additional capital if needed, or if the terms will be acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and negatively affected.

Our ability to attract and retain key employees may change.

Our success depends, in large part, on our ability to attract and retain key employees, competition for which can be intense. We may not be able to hire or retain these employees. The unexpected loss of a key employee could have a material adverse impact on our business as the skills, knowledge of our market and institution, and the years of experience of a departing key employee which are all difficult to quickly replace with qualified personnel.

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Our information systems may experience interruptions or breaches in security.

Our information systems may experience interruptions or breaches in security. We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in disruptions to our accounting, deposit, loan and other systems, and adversely affect the Bank's customer relationships. While we have policies and procedures designed to prevent or limit the effect of these possible events, there can be no assurance that any such failure, interruption or security breach will not occur or, if any does occur, that it can be sufficiently remediated.

There have been increasing efforts on the part of third parties, including through cyberattacks, to breach data security at financial institutions or with respect to financial transactions. There have been several recent instances involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information or the destruction or theft of corporate data. In addition, because the techniques used to cause such security breaches change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures. The ability of our customers to bank remotely, including online and through mobile devices, requires secure transmission of confidential information and increases the risk of data security breaches.

In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions may be affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any failure, interruption or security breach of our systems or the systems of our third-party vendors, particularly if widespread or resulting in financial losses to customers, could require us to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, and/or expose us to civil litigation and financial liability.

Natural disasters, severe weather events, worldwide hostilities, including terrorist attacks, and other external events may adversely affect the general economy, the financial services industry, the industries of our customers, and us in particular.

Natural disasters, severe weather events, including those prominent in our geographic footprint and those prominent in the geographic areas of our vendors and business partners, together with worldwide hostilities, including terrorist attacks, and other external events could have a significant impact on our ability to conduct our business. They could also affect the stability of our deposit base, our borrowers' ability to repay loans, impair collateral, result in a loss of revenue or an increase in expenses. Although management has established disaster recovery and business continuity procedures and plans, the occurrence of any such event may adversely affect our business, which in turn could have a material adverse effect on our financial condition and results of our operations.

We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that are expected to increase our costs of operations.

The Bank is subject to extensive examination, supervision and comprehensive regulation by the FRB and the TDOB and as a bank holding company the Company is subject to examination, supervision and regulation by the FRB. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on an institution's operations, reclassify assets, determine the adequacy of an institution's allowance for loan losses and determine the level of deposit insurance premiums assessed.

Additionally, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has significantly changed the bank regulatory structure and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

The Dodd-Frank Act created the CFPB with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination

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and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Financial institutions such as the Bank with $10 billion or less in assets are examined for compliance with the federal consumer laws by their primary federal bank regulators but are subject to the rules of the CFPB.

The CFPB has issued a number of final regulations and changes to certain consumer protections under existing laws.  These final rules generally prohibit creditors from extending mortgage loans without regard for the consumer’s ability-to-repay and add restrictions and requirements to mortgage origination and servicing practices.  In addition, these rules limit prepayment penalties and require the creditor to retain evidence of compliance with the ability-to-repay requirement for three years. Compliance with these rules has increased, and will likely continue to increase, our overall regulatory compliance costs and may require changes to our underwriting practices with respect to mortgage loans.  Moreover, these rules may adversely affect the volume of mortgage loans that we underwrite and may subject us to increased potential liabilities related to such residential loan origination activities.

It is difficult to predict at this time all the specific impacts the Dodd-Frank Act and the implementation of its rules and regulations will have on community banks.  However, they have increased and are expected to continue to increase our operating and compliance costs, which could adversely affect key operating efficiency ratios, and could increase our non-interest expense. See - “Business - How We Are Regulated” contained in Part I, Item I of this report.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income and may decrease our efficiency.

We, directly and indirectly through the Bank, are subject to extensive regulation, supervision and examination by the TDOB, the FRB and the FDIC, and other regulatory bodies.  These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank's operations, reclassify assets, determine the adequacy of a bank's allowance for loan losses and its risk weighting of its assets and determine the level of deposit insurance premiums assessed.  Our business is highly regulated; therefore, the laws and applicable regulations are subject to frequent change.  Any new regulations or legislation, change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator's interpretation of a law or regulation, could have a material impact on our operations.

The potential exists for additional federal or state laws and regulations, or changes in policy or interpretation, affecting lending and funding practices, interest rate risk management and liquidity standards.  Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements.  Bank regulatory agencies, such as the TDOB and the FRB, regulate the activities in which we may engage primarily for the protection of depositors and not for the protection or benefit of potential investors.  In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations.  New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge and our ongoing operations, costs and profitability.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions. In recent years, a number of banking institutions have been required to pay large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

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Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general.

We, and other participants in the financial services industry upon whom we rely to operate, have been and may in the future become involved in legal and regulatory proceedings. Most of the proceedings we consider to be in the normal course of our business or typical for the industry, however it is inherently difficult to assess the outcome of these matters and there can be no assurance that anyone in particular, including us, will prevail in any proceeding or litigation. There could be substantial cost and management diversion incurred in such litigation and proceedings, and any adverse determination could have a materially adversely effect on our business, brand or image, or our financial condition and results of our operations.

Our business may be adversely affected by increasing prevalence of fraud and other financial crimes.

As a financial institution, we are subject to risk of loss due to fraud and other financial crimes. Nationally, reported incidents of fraud and other financial crimes have increased. We believe we have controls in place to detect and prevent such losses but in some cases multi-party collusion or other sophisticated methods of hiding fraud, may not be readily detected or detectable, and could result in losses that affect our financial condition and results of our operations.

Financial crime is not limited to the financial services industry. Our customers could experience fraud in their businesses, which could materially impact their ability to repay their loans, and deposit customers in all financial institutions are constantly and unwittingly solicited by others in fraud schemes that vary from easily detectable and obvious attempts to high-level and very complex international schemes that could drain an account of millions of dollars and require detailed financial forensics to unravel. While we have controls in place, contractual agreements with our customers partitioning liability, and insurance to help mitigate the risk, none of these are guarantees that we will not experience a loss, potentially a loss that could have a material adverse effect on our financial condition, reputation and results of our operations.

Our business is reliant on outside vendors.

Our business is highly dependent on the use of certain outside vendors for our day-to-day operations, including such high level vendors as our data processing vendor, our card processing vendor and our on-line banking vendors. Our operations are exposed to risk that a vendor may not perform in accordance with established performance standards required in our agreements for any number of reasons including a change in their senior management, their financial condition, their product line or mix and how they support existing customers, or a simple change in their strategic focus. While we have comprehensive policies and procedures in place to mitigate risk at all phases of vendor management from selection, to performance monitoring and renewals, the failure of a vendor to perform in accordance with contractual agreements could be disruptive to our business, which could have a material adverse effect on our financial conditions and results of our operations.

New or changing tax, accounting, and regulatory rules and interpretations could significantly impact strategic initiatives, results of operations, cash flows, and financial condition.

The financial services industry is extensively regulated. Federal and state banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit our stockholders. These regulations may sometimes impose significant limitations on operations. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution's allowance for loan losses. Additionally, actions by regulatory agencies or significant litigation against us could require us to devote significant time and resources to defending our business and may lead to penalties that materially affect us. These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. Any new regulations or legislation, change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator's interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory compliance and of doing business and/or otherwise adversely affect us and our profitability. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent registered public accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of our operations as could our interpretation of those changes. We cannot predict what restrictions may be imposed upon us with future legislation.

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Our business initiatives and strategies, product lines, revenue enhancement or efficiency improvements may be less successful than anticipated or not realized at all.

We make certain projections and assumptions when we adopt or modify existing business initiatives and strategies, product lines, enter or expand our market presence, attempt to re-balance our loan portfolio, execute our customer retention plan or seek revenue enhancement or efficiency improvements. Our projections and assumptions may not be accurate and may be affected by numerous conditions outside of our control and therefore we may not be able to achieve desired or projected results on the timeline we anticipate, some benefits may not be fully realized or we may not realize any benefit at all.

Our customers may have difficulty weathering a downturn in the economy, which may impair their ability to repay their loans.

Historically we have, and will continue to, target our marketing and business development strategies primarily to local or regional, small-to-medium sized businesses, some of whom are in volatile industries such as energy and real estate. These firms are generally more vulnerable to economic downturns, whether large and sudden downturns or moderate downturns that are more prolonged, and may not have the capital needed to compete against their larger, more capitalized competitors or a particular business sector may be affected significantly more than other sectors or the economy as a whole, and these firms may therefore experience volatile operating results, which may affect their ability to repay their loans. Additionally, the continued success of these firms is frequently contingent on a small group of owners or senior management, and the death, disability or resignation of one or more of such individuals could also have a material adverse effect on the business and its ability to repay its loan obligations. Economic downturns and other events that affect the economy as a whole, or our customers business in particular, could cause us to incur credit losses that would have a material adverse effect on our financial condition and results of our operation.

The credit quality of our loans could decline.

Although we regularly review credit exposure related to particular customers, industry sectors and product lines, default risk may arise from circumstances that are difficult to predict or detect. In such circumstances, we could experience an increase in our provision for credit losses, reserve for credit loss, nonperforming assets, and net charge-offs, any of which could have a material adverse effect on our financial condition and results of our operation.

Our loan portfolio also contains adjustable rate loans. Borrowers with adjustable rate loans are exposed to increased monthly payments when the related interest rate adjusts upward under the terms of the loan from the initial fixed to the rate computed in accordance with the applicable index and margin. Any rise in prevailing market interest rates may result in increased payments for borrowers who have adjustable rate loans, increasing the possibility of default. Borrowers seeking to avoid these increased monthly payments by refinancing their loans may no longer be able to find available replacement loans at comparably lower interest rates. In addition, a decline in housing prices may leave borrowers with insufficient equity in the collateral to permit them to refinance or the inability to sell the collateral for an amount equal to or greater than the unpaid principal balance of their loans.

These potential negative events, which may have a greater impact on our earnings and capital than on the earnings and capital of other financial institutions due to our product mix, may cause us to incur losses, which would adversely affect our capital and liquidity and damage our financial condition and business operations.

Our allowance for loan losses may not be sufficient to cover actual loan losses and/or our non-performing assets may increase.

In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, evaluate economic conditions and make various assumptions and judgments about the loan portfolio. Management recognizes that significant new growth in loan portfolios, such as the increased focus on commercial and industrial loans, new loan products and the refinancing of existing loans can result in portfolios not performing in a historical or projected manner. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover actual losses, resulting in additions to our allowance, which decreases our net income.

Our banking regulators periodically review our allowance for loan losses. These entities may require us to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their review. Any increase in our allowance for loan losses or loan charge‑offs as required by these authorities may have a material adverse effect on our financial condition and results of operations. Further, the Financial Accounting Standards Board has adopted a new accounting standard that will be effective for our fiscal year beginning on January 1, 2020. This standard, referred to as Current Expected Credit Loss, or CECL, will require financial institutions to determine periodic estimates of

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lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. This will change the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and may greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan losses. It may also result in even small changes to future forecasts having a significant impact on the allowance, which could make the allowance more volatile, and regulators may impose additional capital buffers to absorb this volatility. Our level of non-performing and other classified assets adversely affect our net income in various ways, including interest accruals, reserves for credit losses, write-downs and additional costs, including carrying costs of other real estate owned assets.

In addition, we may find it necessary or desirable to foreclose on certain loans we originate or acquire, and the foreclosure process may be lengthy and expensive. While we believe we have made all proper filings to properly secure our loans, to the extent we have not properly perfected our lien or ownership interest in the collateral securing our loans, our anticipated priority and perfection of the applicable security interest may be jeopardized. Furthermore, claims may be asserted by other lenders, borrowers or other claimants that might interfere with enforcement of our rights. Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no basis in fact, in an effort to prolong the foreclosure action and seek to force us into a modification of the loan or a favorable buy-out of the borrower’s position in the loan. Foreclosure actions can take several years or more to litigate. At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process and potentially result in a reduction or discharge of a borrower’s debt. Foreclosure also may create a negative public perception of the related property, resulting in a diminution of its value. Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us. Furthermore, any costs or delays involved in the foreclosure of the loan or a liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss.

Further, the resolution of non-performing assets requires the active involvement of management, which can distract them from the overall supervision of our operations and other income-producing activities, all of which can have a material adverse effect on our financial condition and results of operations.

Our Enterprise Risk Management program may not be able to adequately monitor or control perceived risks.

Our enterprise risk management (“ERM”) program, which is designed to formalize the practice of understanding and controlling the nature and amount of risk we take pursuing our business initiatives and strategies and to establish management accountability for the risks accepted, includes an institution-wide coordination of credit risk, operational risk, market risk, capital management and liquidity management.

In 2012, the FRB issued proposed rules (“Enhanced Prudential Standards”) for the management of enterprise wide risk applicable to complex or larger financial institutions over $10 billion in assets or are otherwise covered by the Dodd-Frank Act. Some of the requirements of the Enhanced Prudential Standards include a formal board-level risk committee and the establishment of a Chief Risk Officer with oversight of the ERM program. While the Enhanced Prudential Standards may not currently be a requirement for us, management believes that much of the Enhanced Prudential Standards represent industry best-practices and we have already implemented, or are in the process of implementing, many of its requirements.

While we have an ERM program with Board-level involvement, we may not be able to monitor or control all risks, which could have a materially adverse effect on our financial condition and results of our operations.

We pursue a strategy of supplementing internal growth by acquiring other financial companies or their assets and liabilities that we believe will help us fulfill our strategic objectives and enhance our earnings. There are risks associated with this strategy.

As part of our general growth strategy, we have partially expanded our business through acquisitions. We completed the Highlands acquisition in April 2012 and the acquisition of LegacyTexas Group, Inc. in January 2015. Although our business strategy emphasizes organic expansion, we continue, from time to time in the ordinary course of business, to engage in preliminary discussions with potential acquisition targets. There can be no assurance that, in the future, we will successfully identify suitable acquisition candidates, complete acquisitions and successfully integrate acquired operations into our existing operations or expand into new markets. The consummation of any future acquisitions may dilute shareholder value or may have an adverse effect upon our operating results while the operations of the acquired business are being integrated into our operations. In addition, once integrated, acquired operations may not achieve levels of profitability comparable to those achieved by our existing operations, or otherwise perform as expected. Further, transaction-related expenses may adversely affect our earnings. These adverse effects on our earnings and results of operations may have a negative impact on the value of

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the Company’s stock. Acquiring banks, bank branches or other businesses involves risks commonly associated with acquisitions, including:

• We may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets, and liabilities we acquire. If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially negatively affected;

• Prices at which acquisitions can be made fluctuate with market conditions. We have experienced times during which acquisitions could not be made in specific markets at prices we considered acceptable and expect that we will experience this condition in the future;

• The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity into our company to make the transaction economically successful. This integration process is complicated and time consuming and can also be disruptive to the customers of the acquired business. If the integration process is not conducted successfully and with minimal effect on the acquired business and its customers, we may not realize the anticipated economic benefits of particular acquisitions within the expected time frame, and we may lose customers or employees of the acquired business. We may also experience greater than anticipated customer losses even if the integration process is successful.

• To the extent our costs of an acquisition exceed the fair value of the net assets acquired, the acquisition will generate goodwill.  As discussed below, we are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operations and financial condition; and

• To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing stockholders.

Our securities portfolio may be negatively impacted by fluctuations in market value and interest rates.

Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. Fluctuations in market value may be caused by changes in market interest rates, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, lower market prices for securities and limited investor demand. Our securities portfolio is evaluated for other-than-temporary impairment. If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, a potential loss to earnings may occur. Changes in interest rates can also have an adverse effect on our financial condition, as our available for sale securities are reported at their estimated fair value, and therefore are impacted by fluctuations in interest rates. We increase or decrease our shareholders' equity by the amount of change in the estimated fair value of the available for sale securities, net of taxes. There can be no assurance that declines in the market value of our securities portfolio will not result in other-than-temporary impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels.

The value of our goodwill and other intangible assets may decline.

Goodwill and other intangible assets are subject to a decline, perhaps even significantly, for several reasons including if there is a significant decline in our expected future cash flows, change in the business environment, or a material and sustained decline in the market value of our stock, which may require us to take future charges related to the impairment of that goodwill and other intangible assets in the future, which could have a material adverse effect on our financial condition and results of our operations.

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Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense. We compete with numerous commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of our competitors have substantially greater resources and lending limits than we have, have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we do. Our profitability depends upon our continued ability to successfully compete in our market area. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest earning assets.

We may be subject to additional regulatory scrutiny if and when the Company or the Bank’s total assets exceed $10.0 billion.

The Company’s and the Bank's total assets were $9.09 billion at December 31, 2017. If the Bank’s total assets equal or exceed $10 billion, we will become subject to a number of additional requirements (such as annual stress testing requirements, an enterprise risk management committee comprised of independent directors, including one risk management expert, and general oversight by the CFPB) that will impose additional compliance costs on our business. The $10 billion threshold is calculated in different ways for the various requirements (from simply reaching the $10 billion as of a certain date, to reaching it for four consecutive quarters or to reaching it by averaging total consolidated assets for four consecutive quarters) and the dates the new requirements are triggered also vary (from immediate application to a period of over two years to achieve compliance). Being subject to these additional requirements may also result in higher expectations from regulators. The CFPB has near exclusive supervision authority, including examination authority, over institutions of that size and their affiliates to assess compliance with federal consumer financial laws, to obtain information about the institutions’ activities and compliance systems and procedures, and to detect and assess risks to consumers and markets.

Under the Dodd-Frank Act, the minimum ratio of net worth to insured deposits of the Deposit Insurance Fund was increased from 1.15% to 1.35% and the FDIC is required, in setting deposit insurance assessments, to offset the effect of the increase on institutions with assets of less than $10 billion, which results in institutions with assets greater than $10 billion paying a surcharge during a temporary period expected to last through 2018. In addition, if the Bank exceeds $10 billion in assets, its assessment base for federal deposit insurance will change from the amount of insured deposits to consolidated average assets less tangible capital to a scorecard method. The scorecard method uses a performance score and a loss severity score, which are combined and converted into an initial base assessment rate. The performance score is based on measures of the bank’s ability to withstand asset-related stress and funding-related stress and weighted CAMELS ratings, which are ratings ascribed under the CAMELS supervisory rating system and assigned based on a supervisory authority’s analysis of a bank’s financial statements and on-site examinations. The loss severity score is a measure of potential losses to the FDIC in the event of the bank’s failure. Under a formula, the performance score and loss severity score are combined and converted to a total score that determines the bank’s initial base assessment rate. The FDIC has the discretion to alter the total score based on factors not captured by the scorecard. The resulting initial base assessment rate is also subject to adjustments downward based on long term unsecured debt issued by the bank, to adjustment upward based on long term unsecured debt held by the bank that is issued by other FDIC-insured institutions, and to further adjustment upward if the bank’s brokered deposits exceed 10% of its domestic deposits.

Further, we may be affected by the Durbin Amendment to the Dodd-Frank Act regarding limits on debit card interchange fees. The Durbin Amendment gave the FRB the authority to establish rules regarding interchange fees charged for electronic debit transactions by a payment card issuer that, together with its affiliates, has assets of $10 billion or more and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer. The FRB has adopted rules under this provision that limit the swipe fees that a debit card issuer can charge a merchant for a transaction to the sum of 21 cents and five basis points times the value of the transaction, plus up to one cent for fraud prevention costs.

As a result of the above, if and when our total assets exceed $10 billion, deposit insurance assessments, expenses related to regulatory compliance are likely to increase, and interchange fee income will decrease, the cumulative effect of which may be significant.

Risks Related to the Company's Common Stock

Regulatory and corporate governance anti-takeover provisions may make it difficult for you to receive a change-in-control premium.

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Provisions of federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial to the Company's shareholders. These provisions effectively inhibit a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of the Company's common stock. With certain limited exceptions, federal regulations make it difficult for any one person or company or a group of persons from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the appropriate federal regulator(s). Certain provisions of our corporate documents are also designed to make merger, tender offer or proxy contest more difficult, even if such events were perceived by many of our stockholders to be beneficial to their interests.

Our stock price can be volatile and its trading volume is generally less than other institutions.

Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Our stock price can fluctuate significantly in response to a variety of factors including the risk factors discussed elsewhere in this report that are outside of our control and which may occur regardless of our operating results. Also, although our common stock is currently listed for trading on the Nasdaq, the trading volume of our stock is less than that of other, larger financial services companies. Given the lower trading volume of our stock, significant sales of the stock, or the expectation of these sales, could cause the stock price to fall.

We may not continue to pay dividends on our stock.

Our shareholders are only entitled to receive dividends declared by the Board out of funds legally available for such payments. Although we have historically declared cash dividends, we are not required to do so and may reduce or eliminate future dividends. This could adversely affect the market price of our stock. Also, we are a bank holding company, and our ability and the ability of our subsidiary bank to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines and regulations of the FRB regarding capital adequacy and dividends.  The ability of a subsidiary bank to pay dividends or make other capital distributions depends on its earnings and capital levels and may be limited by its regulators' directives or orders. In our case, our banking subsidiary generally must obtain regulatory approval of a dividend if the total dividends declared by the Bank during the current year, including any proposed dividend, exceeds its net income for the current year and retained net income for the prior two years. Our banking subsidiary's net income for the two years ended December 31, 2017 totaled $199.9 million and the amount paid to the Company during that two year period totaled $35.0 million. See “How We Are Regulated - Limitations on Dividends and Other Capital Distributions” under Item 1 and Note 16 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

An investment in the Company's common stock is not an insured deposit.

The Company's common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in the Company's common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire the Company's common stock, you could lose some or all of your investment.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

At December 31, 2017, our executive offices were located at 5851 Legacy Circle, Suite 1200, Plano, Texas. In addition to our executive offices, at December 31, 2017, we had three administrative offices, 44 full-service branches, one commercial loan production office located in Houston, Texas and a Warehouse Purchase Program office located in Littleton, Colorado. We lease the space in which our executive offices are located and own the majority of the space in which our other administrative offices are located. At December 31, 2017, we owned 25 of our branches, and leased the remaining facilities. The majority of our branches are located in the Dallas/ Fort Worth Metroplex in Texas, and include the cities of Addison, Allen, Carrollton, Coppell, Dallas, Plano, Euless, Flower Mound, Fort Worth, Frisco, Garland, Grand Prairie, Grapevine, McKinney, Richardson, Weatherford and Wylie. We also own two First National Bank of Jacksboro locations in Jack and Wise Counties in Texas. The net book value of our investment in premises, equipment and leaseholds, excluding computer equipment, was approximately $65.7 million at December 31, 2017. We believe that our current facilities are adequate to meet the present and

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immediately foreseeable needs of the Bank and the Company.

At December 31, 2017, we utilized IBM and Jack Henry Silverlake data processing systems. The net book value of all of our data processing and computer equipment at December 31, 2017, was $4.0 million.

For more information about our premises and equipment, please see Note 8 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Item 3. Legal Proceedings

We are involved from time to time as plaintiff or defendant in various legal actions arising in the normal course of our businesses. While the ultimate outcome of pending proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing us in such proceedings, that the resolution of these proceedings should not have a material adverse effect on our consolidated financial position or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the Nasdaq Global Select Market under the symbol “LTXB”. There were 1,627 holders of record of our common stock as of February 6, 2018.

The following table presents quarterly market high and low closing sales price information and cash dividends per share declared for our common stock for the two years ended December 31, 2017.

	2017						2016
	Market Price Range				Dividends		Market Price Range				Dividends
Quarter	High		Low		Declared		High		Low		Declared
First	$	44.19	$	38.41	$	0.15	$	24.26	$	17.01	$	0.14
Second	40.18		35.22		0.15		28.27		17.94		0.14
Third	39.92		34.87		0.15		31.90		25.81		0.15
Fourth	43.03		36.73		0.16		43.81		31.59		0.15

The timing and amount of cash dividends paid depends on our earnings, capital requirements, financial condition and other relevant factors. The primary source for dividends paid to shareholders are dividends or capital distributions paid to the Company from the Bank, our wholly owned subsidiary. There are regulatory restrictions on the ability of the Bank to pay dividends. See “How We Are Regulated — Limitations on Dividends and Other Capital Distributions” under Item 1 of this report andNote 16 of Notes to Consolidated Financial Statements contained in Item 8 of this report.

Stock Repurchases

On August 22, 2012, the Company announced its intention to repurchase up to 5% of its total common shares outstanding, or approximately 1,978,871 shares. The stock repurchase program, which is open-ended, allows the Company to repurchase its shares from time to time in the open market and in negotiated transactions, depending upon market conditions. No shares were repurchased under this program in 2017 or 2016. During 2015, 357,950 shares were repurchased and retired at an average price of $22.32. At December 31, 2017, 1,537,121 shares remain available for future repurchases under the program.

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Equity Compensation Plans

Set forth below is information, at December 31, 2017, regarding the Company's equity compensation plans, all of which were approved by the Company's shareholders.

	Number of Securities to be Issued upon Exercise of Outstanding Options	Weighted Average Exercise Price		Number of Securities Remaining Available for Issuance under Plans
2007 Equity Incentive Plan	879,985	$	20.65	—	1
2012 Equity Incentive Plan	1,316,758	30.94		—	1
2017 Omnibus Incentive Plan	10,500	39.10		3,239,500	2
Total	2,207,243	$	26.88	3,239,500

¹  No further shares are available to be awarded under the 2007 and 2012 Equity Incentive Plans as a result of shareholder approval of the 2017 Omnibus Incentive Plan. However, 26,204 shares may be issued if performance targets set under existing awards are met.

²  Total number of shares available for issuance, with a fungible share rate of 2.5 to 1 for full-value awards (stock-based awards other than stock options and stock appreciation rights).

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Shareholder Return Performance Graph Presentation

The line graph below compares the cumulative total shareholder return on the Company’s common stock to the cumulative total return of a broad index of the Nasdaq Stock Market and a regional banking index (Morningstar Banks - Regional - US) for the period December 31, 2012 through December 31, 2017. The graph assumes an investment of $100 on December 31, 2012 and reinvestment of dividends on the date of payment without commissions. The graph represents past performance and should not be considered to be an indication of future performance.

	12/31/2012		12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017
LegacyTexas Financial Group, Inc.	$	100.00	$	133.12	$	117.85	$	126.17	$	222.10	$	221.12
Nasdaq Composite-Total Returns	100.00		140.12		160.78		171.97		187.22		242.71
Morningstar Banks - Regional - US	100.00		138.74		149.60		156.82		212.44		231.78

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Item 6. Selected Financial Data

The summary information presented below under “Selected Financial Condition Data” and “Selected Operations Data” for each of the years ended December 31 is derived from our audited consolidated financial statements. The following information is only a summary and you should read it in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 7 of this report and “Financial Statements and Supplementary Data” contained in Item 8 of this report below.

	At and For the Years Ended December 31,
	2017			2016		2015		2014		2013
	(Dollars in thousands)
Selected Financial Condition Data:
Total assets	$	9,086,196		$	8,362,255	$	7,691,940	$	4,164,114	$	3,525,232
Warehouse Purchase Program loans	1,154,588			1,055,341		1,043,719		786,416		673,470
Loans receivable, excluding Warehouse Purchase Program loans, net	6,584,529			5,998,596		5,017,554		2,605,204		2,029,277
Loans held for sale	16,707			21,279		22,535		—		—
Securities available for sale, at fair value	419,717			354,515		311,708		199,699		248,012
Securities held to maturity, at amortized cost	173,509			210,387		240,433		241,920		294,583
FHLB stock and other restricted securities, at cost	64,790			43,266		63,075		44,084		34,883
Bank-owned life insurance	57,684			56,477		55,231		36,193		35,565
Deposits	6,767,683			6,365,476		5,226,711		2,657,809		2,264,639
Borrowings	1,262,361			1,054,405		1,608,165		887,907		664,096
Shareholders' equity	959,874			885,365		804,076		568,223		544,460
Selected Operations Data:
Total interest income	$	366,857		$	317,352	$	262,692	$	149,647	$	137,089
Total interest expense	55,426			35,083		21,615		16,640		18,869
Net interest income	311,431			282,269		241,077		133,007		118,220
Provision for credit losses	39,456			26,900		25,465		6,721		3,199
Net interest income after provision for credit losses	271,975			255,369		215,612		126,286		115,021
Service charges and other fees	35,742			36,690		30,936		19,382		18,715
Net gain on sale of mortgage loans held for sale	7,322			8,225		8,036		—		—
Net gain (loss) on securities transactions	(39		)	56		203		—		(177		)
Other non-interest income	557			6,960		5,640		1,361		3,295
Total non-interest income	43,582			51,931		44,815		20,743		21,833
Total non-interest expense	160,344			156,377		151,555		98,092		88,877
Income before income tax expense	155,213			150,923		108,872		48,937		47,977
Income tax expense	65,719			53,102		37,956		17,659		16,289
Net income	$	89,494		$	97,821	$	70,916	$	31,278	$	31,688

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	At and For the Years Ended December 31,
	2017		2016		2015		2014		2013
Selected Financial Ratios and Other Data (Unaudited):
Performance Ratios:
Return on assets (ratio of net income to average total assets)	1.04	%	1.24	%	1.10	%	0.85	%	0.94	%
Return on equity (ratio of net income to average equity)	9.62		11.52		9.12		5.60		5.92
Interest rate spread:
Average during period	3.58		3.65		3.88		3.63		3.51
End of period	3.38		3.43		3.24		3.21		3.36
Net interest margin	3.81		3.79		4.00		3.78		3.71
Non-interest income to operating revenue	10.62		14.06		14.57		12.17		13.74
Operating expense to average total assets	1.86		1.98		2.35		2.65		2.64
Average interest-earning assets to average interest-bearing liabilities	133.65		130.42		133.36		133.50		133.61
Dividend payout ratio	32.71		28.29		36.31		61.34		40.33		1
Asset Quality Ratios:
Non-performing assets to total assets at end of period	1.13		1.46		0.58		0.58		0.64
Non-performing loans to total loans held for investment, excluding Warehouse Purchase Program loans	1.42		1.84		0.75		0.89		1.08
Non-performing loans to total loans held for investment	1.21		1.56		0.63		0.69		0.81
Allowance for loan losses to non-performing loans	75.53		57.97		123.23		108.69		87.50
Allowance for loan losses to total loans held for investment, excluding Warehouse Purchase Program loans	1.07		1.06		0.93		0.97		0.94
Allowance for loan losses to total loans held for investment	0.91		0.91		0.77		0.75		0.71
Capital Ratios:
Equity to total assets at end of period	10.56		10.59		10.45		13.65		15.44
Average equity to average assets	10.80		10.77		12.07		15.10		15.88
Other Data:
Number of branches	44		45		47		31		31
Number of loan production offices	1		1		1		1		1

¹  In 2012, the Company prepaid the quarterly dividend for the first quarter of 2013 in December 2012, distributing an additional $0.10 per common share. Had the dividend been paid in 2013, the dividend payout ratio for the year ended December 31, 2013 would have been 52.83%.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

This document and other filings by the Company with the Securities and Exchange Commission (the “SEC”), as well as press releases or other public or stockholder communications released by the Company, may contain forward-looking statements, including, but not limited to, (i) statements regarding our financial condition, results of operations and business, (ii) statements about our plans, objectives, expectations and intentions and other statements that are not historical facts and (iii) other statements identified by the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions that are intended to identify "forward-looking statements", within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current beliefs and expectations of the Company’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the expected cost savings, synergies and other financial benefits from acquisition or disposition transactions might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters might be greater than expected; changes in economic conditions; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; our ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in our market area; fluctuations in the price of oil, natural gas and other commodities; competition; changes in management's business strategies; our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; results of examinations of us by the FRB and our bank subsidiary by the TDOB or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including the revenue impact from, and any mitigation actions taken in response, to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”); changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; changes in the regulatory and tax environments in which the Company operates, including the impact of the "Tax Cuts and Jobs Act" (the "TCJA") on the Company's deferred tax asset, and the anticipated impact of the TCJA on the Company's future earnings; and the other risks set forth under Risk Factors under Item 1A. of this Form 10-K.

The factors listed above could materially affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

We do not undertake - and specifically decline any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. When considering forward-looking statements, you should keep in mind these risks and uncertainties. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. You should refer to our periodic and current reports filed with the SEC for specific risks that could cause actual results to be significantly different from those expressed or implied by any forward-looking statements.

General

Our principal business consists of attracting retail deposits from the general public and the business community and investing those funds, along with borrowed funds, in commercial real estate loans, secured and unsecured commercial and industrial loans, as well as permanent loans secured by first and second mortgages on one- to four-family residences and consumer loans. Additionally, the Warehouse Purchase Program allows mortgage banking company customers to close one- to four-family real estate loans in their own name and manage its cash flow needs until the loans are sold to investors. Our operating revenues are derived principally from interest earned on interest-earning assets, including loans and investment securities and service charges and fees on deposits and other account services. Our primary sources of funds are deposits, FHLB advances and other borrowings, and payments received on loans and securities. We offer a variety of deposit accounts that provide a wide range of interest rates and terms, generally including savings, money market, certificate of deposit and

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demand accounts. Our principal objective is to be an independent, commercially-oriented, customer-focused financial services company, providing outstanding service and innovative products in our primary market area of North Texas.

Critical Accounting Estimates

Certain of our accounting estimates are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Management believes that determining the allowance for loan losses is its most critical accounting estimate. Our accounting policies are discussed in detail in Note 1 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Allowance for Loan Loss. The allowance for loan losses and related provision expense are susceptible to change if the credit quality of our loan portfolio changes, which is evidenced by many factors, including but not limited to charge-offs and non-performing loan trends. Generally, consumer real estate lending has a lower risk profile compared to other consumer lending (such as automobile loans). Commercial real estate and commercial and industrial lending, however, can have higher risk profiles than consumer loans due to these loans being larger in amount and more susceptible to fluctuations in industry, market and economic conditions. While management uses available information to recognize losses on loans, changes in economic conditions, the mix and size of the loan portfolio and individual borrower conditions can dramatically impact our level of allowance for loan losses in relatively short periods of time. Management believes that the allowance for loan losses is maintained at a level that represents coverage of our best estimate of credit losses in the loan portfolio as of December 31, 2017.

Management evaluates current information and events regarding a borrower's ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according to the contractual terms of the loan agreement, is in doubt. If an impaired loan is collateral-dependent, the fair value of the collateral, less the estimated cost to sell, is used to determine the amount of impairment. If an impaired loan is not collateral-dependent, the impairment amount is determined using the negative difference, if any, between the estimated discounted cash flows and the loan amount due. For impaired loans, the amount of the impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral or until the basis is collected. Impairment losses are reflected in the allowance for loan losses through a charge to the provision for credit losses. Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal.

Business Strategy

Our principal objective is to be an independent, commercially-oriented, customer-focused financial services company, providing outstanding service and innovative products in our primary market area of North Texas. Our Board of Directors adopted a strategy designed to maintain growth and profitability, a strong capital position and sound asset quality. Please see "Business Strategies" contained in Item 1 of this report for more information.

Comparison of Financial Condition at December 31, 2017 and December 31, 2016

General. Total assets increased by $723.9 million, or 8.7%, to $9.09 billion at December 31, 2017, from $8.36 billion at December 31, 2016, primarily due to a $683.3 million increase in gross loans held for investment, including Warehouse Purchase Program loans.

Loans. Gross loans held for investment, including Warehouse Purchase Program loans, increased by $683.3 million, or 9.6%, to $7.80 billion at December 31, 2017, from $7.12 billion at December 31, 2016, while one- to four-family mortgage loans held for sale decreased by $4.6 million, or 21.5%, to $16.7 million at December 31, 2017, from $21.3 million at December 31, 2016.

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	December 31, 2017		December 31, 2016		Dollar Change			Percent Change
	(Dollars in thousands)
Commercial real estate	$	3,019,339	$	2,670,455	$	348,884		13.1	%
Commercial and industrial	2,093,307		1,971,160		122,147			6.2
Construction and land	277,864		294,894		(17,030		)	(5.8	)
Consumer real estate	1,213,434		1,074,923		138,511			12.9
Other consumer	45,506		53,991		(8,485		)	(15.7	)
Gross loans held for investment, excluding Warehouse Purchase Program loans	6,649,450		6,065,423		584,027			9.6
Warehouse Purchase Program loans	1,154,588		1,055,341		99,247			9.4
Gross loans held for investment	7,804,038		7,120,764		683,274			9.6
Loans held for sale	16,707		21,279		(4,572		)	(21.5	)
Gross loans	$	7,820,745	$	7,142,043	$	678,702		9.5	%

Gross loans held for investment at December 31, 2017, excluding Warehouse Purchase Program loans, grew $584.0 million, or 9.6%, from December 31, 2016, which included growth in all loan portfolios with the exception of a $17.0 million decline in construction and land loans and an $8.5 million decline in other consumer loans. Commercial real estate and commercial and industrial loans at December 31, 2017 increased by $348.9 million and $122.1 million, respectively, from December 31, 2016, while consumer real estate loans increased by $138.5 million for the same period.

Reserve-based energy loans, which are reported as commercial and industrial loans, totaled $531.7 million at December 31, 2017, up $4.5 million from $527.2 million at December 31, 2016. Substantially all of the reserve-based energy loans are secured by deeds of trust on properties containing proven oil and natural gas reserves. At December 31, 2017, our reserve-based energy portfolio was secured by collateral that consisted of 49% natural gas reserves and 51% crude oil reserves. We encourage, and in some cases even require, borrowers to utilize commodity hedges, in order to stabilize cash flows during volatile commodity price environments.  Hedges are used to guard against falling prices, and the goal is that the duration of the hedge will last long enough for prices to come back from any significant decline.  Hedges will typically include minimum and maximum allowed percentage of production, a minimum and maximum allowed term, and a minimum price.

In addition to the reserve-based energy loans, the Bank has energy loans categorized as "Midstream and Other," which are typically related to the transmission of oil and natural gas and would only be indirectly impacted from declining commodity prices. At December 31, 2017, "Midstream and Other" loans had a total outstanding balance of $15.4 million, down $23.6 million from $39.0 million at December 31, 2016.

Warehouse Purchase Program loans increased by $99.2 million, or 9.4%, to $1.15 billion at December 31, 2017 from $1.06 billion at December 31, 2016. Although not bound by any legally binding commitment, when a purchase decision is made, the Bank purchases a 100% participation interest in the loans originated by our mortgage banking company customers. The mortgage banking company closes mortgage loans consistent with underwriting standards established by approved investors and, once all pertinent documents are received, the participation interest is delivered by the Bank to the investor selected by the originator and approved by us. Loans funded by the Warehouse Purchase Program during the fourth quarter of 2017 consisted of 52% conforming loans, 40% government-guaranteed loans and 8% of other loan types, including Jumbo loans.

Allowance for Loan Losses. The allowance for loan losses is maintained to cover losses that are estimated in accordance with US GAAP. It is our estimate of credit losses in our loan portfolio at each balance sheet date. Our methodology for analyzing the allowance for loan losses consists of general and specific components. For more information about the calculation of our allowance for loan losses, please see "Business-Allowance for Loan Losses" contained in Item I and Notes 1 and 5 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Our non-performing loans, which consist of nonaccrual loans, include both smaller balance homogeneous loans that are collectively evaluated for impairment and larger individually classified impaired loans. Loans are placed on nonaccrual status when the collection of principal and/or interest becomes doubtful or other factors involving the loan warrant placing the loan on nonaccrual status.

At December 31, 2017, we had $18.1 million of loans classified as TDRs, of which $768,000 were accruing interest and $17.3 million were classified as nonaccrual. For more information about the Company's TDRs, please see "Business -Non-

44

performing Assets" contained in Item I and Notes 1 and 5 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Non-performing loans to total loans held for investment, excluding Warehouse Purchase Program loans, was 1.42% at December 31, 2017 compared to 1.84% at December 31, 2016. Including Warehouse Purchase Program loans, non-performing loans to total loans held for investment was 1.21% at December 31, 2017 compared to 1.56% at December 31, 2016. Non-performing loans decreased by $17.0 million to $94.4 million at December 31, 2017 from $111.4 million at December 31, 2016. This decrease was primarily driven by the resolution of an $11.4 million non-performing construction and land relationship with a residential home builder. After various lots and completed homes were liquidated, the Company foreclosed on the remaining partially completed homes in the 2017 period, which resulted in net charge-offs totaling $343,000. Non-performing energy loans decreased by $9.2 million compared to December 31, 2016, primarily due to the resolution of two reserve-based energy relationships in the 2017 period that resulted in $11.9 million in charge-offs.

Our allowance for loan losses was $71.3 million at December 31, 2017 compared to $64.6 million at December 31, 2016, or 0.91% of total loans held for investment (including Warehouse Purchase Program loans) at December 31, 2017 compared to 0.91% at December 31, 2016. Our allowance for loan losses to non-performing loans was 75.53% at December 31, 2017 compared to 57.97% at December 31, 2016. The increase in the allowance for loan losses from December 31, 2016 was primarily related to increased loan loss reserves allocated to the corporate healthcare finance portfolio, which is reported on the balance sheet as commercial and industrial loans and totaled $38.0 million at December 31, 2017. During the first quarter of 2017, the Company charged-off its $16.4 million interest in a large syndicated credit within the corporate healthcare finance portfolio. The note was sold at a deep discount after the borrower experienced liquidity constraints that challenged its ongoing viability. Two other relationships in the corporate healthcare finance portfolio totaling $20.6 million were considered to be impaired and rated as substandard (non-performing) at December 31, 2017. At this time, the Company is no longer originating corporate healthcare finance loans. At December 31, 2017, the allowance for loan losses allocated to the Company's corporate healthcare finance portfolio totaled $3.4 million.

The allowance for loan losses allocated to energy loans at December 31, 2017 totaled $20.7 million, up $1.5 million from $19.2 million at December 31, 2016. We believe that the level of loan loss reserves for energy loans as of December 31, 2017 is sufficient to cover estimated credit losses in the portfolio based on currently available information; however, future sustained declines in oil pricing could lead to further risk rating downgrades, additional loan loss reserves or losses.

Securities. Our securities portfolio increased by $28.3 million, or 5.0%, to $593.2 million at December 31, 2017, from $564.9 million at December 31, 2016. During the year ended December 31, 2017, paydowns, calls and maturities of securities totaling $2.06 billion were offset by purchases totaling $2.10 billion. The majority of these purchases were completed for tax strategy purposes.

Deposits. Total deposits increased by $402.2 million, or 6.3%, to $6.77 billion at December 31, 2017, from $6.37 billion at December 31, 2016.

	December 31, 2017		December 31, 2016		Dollar Change			Percent Change
	(Dollars in thousands)
Non-interest-bearing demand	$	1,635,622	$	1,383,951	$	251,671		18.2	%
Interest-bearing demand	1,029,375		903,314		126,061			14.0
Savings and money market	2,735,296		2,710,307		24,989			0.9
Time	1,367,390		1,367,904		(514		)	—
Total deposits	$	6,767,683	$	6,365,476	$	402,207		6.3	%

During 2017, all deposit categories increased with the exception of time deposit balances, which declined by $514,000. Non-interest-bearing demand and interest-bearing demand deposits increased by $251.7 million and $126.1 million, respectively, while savings and money market deposits increased by $25.0 million from December 31, 2016.

Borrowings. FHLB advances increased$209.5 million, or 25.1%, to $1.04 billion at December 31, 2017 from $833.7 million at December 31, 2016. The increase in FHLB advances during 2017 was related to loan growth and increased Warehouse Purchase Program balances. At December 31, 2017, the Company was eligible to borrow an additional $2.08 billion from the FHLB.

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The below table shows FHLB advances by maturity and weighted average rate at December 31, 2017:

	Balance		Weighted Average Rate
	(Dollars in thousands)
Less than 90 days	$	828,601	1.21	%
90 days to less than one year	209,153		1.44
One to three years	3,245		5.49
After three to five years	1,551		5.51
After five years	613		5.44
Total	1,043,163		1.51	%

Additionally, we have seven available federal funds lines of credit with other financial institutions totaling $250.0 million and were eligible to borrow $78.6 million from the FRB discount window. In addition to FHLB advances, at December 31, 2017, we had a $25.0 million outstanding structured repurchase agreement with Credit Suisse, as well as $59.7 million in overnight repurchase agreements with depositors. Also, at December 31, 2017, subordinated debt totaled $134.5 million, which included $122.6 million of fixed-to-floating rate subordinated notes, as well as $11.9 million of trust preferred securities that were acquired through the merger with LegacyTexas Group, Inc. (reported net of purchase accounting fair value adjustments and debt issuance costs). Please see Note 11 of the Notes to Consolidated Financial Statements contained in Item 8 of this report for more information about borrowed funds.

Shareholders’ Equity. Total shareholders' equity increased by $74.5 million, or 8.4%, to $959.9 million at December 31, 2017, from $885.4 million at December 31, 2016.

	December 31, 2017			December 31, 2016			Dollar Change			Percent Change
	(Dollars in thousands)
Common stock	$	481		$	479		$	2		0.4	%
Additional paid-in capital	603,884			589,408			14,476			2.5
Retained earnings	370,858			310,641			60,217			19.4
Accumulated other comprehensive income (loss), net	(3,429		)	(2,713		)	(716		)	26.4
Unearned ESOP shares	(11,920		)	(12,450		)	530			(4.3	)
Total shareholders’ equity	$	959,874		$	885,365		$	74,509		8.4	%

The increase in shareholders' equity at December 31, 2017, compared to December 31, 2016, was primarily due to net income of $89.5 million recognized during the year ended December 31, 2017, which was partially offset by the payment of quarterly dividends totaling $0.61 per common share, or $29.3 million, during the year ended December 31, 2017.

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Comparison of Results of Operation for the Years Ended December 31, 2017, 2016, and 2015

General. Net income for the year ended December 31, 2017 was $89.5 million, a decrease of $8.3 million, or 8.5%, from net income of $97.8 million for the year ended December 31, 2016. Net income for the 2017 period was affected by a $13.5 million income tax adjustment to the Company's deferred tax asset related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act. Excluding this adjustment, net income totaled $103.0 million for the year ended December 31, 2017, an increase of $5.2 million from the year ended December 31, 2016. A $29.2 million increase in net interest income from the year ended December 31, 2016, was partially offset by an $8.3 million decrease in non-interest income, a $12.6 million increase in the provision for credit losses and a $4.0 million increase in non-interest expense.

Basic earnings per share for the year ended December 31, 2017 was $1.91, a decrease of $0.20 from $2.11 for the year ended December 31, 2016. Diluted earnings per share for the year ended December 31, 2017 was $1.89, a decrease of $0.20 from $2.09 for the year ended December 31, 2016.

Net income for the year ended December 31, 2016 was $97.8 million, an increase of $26.9 million, or 37.9%, from net income of $70.9 million for the year ended December 31, 2015. The increase in net income was driven by a $41.2 million increase in net interest income and an increase in non-interest income of $7.1 million, which was partially offset by a $1.4 million increase in the provision for credit losses and a $4.8 million increase in non-interest expense. Basic earnings per share for the year ended December 31, 2016 was $2.11, an increase of $0.57 from $1.54 for the year ended December 31, 2015. Diluted earnings per share for the year ended December 31, 2016 was $2.09, an increase of $0.56 from $1.53 for the year ended December 31, 2015.

Interest Income. Interest income increased by $49.5 million, or 15.6%, to $366.9 million for the year ended December 31, 2017, from $317.4 million for the year ended December 31, 2016. Interest income increased by $54.7 million, or 20.8%, to $317.4 million for the year ended December 31, 2016, from $262.7 million for the year ended December 31, 2015.

	Years Ended December 31,						Change
	2017		2016		2015		2017 versus 2016				2016 versus 2015
(Dollars in thousands)							Dollar		Percent		Dollar		Percent
Interest and dividend income
Loans, including fees	$	347,438	$	301,542	$	248,665	$	45,896	15.2	%	$	52,877	21.3	%
Securities	13,707		12,306		12,302		1,401		11.4		4		—
Interest-bearing deposits in other financial institutions	4,009		1,878		631		2,131		113.5		1,247		197.6
FHLB and FRB stock and other	1,703		1,626		1,094		77		4.7		532		48.6
	$	366,857	$	317,352	$	262,692	$	49,505	15.6	%	$	54,660	20.8	%

The $49.5 million increase in interest income for the year ended December 31, 2017 compared to the 2016 period was primarily due to a $45.9 million, or 15.2%, increase in interest income on loans, which was driven by increased volume in commercial real estate, commercial and industrial and consumer real estate loans. The average balance of commercial real estate loans increased by $399.8 million, resulting in a $19.3 million increase in interest income. The average balance of commercial and industrial loans increased by $288.0 million and, when combined with the impact of the complete amortization of a $4.7 million discount on a purchased energy loan that occurred during the 2017 period, resulted in a $21.8 million increase in interest income. The average balance of consumer real estate loans increased by $135.3 million, increasing interest income by $4.7 million. These increases in interest income were partially offset by a $749,000 decline in interest income recorded on other consumer loans, the average balance of which declined by $12.7 million compared to the 2016 period. Despite a $97.7 million decline in the average balance of Warehouse Purchase Program loans compared to the prior year period, interest income on Warehouse Purchase Program loans increased by $1.1 million due to a 48 basis point increase in the average yield earned for the year ended December 31, 2017, compared to the same period last year. The average yield earned on total net loans for the year ended December 31, 2017 was 4.83%, up 18 basis points from 4.65% for the year ended December 31, 2016.

The increase in interest income for the year ended December 31, 2016 compared to the 2015 period was primarily due to a $52.9 million, or 21.3%, increase in interest income on loans, which was driven by increased volume in all loan categories with the exception of other consumer loans. The average balance of commercial real estate loans increased by $508.6 million to $2.45 billion from the year ended December 31, 2015, resulting in a $23.4 million increase in interest income, while the average balance of commercial and industrial loans increased by $406.1 million to $1.71 billion from the year ended December

47

31, 2015, resulting in a $16.4 million increase in interest income. The average balance of consumer real estate loans increased by $179.3 million to $1.02 billion from the year ended December 31, 2015, resulting in a $6.9 million increase in interest income, while the average balance of construction and land loans increased by $43.2 million to $282.1 million from the year ended December 31, 2015, resulting in a $1.2 million increase in interest income. The average balance of Warehouse Purchase Program loans increased by $196.6 million to $1.00 billion from the year ended December 31, 2015, which resulted in a $6.1 million increase in interest income. Interest income on loans for the year ended December 31, 2016 included $4.6 million in accretion of purchase accounting fair value adjustments on acquired loans. The average yield earned on all loan portfolios for the year ended December 31, 2016 declined compared to 2015, with the exception of other consumer loans, which increased by 15 basis points. The average yield earned on loans for the year ended December 31, 2016 was 4.65%, down 14 basis points from 4.79% for the year ended December 31, 2015.

Interest Expense. Interest expense increased by $20.3 million, or 58.0%, to $55.4 million for the year ended December 31, 2017, from $35.1 million for the year ended December 31, 2016. Interest expense increased by $13.5 million, or 62.3%, to $35.1 million for the year ended December 31, 2016, from $21.6 million for the year ended December 31, 2015.

	Years Ended December 31,						Change
	2017		2016		2015		2017 versus 2016				2016 versus 2015
(Dollars in thousands)							Dollar		Percent		Dollar		Percent
Interest expense
Deposits	$	36,694	$	21,034	$	13,127	$	15,660	74.5	%	$	7,907	60.2	%
FHLB advances	9,650		7,167		6,552		2,483		34.6		615		9.4
Repurchase agreement and other borrowings	9,082		6,882		1,936		2,200		32.0		4,946		255.5
	$	55,426	$	35,083	$	21,615	$	20,343	58.0	%	$	13,468	62.3	%

The increase in interest expense for the year ended December 31, 2017 compared to the 2016 period was primarily due to an increase in interest expense on deposits, which was driven by increased rates paid on all deposit categories during the year ended December 31, 2017 compared to 2016, which included a 30 basis point increase in the average rate paid on savings and money market deposits and a 28 basis point increase in the average rate paid on time deposits. Additionally, volume in all deposit categories increased during the year ended December 31, 2017, compared to the 2016 period, which included a $412.0 million increase in the average balance of savings and money market deposits and a $110.1 million increase in the average balance of time deposits. Interest expense on borrowings for the year ended December 31, 2017 increased by $4.7 million compared to the 2016 period, due to a 62 basis point increase in the average rate paid on borrowings.

The increase in interest expense for the year ended December 31, 2016 compared to the 2015 period was primarily due to increased volume in all deposit categories, as well as higher average rates paid in the 2016 period on all interest-bearing liabilities. A 12 basis point increase in the average rate and a $474.6 million increase in the average balance to $2.37 billion led to a $3.6 million increase in interest expense on savings and money market accounts for the year ended December 31, 2016 compared to the 2015 period. The average balance of time deposits increased by $368.5 million to $1.25 billion for the year ended December 31, 2016, while the average rate paid on time deposits increased by eight basis points, resulting in a $3.6 million increase in interest expense compared to the year ended December 31, 2015. The average balance of interest-bearing demand deposits increased by $82.8 million to $805.1 million for the year ended December 31, 2016, while the average rate paid on interest-bearing demand deposits increased by three basis points, resulting in a $677,000 increase in interest expense compared to the year ended December 31, 2015. A 25 basis point increase in the average rate and a $273.1 million increase in the average balance to $1.29 billion led to a $5.6 million increase in interest expense on borrowings for the year ended December 31, 2016 compared to the 2015 period.

Net Interest Income. Net interest income increased by $29.2 million, or 10.3%, to $311.4 million for the year ended December 31, 2017 from $282.3 million for the year ended December 31, 2016. The net interest margin increased by two basis points to 3.81% for the year ended December 31, 2017 from 3.79% for the 2016 period. The net interest rate spread decreased by seven basis points to 3.58% for the year ended December 31, 2017 from 3.65% for the 2016 period. The average yield on earning assets for the year ended December 31, 2017 was 4.49%, a 23 basis point increase from the year ended December 31, 2016, while the average cost of interest-bearing liabilities for the year ended December 31, 2017 was 0.91%, up 30 basis points from the year ended December 31, 2016.

Net interest income increased by $41.2 million, or 17.1%, to $282.3 million for the year ended December 31, 2016 from $241.1 million for the year ended December 31, 2015. The net interest margin decreased by 21 basis points to 3.79% for

48

the year ended December 31, 2016 from 4.00% for the 2015 period. The net interest rate spread decreased by 23 basis points to 3.65% for the year ended December 31, 2016 from 3.88% for the 2015 period. The average yield on earning assets for the year ended December 31, 2016 was 4.26%, a ten basis point decrease from the year ended December 31, 2015, which was primarily due to a decrease in acquisition-related accretion income recorded during the 2016 period compared to the 2015 period, as well as lower yields earned on loans in the 2016 period. The average cost of interest-bearing liabilities for the year ended December 31, 2016 was 0.61%, up 13 basis points from the year ended December 31, 2015.

Provision for Credit Losses. The provision for credit losses was $39.5 million for the year ended December 31, 2017, an increase of $12.6 million from $26.9 million for the year ended December 31, 2016. The increase in the provision for credit losses was primarily related to increased loan loss reserves allocated to the corporate healthcare finance portfolio, which is reported on the balance sheet in the commercial and industrial loan category and totaled $38.0 million at December 31, 2017. During the first quarter of 2017, the Company charged-off its $16.4 million interest in a large syndicated credit within the corporate healthcare finance portfolio. Also, during the third quarter of 2017, the Company charged-off $11.9 million on the resolution of two reserve-based energy relationships, which also contributed to the higher provision expense. For more information about the Company's allowance for loan losses, please see "Management's Discussion and Analysis - Comparison of Financial Condition at December 31, 2017 and December 31, 2016 - Allowance for Loan Losses" contained in Item 7 of this report.

The provision for credit losses was $26.9 million for the year ended December 31, 2016, an increase of $1.4 million from $25.5 million for the year ended December 31, 2015. The increase in the provision for credit losses compared to the 2015 period was primarily related to elevated qualitative reserve factors applied to the energy portfolio due to sustained economic and regulatory uncertainty surrounding energy loans, as well as increased loan production in the 2016 period. The allowance for loan losses allocated to energy loans at December 31, 2016 totaled $19.2 million, up $7.2 million from $12.0 million at December 31, 2015. Provision for credit losses also included a $1.5 million expense recorded to establish a reserve for credit losses on off-balance sheet commitments, which resulted from the expansion of our lending business, as well as recent increased diversification of the types of off-balance sheet commitments offered by the Bank.

Non-interest Income. Non-interest income decreased by $8.3 million, or 16.1%, to $43.6 million for the year ended December 31, 2017, from $51.9 million for the year ended December 31, 2016. For the year ended December 31, 2016, non-interest income increased by $7.1 million, or 15.9%, from $44.8 million for the year ended December 31, 2015.

	Years Ended December 31,							Change
	2017			2016		2015		2017 versus 2016					2016 versus 2015
(Dollars in thousands)								Dollar			Percent		Dollar			Percent
Non-interest income
Service charges and other fees	$	35,742		$	36,690	$	30,936	$	(948	)	(2.6	)%	$	5,754		18.6	%
Net gain on sale of mortgage loans held for sale	7,322			8,225		8,036		(903		)	(11.0	)	189			2.4
Bank-owned life insurance income	1,727			1,744		1,699		(17		)	(1.0	)	45			2.6
Net gain (loss) on securities transactions	(39		)	56		203		(95		)	N/M1		(147		)	N/M1
Gain (loss) on sale and disposition of assets	(1,572		)	3,356		873		(4,928		)	N/M1		2,483			N/M1
Other	402			1,860		3,068		(1,458		)	(78.4	)	(1,208		)	(39.4	)
	$	43,582		$	51,931	$	44,815	$	(8,349	)	(16.1	)%	$	7,116		15.9	%

¹ N/M - not meaningful

The decrease in non-interest income for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to a $4.9 million decrease in gain (loss) on sale and disposition of assets, which included a $3.9 million write-down on a foreclosed property in the 2017 period. This write-down was partially offset by $1.7 million in gains recorded in the 2017 period on the sale of one branch location and one parcel of land. Comparatively, gain (loss) on sale and disposition of assets for the year ended December 31, 2016 included gains totaling $5.1 million recorded on the sale of two buildings and the Company's insurance subsidiary operations; this $5.1 million in gains was partially offset by a $1.5 million loss recorded in 2016 on the sale of the Company's Federal Housing Administration ("FHA") loan portfolio and a $407,000 loss on the sale of a foreclosed property. Other non-interest income declined by $1.5 million for the year ended December 31, 2017 compared to the year ended December 31, 2016, primarily due to $1.3 million in income recorded from insurance activities in 2016, which was not repeated in the 2017 period due to the above-mentioned sale of the Company’s insurance subsidiary operations. Service charges and other fees decreased by $948,000 for the year ended December 31, 2017 compared to December 31, 2016

49

due to a $591,000 decrease in title premiums, a $522,000 decrease in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees), a $363,000 decrease in insufficient funds fees, and a $328,000 decrease in brokerage income after the Company discontinued its brokerage services in 2017. These decreases in service charges and other fees compared to the 2016 period were partially offset by a $768,000 increase in Warehouse Purchase Program fee income due to increased volume in that loan portfolio during 2017.

The increase in non-interest income for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to a $5.8 million increase in service charges and other fees, which included a $3.0 million increase in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees), a $1.0 million increase in debit card interchange income, a $695,000 incentive payment received from Mastercard for 2015 transaction performance, a $699,000 increase in title premiums and a $474,000 increase in Warehouse Purchase Program fee income due to increased volume in that loan portfolio. These increases in service charges and other fees for the year ended December 31, 2016 compared to the 2015 period were partially offset by a decline of $671,000 in insufficient funds fees. Gain on sale and disposition of assets for the year ended December 31, 2016 included a $3.9 million gain recorded on the sale of two buildings and a $1.2 million gain recorded on the 2016 sale of our insurance subsidiary operations, which were partially offset by a loss of $1.5 million on the 2016 sale of our Federal Housing Administration ("FHA") loan portfolio and a loss of $407,000 recorded in the 2016 period on the sale of a foreclosed property. Other non-interest income declined by $1.2 million for the year ended December 31, 2016 compared to the year ended December 31, 2015, primarily due to $1.6 million less income recorded in the 2016 period from insurance activities due to the above-mentioned sale of our insurance subsidiary operations. Partially offsetting this decline in other non-interest income for the year ended December 31, 2016 was $498,000 in swap fee income recorded on interest rate derivative positions with our customers, with only $227,000 in comparable income recognized during the 2015 period.

Non-interest Expense. Non-interest expense increased by $4.0 million, or 2.5%, to $160.3 million for the year ended December 31, 2017, from $156.4 million for the year ended December 31, 2016. For the year ended December 31, 2016, non-interest expense increased by $4.8 million, or 3.2%, from $151.6 million for the year ended December 31, 2015.

	Years Ended December 31,						Change
	2017		2016		2015		2017 versus 2016					2016 versus 2015
(Dollars in thousands)							Dollar			Percent		Dollar			Percent
Non-interest expense
Salaries and employee benefits	$	95,136	$	92,568	$	92,527	$	2,568		2.8	%	$	41		—	%
Merger and acquisition costs	—		—		1,553		—			—		(1,553		)	(100.0	)
Advertising	4,378		3,861		3,773		517			13.4		88			2.3
Occupancy and equipment	14,385		15,007		14,860		(622		)	(4.1	)	147			1.0
Outside professional services	4,889		3,872		3,332		1,017			26.3		540			16.2
Regulatory assessments	4,479		4,948		4,260		(469		)	(9.5	)	688			16.2
Data processing	16,796		14,974		11,278		1,822			12.2		3,696			32.8
Office operations	9,238		9,901		10,697		(663		)	(6.7	)	(796		)	(7.4	)
Other	11,043		11,246		9,275		(203		)	(1.8	)	1,971			21.3
	$	160,344	$	156,377	$	151,555	$	3,967		2.5	%	$	4,822		3.2	%

The increase in non-interest expense for the year ended December 31, 2017 compared to the year ended December 31, 2016 included a $2.6 million increase in salaries and employee benefits expense due to increases in base salaries and share-based compensation expense during the 2017 period, which were partially offset by decreased expense related to the payoff of one of the Company’s ESOP loans at the end of the third quarter of 2016, as well as lower performance-based incentives, health care costs, and an increase in deferred salary costs related to loan originations that will be accounted for over the lives of the related loans during the 2017 period. Data processing expense increased by $1.8 million during the year ended December 31, 2017 compared to the prior year, as the Company transitioned to outsourcing certain segments of its data processing, as well as upgraded systems to enhance customer service and increase operating efficiency. Outside professional services expense increased by $1.0 million during the year ended December 31, 2017 compared to the prior year due to increased legal and compliance costs in the 2017 period, while advertising expense increased by $517,000 due to a higher number of events and sponsorships. These increased costs for the 2017 period were partially offset by a $663,000 decrease in office operations expense related to renegotiated contracts and closed locations, as well as a $622,000 decrease in occupancy and equipment

50

expense, which included an early termination fee collected from a tenant. Regulatory assessments expense also decreased by $469,000 for the year ended December 31, 2017 compared to the year ended December 31, 2016 due to a lower FDIC assessment rate in the 2017 period, which was related to a $17.0 million decline in non-performing loans, which impacts our assessment rate.

The increase in non-interest expense for the year ended December 31, 2016 compared to the year ended December 31, 2015 included a $3.7 million increase in data processing expense primarily related to increased expenses for debit card issuance and processing services, as the Bank has converted all debit cards to the Europay, Mastercard and Visa ("EMV") chip technology to reduce future fraud, as well as increased costs compared to the prior year for system upgrades to enhance customer service and increase operating efficiency. Other non-interest expense increased by $2.0 million for the year ended December 31, 2016 compared to the 2015 period due to an increase in debit card fraud losses in the 2016 period. During 2016, we identified $1.3 million of debit card fraud losses that were directly related to a breach in a franchised restaurant’s point of sale (“POS”) system that had been ongoing since the fall of 2015. The Company has identified all compromised cards related to this breach, and all cards were reissued prior to the end of the third quarter of 2016. Regulatory assessments expense increased by $688,000 during the year ended December 31, 2016 based on increases to our asset size and balance of non-performing loans in the 2016 period (which increases our assessment rate). Outside professional services expense increased by $540,000 during the year ended December 31, 2016 due to increased consulting costs in the 2016 period. Salaries and employee benefits expense for the year ended December 31, 2016 included increases in base salary expense, incentive expense, health care costs, and share-based compensation expense, as the number of full-time equivalent employees increased to 885 at December 31, 2016, from 840 at December 31, 2015. These increases to salaries and employee benefits expense for the year ended December 31, 2016 were partially offset by decreased expense related to the payoff of one of the Company’s ESOP loans at the end of the third quarter of 2016, an increase in deferred salary costs related to loan originations that will be accounted for over the lives of the related loans, and a reduction in salary costs due to the sale of our insurance subsidiary operations in the second quarter of 2016. Non-interest expense for the year ended December 31, 2015 was reduced by $1.6 million in merger and acquisition costs related to the 2015 merger with LegacyTexas Group, Inc.

Income Tax Expense. For the year ended December 31, 2017, we recognized income tax expense of $65.7 million on our pre-tax income, which was an effective tax rate of 42.3%, compared to income tax expense of $53.1 million for the year ended December 31, 2016, which was an effective tax rate of 35.2%. The increase in the effective tax rate was primarily due to a $13.5 million income tax expense adjustment to the Company's deferred tax asset related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act. The Company is still analyzing certain aspects of the Tax Cuts and Jobs Act, and refining its calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The Company estimates that its effective tax rate for 2018 will be approximately 20%.

Also impacting the Company's effective tax rate for the 2017 period was the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, in the 2017 period, which changed the tax effect of the difference between the amount of share-based compensation cost recognized for financial reporting purposes and the amount deducted on the Company's tax return for share-based payment awards. Previously, the tax effects of income tax deductions in excess of compensation cost (windfalls) and the tax effects of compensation cost in excess of income tax deductions (shortfalls) were recorded in equity to the extent of previously recognized windfalls, with the remainder recorded in income tax expense.  Under ASU 2016-09, all tax effects of windfalls and shortfalls related to share-based payments are recorded through the income statement. For more information about the Company's income taxes, please see Note 14 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

During the fourth quarter of 2017, the Company filed an advance consent application for change in accounting method with the Internal Revenue Service (the "IRS") to change the Company's tax method of accounting for its loan portfolio. The application will require affirmative consent of the IRS, which the Company has not yet received. This potential change in the income tax accounting treatment of the Company's loan portfolio could potentially impact the Company's deferred tax asset and income tax expense in 2018.

For the year ended December 31, 2016, we recognized income tax expense of $53.1 million on our pre-tax income, which was an effective tax rate of 35.2%, compared to income tax expense of $38.0 million for the year ended December 31, 2015, which was an effective tax rate of 34.9%. The increase in the effective tax rate was primarily due to the significant difference between the book and tax basis of LegacyTexas Insurance Services, which was sold in 2016.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Also presented are the weighted average yields on interest-earning assets, rates paid on interest- bearing liabilities and the resultant spread. All average balances are daily average balances. Non-accruing loans have been included in the table as loans carrying a zero yield.

	Years Ended December 31,
	2017							2016							2015
	Average Outstanding Balance			Interest Earned/Paid		Yield/ Rate		Average Outstanding Balance			Interest Earned/Paid		Yield/ Rate		Average Outstanding Balance			Interest Earned/Paid		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Commercial real estate	$	2,848,548		$	144,117	5.06	%	$	2,448,730		$	124,857	5.10	%	$	1,940,113		$	101,469	5.23	%
Warehouse Purchase Program	907,097			34,156		3.77		1,004,797			33,094		3.29		808,163			27,041		3.35
Commercial and industrial	2,001,795			98,758		4.93		1,713,845			76,968		4.49		1,307,743			60,609		4.63
Construction and land	284,227			14,559		5.12		282,087			14,819		5.25		238,904			13,660		5.72
Consumer real estate	1,150,583			52,337		4.55		1,015,324			47,615		4.69		836,020			40,741		4.87
Other consumer	48,887			2,736		5.60		61,548			3,485		5.66		80,648			4,440		5.51
Loans held for sale	19,792			775		3.92		19,991			704		3.52		18,818			705		3.75
Less: deferred fees and allowance for loan loss	(67,592		)	—		—		(54,593		)	—		—		(34,478		)	—		—
Loans receivable 1	7,193,337			347,438		4.83		6,491,729			301,542		4.65		5,195,931			248,665		4.79
Agency mortgage-backed securities	312,276			6,617		2.12		344,119			6,996		2.03		341,406			6,857		2.01
Agency collateralized mortgage obligations	174,252			4,072		2.34		91,161			2,072		2.27		112,415			2,239		1.99
Investment securities	107,810			3,018		2.80		128,071			3,238		2.53		117,810			3,206		2.72
FHLB and FRB stock and other restricted securities	49,922			1,703		3.41		56,922			1,626		2.86		58,710			1,094		1.86
Interest-earning deposit accounts	331,258			4,009		1.21		339,325			1,878		0.55		194,301			631		0.32
Total interest-earning assets	8,168,855			366,857		4.49		7,451,327			317,352		4.26		6,020,573			262,692		4.36
Non-interest-earning assets	438,626							430,554							422,425
Total assets	$	8,607,481						$	7,881,881						$	6,442,998
Interest-bearing liabilities:
Interest-bearing demand	$	876,518		5,475		0.62		$	805,059		3,974		0.49		$	722,225		3,297		0.46
Savings and money market	2,782,336			16,845		0.61		2,370,366			7,288		0.31		1,895,809			3,644		0.19
Time	1,360,731			14,374		1.06		1,250,667			9,772		0.78		882,196			6,186		0.70
Borrowings	1,092,547			18,732		1.71		1,287,342			14,049		1.09		1,014,279			8,488		0.84
Total interest-bearing liabilities	6,112,132			55,426		0.91		5,713,434			35,083		0.61		4,514,509			21,615		0.48
Non-interest-bearing demand	1,451,258							1,240,712							1,077,310
Non-interest-bearing liabilities	114,188							78,947							73,771
Total liabilities	7,677,578							7,033,093							5,665,590
Total shareholders’ equity	929,903							848,788							777,408
Total liabilities and shareholders’ equity	$	8,607,481						$	7,881,881						$	6,442,998
Net interest income and margin				$	311,431	3.81	%				$	282,269	3.79	%				$	241,077	4.00	%
Net interest income and margin (tax-equivalent basis) 2				$	312,448	3.82	%				$	283,338	3.80	%				$	242,128	4.02	%
Net interest rate spread						3.58	%						3.65	%						3.88	%
Net earning assets	$	2,056,723						$	1,737,893						$	1,506,064
Average interest-earning assets to average interest-bearing liabilities	133.65		%					130.42		%					133.36		%

¹  Calculated net of deferred fees and costs, loan discounts, loans in process and allowance for loan losses.

²  In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax-equivalent adjustment (a non-GAAP measure) has been computed using a federal income tax rate of 35% for 2017, 2016, and 2015. Tax-exempt investments and loans had an average balance of $100.5 million, $106.0 million and $104.8 million for the years ended December 31, 2017, 2016, and 2015, respectively.

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Rate/Volume Analysis

The following schedule presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and those due to changes in interest rates. The change in interest attributable to rate has been determined by applying the change in rate between periods to average balances outstanding in the earlier period. The change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstanding between periods. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.

	Years Ended December 31,
	2017 versus 2016									2016 versus 2015
	Increase (Decrease) Due to						Total Increase			Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(Dollars in thousands)
Interest-earning assets:
Commercial real estate	$	20,235		$	(975	)	$	19,260		$	25,992		$	(2,604	)	$	23,388
Warehouse Purchase Program	(3,404		)	4,466			1,062			6,483			(430		)	6,053
Commercial and industrial	13,735			8,055			21,790			18,291			(1,932		)	16,359
Construction and land	112			(372		)	(260		)	2,331			(1,172		)	1,159
Consumer real estate	6,188			(1,466		)	4,722			8,458			(1,584		)	6,874
Other consumer	(709		)	(40		)	(749		)	(1,078		)	123			(955		)
Loans held for sale	(7		)	78			71			43			(44		)	(1		)
Loans receivable	36,150			9,746			45,896			60,520			(7,643		)	52,877
Agency mortgage-backed securities	(666		)	287			(379		)	55			84			139
Agency collateralized mortgage obligations	1,940			60			2,000			(457		)	290			(167		)
Investment securities	(545		)	325			(220		)	268			(236		)	32
FHLB and FRB stock and other restricted securities	(215		)	292			77			(34		)	566			532
Interest-earning deposit accounts	(46		)	2,177			2,131			642			605			1,247
Total interest-earning assets	36,618			12,887			49,505			60,994			(6,334		)	54,660
Interest-bearing liabilities:
Interest-bearing demand	376			1,125			1,501			396			281			677
Savings and money market	1,453			8,104			9,557			1,073			2,571			3,644
Time	921			3,681			4,602			2,816			770			3,586
Borrowings	(2,380		)	7,063			4,683			2,611			2,950			5,561
Total interest-bearing liabilities	370			19,973			20,343			6,896			6,572			13,468
Net interest income	$	36,248		$	(7,086	)	$	29,162		$	54,098		$	(12,906	)	$	41,192

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Liquidity

Management maintains a liquidity position that it believes will adequately provide funding for loan demand and deposit run-off that may occur in the normal course of business. We rely on a number of different sources in order to meet our potential liquidity demands. The primary sources are increases in deposit accounts and cash flows from loan payments and the securities portfolio.

In addition to the primary sources of funds, management has several secondary sources available to meet potential funding requirements. At December 31, 2017, we had an additional borrowing capacity of $2.08 billion with the FHLB. Also, at December 31, 2017, we had $250.0 million in federal funds lines of credit available with other financial institutions. We may also use the discount window at the FRB as a source of short-term funding. FRB borrowing capacity varies based upon securities pledged to the discount window line. At December 31, 2017, securities pledged had a collateral value of $78.6 million.

At December 31, 2017, we had classified 70.8% of our securities portfolio as available for sale (including pledged securities), providing an additional source of liquidity. Management believes that because active markets exist and our securities portfolio is of high quality, our available for sale securities are marketable. Selling participations in loans we originate, including portions of commercial real estate loans, creates another source of liquidity and allows us to manage borrower concentration risk, as well as interest rate risk.

Liquidity management is both a daily and long-term function of business management. Short-term excess liquidity is generally placed in short-term investments, such as overnight deposits at the FRB and correspondent banks. On a longer term basis, we maintain a strategy of investing in various lending products and investment securities, including mortgage-backed securities.

Planning for our normal business liquidity needs, both expected and unexpected, is done on a daily and short-term basis through the cash management function. On a longer-term basis it is accomplished through the budget and strategic planning functions, with support from internal asset/liability management software model projections.

The Liquidity Committee monitors liquidity positions and projections. Liquidity contingency planning is part of the Committee's process by focusing on possible scenarios that would stress liquidity beyond the Bank's normal business liquidity needs. These scenarios may include macro-economic and bank specific situations focusing on high probability-high impact, high probability-low impact, low probability-high impact, and low probability-low impact stress events.

Management recognizes that the factors and conditions leading up to and occurring during a liquidity stress event cannot be precisely defined or listed. Nevertheless, management believes that liquidity stress events can be categorized into sources and uses of liquidity, and levels of severity, with responses that apply to various situations.

The Company, which is a separate legal entity from the Bank and must provide for its own liquidity, had liquid assets of $26.7 million on an unconsolidated basis at December 31, 2017. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders, funds paid out for Company stock repurchases, and payments on trust-preferred securities and subordinated debt held at the Company level. The Company has the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. See “How We Are Regulated - Limitations on Dividends and Other Capital Distributions” under Item 1 and Note 16 of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

The Bank uses its sources of funds primarily to meet its expenses, pay maturing deposits and fund withdrawals, and to fund loan commitments. Total approved loan commitments (including Warehouse Purchase Program commitments, unused lines of credit and letters of credit) amounted to $2.37 billion and $2.56 billion at December 31, 2017 and 2016, respectively. It is management's policy to offer deposit rates that are competitive with other local financial institutions. Based on this management strategy, we believe that a majority of maturing deposits will remain with the Bank. Certificates of deposit scheduled to mature in one year or less at December 31, 2017 totaled $860.1 million with a weighted average rate of 1.16%.

During the year ended December 31, 2017, cash and cash equivalents increased by $4.2 million, or 1.5%, to $293.5 million at December 31, 2017 from $289.2 million at December 31, 2016. Operating activities provided cash of $189.0 million and financing activities provided cash of $585.1 million, which was partially offset by cash used in investing activities of $769.9 million. Primary sources of cash for the year ended December 31, 2017 included proceeds from pay-offs of Warehouse Purchase Program loans totaling $21.82 billion, proceeds from FHLB advances of $825.0 million and maturities, prepayments and calls of available for sale securities of $2.03 billion. Primary uses of cash for the year ended December 31, 2017 included originations of Warehouse Purchase Program loans totaling $21.92 billion, repayments on FHLB advances of $615.5 million,

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net funding of loans held for investment of $620.1 million and purchases of available for sale securities of $2.10 billion.

Please see Item 1A (Risk Factors) contained in Part 1 of this Form 10-K for information regarding liquidity risk.

Off-Balance Sheet Arrangements, Contractual Obligations and Commitments

The following table presents our contractual obligations and commitments to make future payments as of December 31, 2017. Commitments to extend credit to our borrowers are shown in aggregate and by payment due dates (not including any interest amounts). In addition to the commitments below, we had overdraft protection available to the Bank's depositors in the amount of $84.7 million and credit card guarantees outstanding in the amount of $5.3 million at December 31, 2017.

	December 31, 2017
	Less than One Year		One through Three Years		Four through Five Years		After Five Years		Total
	(Dollars in thousands)
Contractual obligations:
Deposits without a stated maturity	$	5,400,293	$	—	$	—	$	—	$	5,400,293
Certificates of deposit	860,102		424,780		78,835		3,673		1,367,390
FHLB advances 1	1,037,754		3,245		1,551		613		1,043,163
Repurchase agreements	84,676		—		—		—		84,676
Subordinated debt 1	—		—		—		140,464		140,464
Private equity fund for Community Reinvestment Act purposes	1,680		—		—		—		1,680
Operating leases (premises)	5,725		9,765		8,178		16,303		39,971
Total contractual obligations	$	7,390,230	$	437,790	$	88,564	$	161,053	8,077,637
Off-balance sheet loan commitments: 2
Unused commitments to extend credit	$	840,766	$	531,437	$	170,109	$	58,482	1,600,794
Unused capacity on Warehouse Purchase Program loans 3	611,412		127,000		—		—		738,412
Standby letters of credit	28,229		4,970		892		—		34,091
Total loan commitments	$	1,480,407	$	663,407	$	171,001	$	58,482	2,373,297
Total contractual obligations and loan commitments									$	10,450,934

¹  FHLB advances and subordinated debt are shown at their contractual amounts. Please see Note 11 of the Notes to Consolidated Financial Statements contained in Item 8 of this report for more information regarding adjustments to the contractual amount.

²  Loans having no stated maturity are reported in the “Less than One Year” category.

³  In regards to unused capacity on Warehouse Purchase Program loans, the Company has established a maximum purchase facility amount, but reserves the right, at any time, to refuse to buy any mortgage loans offered for sale by its mortgage banking company customers for any reason in the Company's sole and absolute discretion.

Capital Resources

The Bank and the Company are regulated by the TDOB and the FRB. Consistent with our goal to operate a sound and profitable organization, our policy is for the Company and its subsidiary bank to maintain “well-capitalized” status under the FRB regulations. Based on capital levels at December 31, 2017 and 2016, the Bank and the Company were considered to be well-capitalized. See “How We Are Regulated - Regulatory Capital Requirements.”

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At December 31, 2017, the Bank's equity totaled $1.04 billion. The Company's consolidated equity totaled $959.9 million, or 10.6% of total assets, at December 31, 2017. Warehouse Purchase Program loan volumes can increase significantly on the last day of the month, potentially leading to a significant difference between the ending and average balance of Warehouse Purchase Program loans. At December 31, 2017, Warehouse Purchase Program loans totaled $1.15 billion, compared to an average balance of $1.01 billion for the year then ended. Because the capital ratios below are calculated using ending risk-weighted assets and Warehouse Purchase Program loans are risk-weighted at 100%, the end of period increase in these balances can significantly impact the Company's reported capital ratios.

	Actual				Required for Capital Adequacy Purposes				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2017	(Dollars in Thousands)
Total risk-based capital
Company	$	991,713	11.87	%	$	668,142	8.00	%	$	835,178	10.00	%
Bank	939,655		11.25		668,096		8.00		835,120		10.00
Tier 1 risk-based capital
Company	796,887		9.54		501,107		6.00		501,107		6.00
Bank	867,424		10.39		501,072		6.00		668,096		8.00
Common equity tier 1 risk-based capital
Company	784,960		9.40		375,830		4.50		n/a1		n/a1
Bank	867,424		10.39		375,804		4.50		542,828		6.50
Tier 1 leverage
Company	796,887		9.17		347,731		4.00		n/a1		n/a1
Bank	867,424		9.98		347,808		4.00		434,759		5.00
December 31, 2016
Total risk-based capital
Company	$	910,040	11.71	%	$	621,870	8.00	%	$	777,338	10.00	%
Bank	869,523		11.19		621,840		8.00		777,300		10.00
Tier 1 risk-based capital
Company	721,600		9.28		466,403		6.00		466,403		6.00
Bank	803,374		10.34		466,380		6.00		621,840		8.00
Common equity tier 1 risk-based capital
Company	709,858		9.13		349,802		4.50		n/a1		n/a1
Bank	803,374		10.34		349,785		4.50		505,245		6.50
Tier 1 leverage
Company	721,600		8.73		330,782		4.00		n/a1		n/a1
Bank	803,374		9.71		330,873		4.00		413,591		5.00

¹ Not applicable

Pursuant to capital regulations adopted by the FRB and the other federal banking agencies, the Company and the Bank must maintain a capital conservation buffer consisting of additional common equity tier 1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. The capital conservation buffer requirement became effective on January 1, 2016, when a buffer of greater than 0.625% of risk-weighted assets was required. The buffer was 1.25% of risk-weighted assets as of December 31, 2017. It will increase each year until the buffer requirement is fully implemented on January 1, 2019, when the buffer must exceed 2.5% of risk-weighted assets. At December 31, 2017, the Company's and the Bank's common equity tier 1 capital exceeded the required capital conservation buffer.

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Impact of Inflation

The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the economic value of total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timing nor the magnitude of changes in the consumer price index (“CPI”) coincides with changes in interest rates or asset values. For example, the price of one or more of the components of the CPI may fluctuate considerably, influencing composite CPI, without having a corresponding effect on interest rates, asset values, or the cost of those goods and services normally purchased by the Bank. In years of high inflation, intermediate and long-term interest rates tend to increase, adversely impacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, high inflation may lead to higher short-term interest rates, which tend to increase the cost of funds. In years of low inflation, the opposite may occur.

Recent Accounting Pronouncements

For discussion of Recent Accounting Pronouncements, please see Note 1 — Adoption of New Accounting Standards and Note 1 — Effect of Newly Issued But Not Yet Effective Accounting Standards of the Notes to Consolidated Financial Statements contained in Item 8 of this report.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. However, market rates change over time. Like other financial institutions, our results of operations are impacted by changes in market interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in market interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in market interest rates and comply with applicable regulations, we calculate and monitor our interest rate risk. In doing so, we analyze and manage assets and liabilities based on their interest rates and contractual cash flows, timing of maturities, prepayment potential, repricing opportunities, and sensitivity to actual or potential changes in market interest rates.

We are subject to interest rate risk to the extent that our interest-bearing liabilities, primarily deposits, FHLB advances and other borrowings, reprice more rapidly or slowly, or at different rates (basis risk) than our interest-earning assets, primarily loans and investment securities.

The Bank calculates interest rate risk by entering relevant contractual and projected information into its asset/liability management software simulation model. Data required by the model includes balance, rate, pay down schedule, and maturity. For items that contractually reprice, the repricing index, spread, and frequency are entered, including any initial, periodic, and lifetime interest rate caps and floors.

The Bank has adopted an asset and liability management policy. This policy sets the foundation for monitoring and managing the potential for adverse effects of material prolonged increases or decreases in interest rates on our results of operations. The Board of Directors sets the asset and liability policy for the Bank, which is implemented by the Asset/Liability Management Committee.

The purpose of the Asset/Liability Management Committee is to monitor, communicate, coordinate, and direct asset/liability management consistent with our business plan and board-approved policies. The Committee directs and monitors the volume and mix of assets and funding sources, taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, interest rate risk, growth, and profitability goals.

The Committee meets on a quarterly basis to, among other things, protect capital through earnings stability over the interest rate cycle, maintain our well-capitalized status, and provide a reasonable return on investment. The Committee recommends appropriate strategy changes based on this review. The Committee is responsible for reviewing and reporting the effects of policy implementation and strategies to the Board of Directors at least quarterly. Senior managers oversee the process on a daily basis.

A key element of the Bank’s asset/liability management strategy is to protect earnings by managing the inherent maturity and repricing mismatches between its interest-earning assets and interest-bearing liabilities. The Bank generally

57

manages such earnings exposure through the addition of loans, investment securities and deposits with risk mitigating characteristics and by entering into appropriate term FHLB advance agreements.

As part of its efforts to monitor and manage interest rate risk, the Bank uses the economic value of equity (“EVE”) methodology adopted by the Federal Financial Institutions Examination Council ("FFEIC") as part of its capital regulations. In essence, the EVE approach calculates the difference between the present value of expected cash flows from assets and liabilities. In addition to monitoring selected measures of EVE, management also calculates and monitors potential effects on net interest income resulting from increases or decreases in market interest rates. This approach uses the earnings at risk (“EAR”) methodology adopted by the Joint Agency Policy Statement on Interest Rate Risk as part of its capital regulations. EAR calculates estimated net interest income using a flat balance sheet approach over a twelve month time horizon. The EAR process is used in conjunction with EVE measures to identify interest rate risk on both a global and account level basis. Management and the Board of Directors review EVE and EAR measurements at least quarterly to review historical trends, projected measurements, and to determine whether the Bank's interest rate exposure is within the limits established by the Board of Directors.

The Bank's asset/liability management strategy sets acceptable limits for the percentage change in EVE and EAR given changes in interest rates. For an instantaneous, parallel, and sustained interest rate increase or decrease of 100 basis points, the Bank's policy indicates that EVE should not decrease by more than 5%, and for increases of 200, 300, and 400 basis points, EVE should not decrease by more than 10%, 12.5%, and 15%, respectively.  For an instantaneous, parallel, and sustained interest rate increase or decrease of 100 basis points, the Bank's policy indicates that EAR should not decrease by more than 7%, and for increases of 200, 300, and 400 basis points, EAR should not decrease by more than 10%, 13%, and 15%, respectively.

As illustrated in the tables below, the Bank was within policy limits for all scenarios tested. The tables presented below, as of December 31, 2017, and 2016, are internal analyses of our interest rate risk as measured by changes in EVE and EAR for instantaneous, parallel, and sustained shifts for all market rates and yield curves, in 100 basis point increments, up 400 basis points and down 100 basis points.

As illustrated in the tables below, our EVE would be negatively impacted by a parallel, instantaneous, and sustained increase in market rates. Such an increase in rates would negatively impact EVE as a result of the duration of assets, including loans and investments, being longer than the duration of liabilities, primarily deposit accounts and FHLB borrowings. As illustrated in the table below at December 31, 2017, our EAR would be positively impacted by a parallel, instantaneous, and sustained increase in market rates of 100, 200, 300, or 400 basis points.

Change in Interest Rates in Basis Points		Economic Value of Equity						Earnings at Risk (12 months)
		Estimated EVE	Estimated Increase / (Decrease) in EVE				EVE Ratio %	Estimated Net Interest Income	Increase / (Decrease) in Estimated Net Interest Income
		$ Amount	$ Change		% Change			$ Amount	$ Change		% Change
December 31, 2017		(Dollars in thousands)
400		1,250,757	(125,669	)	(9.13	)	14.89	358,384	15,210		4.43
300		1,289,760	(86,666	)	(6.30	)	15.09	355,186	12,012		3.50
200		1,322,187	(54,239	)	(3.94	)	15.21	351,794	8,620		2.51
100		1,348,578	(27,848	)	(2.02	)	15.26	348,173	4,999		1.46
—		1,376,426	—		—		15.34	343,174	—		—
(100	)	1,315,702	(60,724	)	(4.41	)	14.45	334,954	(8,220	)	(2.40	)
December 31, 2016
400		1,137,560	(127,508	)	(10.08	)	14.74	312,457	1,807		0.58
300		1,180,103	(84,965	)	(6.72	)	15.02	312,109	1,459		0.47
200		1,216,125	(48,943	)	(3.87	)	15.21	311,549	899		0.29
100		1,248,129	(16,939	)	(1.34	)	15.34	310,953	303		0.10
—		1,265,068	—		—		15.30	310,650	—		—
(100	)	1,230,570	(34,498	)	(2.73	)	14.64	297,726	(12,924	)	(4.16	)

58

The Bank's EVE was $1.38 billion, or 15.34%, of the market value of portfolio assets as of December 31, 2017, an $111.4 million increase from $1.27 billion, or 15.30%, of the market value of portfolio assets as of December 31, 2016. Based upon the assumptions utilized, an immediate 200 basis point increase in market interest rates would result in a $54.2 million decrease in our EVE at December 31, 2017, compared to a $48.9 million decrease at December 31, 2016, and would result in a 13 basis point decrease in our EVE ratio to 15.21% at December 31, 2017, compared to a nine basis point decrease to 15.21% at December 31, 2016. An immediate 100 basis point decrease in market interest rates would result in a $60.7 million decrease in our EVE at December 31, 2017, compared to a $34.5 million decrease at December 31, 2016, and would result in an 89 basis point decrease in our EVE ratio to 14.45% at December 31, 2017, compared to a 66 basis point decrease in our EVE ratio to 14.64% at December 31, 2016.

The Bank's projected EAR for the twelve months ending December 31, 2018 was measured at $343.2 million, compared to $310.7 million for the twelve months ended December 31, 2017. Based on the assumptions utilized, an immediate 200 basis point increase in market rates would result in an $8.6 million, or 2.51%, increase in net interest income for the twelve months ending December 31, 2018, compared to an $899,000, or 0.29%, increase for the twelve months ended December 31, 2017. An immediate 100 basis point decrease in market rates would result in an $8.2 million decrease in net interest income for the twelve months ending December 31, 2018, compared to a $12.9 million decrease for the twelve months ended December 31, 2017.

We have implemented a strategic plan to mitigate interest rate risk. This plan includes the ongoing review of our current and projected mix of fixed rate versus variable rate loans, investments, deposits, and borrowings. When available and appropriate, high quality adjustable rate assets are purchased or originated. These assets generally may reduce our sensitivity to upward interest rate shocks. On the liability side of the balance sheet, borrowings are added as appropriate. These borrowings will be of a size and term so as to mitigate the impact of duration mismatches, reducing our sensitivity to upward interest rate shocks. These strategies are implemented as needed and as opportunities arise to mitigate interest rate risk without materially sacrificing earnings.

In managing our mix of assets and liabilities, while considering the relationship between long and short term interest rates, market conditions, and consumer preferences, we may place somewhat greater emphasis on maintaining or increasing the Bank's net interest margin than on strictly matching the interest rate sensitivity of its assets and liabilities.

Management also believes that at times the increased net income which may result from a mismatch in the actual maturity, repricing, or duration of its asset and liability portfolios can provide sufficient returns to justify the increased exposure to sudden and unexpected increases or decreases in interest rates which may result from such a mismatch. Management believes that the Bank's level of interest rate risk is acceptable under this approach.

In evaluating the Bank's exposure to market interest rate movements, certain shortcomings inherent in the method of analysis presented in the foregoing table must be considered. For example, although certain assets and liabilities may have similar maturities or repricing characteristics, their interest rate drivers may react in different degrees to changes in market interest rates (basis risk). Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market interest rates. Additionally, certain assets, such as adjustable rate mortgages, have features which restrict changes in interest rates over the life of the asset (time to initial interest rate reset; interest rate reset frequency; initial, periodic, and lifetime caps and floors). Further, in the event of a significant change in market interest rates, loan and securities prepayment and time deposit early withdrawal levels may deviate significantly from those assumed in the table above. Assets with prepayment options and liabilities with early withdrawal options are being monitored, with assumptions stress tested on a regular basis. Current market rates and customer behavior are being considered in the management of interest rate risk. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. The Bank considers all of these factors in monitoring its exposure to interest rate risk. Of note, the current historically low interest rate environment has resulted in asymmetrical interest rate risk. The interest rates on certain repricing assets and liabilities cannot be fully shocked downward.

The Board of Directors and management believe that the Bank's ability to successfully manage and mitigate its exposure to interest rate risk is strengthened by several key factors. For example, the Bank manages its balance sheet duration and overall interest rate risk by placing a preference on originating and retaining adjustable rate loans. In addition, the Bank borrows at various maturities from the FHLB to mitigate mismatches between the asset and liability portfolios. Furthermore, the investment securities portfolio is used as a primary interest rate risk management tool through the duration and repricing targeting of purchases and sales.

59

Item 8. Financial Statements and Supplementary Data

LEGACYTEXAS FINANCIAL GROUP, INC.

FINANCIAL STATEMENTS

December 31, 2017, 2016, and 2015

INDEX

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	61
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets	62
Consolidated Statements of Income	63
Consolidated Statements of Comprehensive Income	64
Consolidated Statements of Changes in Shareholders’ Equity	65
Consolidated Statements of Cash Flows	66
Notes to Consolidated Financial Statements	68

60

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of LegacyTexas Financial Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of LegacyTexas Financial Group, Inc. (the "Company") as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 8, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009.

Dallas, Texas

February 8, 2018

61

CONSOLIDATED BALANCE SHEETS

Years ended December 31,

(Dollar amounts in thousands, except per share data)

	2017			2016
ASSETS
Cash and due from financial institutions	$	61,713		$	59,823
Short-term interest-bearing deposits in other financial institutions	231,743			229,389
Total cash and cash equivalents	293,456			289,212
Securities available for sale, at fair value	419,717			354,515
Securities held to maturity, (fair value: December 31, 2017 — $174,926, December 31, 2016 — $212,981)	173,509			210,387
Loans held for sale, at fair value	16,707			21,279
Loans held for investment:
Loans held for investment (net of allowance for loan losses of $71,301 at December 31, 2017 and $64,576 at December 31, 2016)	6,584,529			5,998,596
Loans held for investment - Warehouse Purchase Program	1,154,588			1,055,341
Total loans held for investment	7,739,117			7,053,937
Federal Home Loan Bank ("FHLB") stock and other restricted securities, at cost	64,790			43,266
Bank-owned life insurance	57,684			56,477
Premises and equipment, net	69,693			74,226
Goodwill	178,559			178,559
Other assets	72,964			80,397
Total assets	$	9,086,196		$	8,362,255
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest-bearing demand	$	1,635,622		$	1,383,951
Interest-bearing demand	1,029,375			903,314
Savings and money market	2,735,296			2,710,307
Time	1,367,390			1,367,904
Total deposits	6,767,683			6,365,476
FHLB advances	1,043,163			833,682
Repurchase agreements	84,676			86,691
Subordinated debt	134,522			134,032
Accrued expenses and other liabilities	96,278			57,009
Total liabilities	8,126,322			7,476,890
Commitments and contingent liabilities (See Note 17)
Shareholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized; 0 shares issued — December 31, 2017 and December 31, 2016	—			—
Common stock, $.01 par value; 90,000,000 shares authorized; 48,117,390 shares issued — December 31, 2017 and 47,876,198 shares issued — December 31, 2016	481			479
Additional paid-in capital	603,884			589,408
Retained earnings	370,858			310,641
Accumulated other comprehensive income (loss), net	(3,429		)	(2,713		)
Unearned Employee Stock Ownership Plan (ESOP) shares; 1,192,093 shares at December 31, 2017 and 1,245,046 shares at December 31, 2016	(11,920		)	(12,450		)
Total shareholders’ equity	959,874			885,365
Total liabilities and shareholders’ equity	$	9,086,196		$	8,362,255
See accompanying notes to consolidated financial statements.

62

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31,

(Dollar amounts in thousands, except per share data)

	2017			2016		2015
Interest and dividend income
Loans, including fees	$	347,438		$	301,542	$	248,665
Taxable securities	10,800			9,254		9,307
Nontaxable securities	2,907			3,052		2,995
Interest-bearing deposits in other financial institutions	4,009			1,878		631
FHLB and FRB stock and other	1,703			1,626		1,094
	366,857			317,352		262,692
Interest expense
Deposits	36,694			21,034		13,127
FHLB advances	9,650			7,167		6,552
Repurchase agreements and other borrowings	9,082			6,882		1,936
	55,426			35,083		21,615
Net interest income	311,431			282,269		241,077
Provision for credit losses	39,456			26,900		25,465
Net interest income after provision for credit losses	271,975			255,369		215,612
Non-interest income
Service charges and other fees	35,742			36,690		30,936
Net gain on sale of mortgage loans held for sale	7,322			8,225		8,036
Bank-owned life insurance income	1,727			1,744		1,699
Net gain (loss) on securities transactions	(39		)	56		203
Gain (loss) on sale and disposition of assets	(1,572		)	3,356		873
Other	402			1,860		3,068
	43,582			51,931		44,815
Non-interest expense
Salaries and employee benefits	95,136			92,568		92,527
Merger and acquisition costs	—			—		1,553
Advertising	4,378			3,861		3,773
Occupancy and equipment	14,385			15,007		14,860
Outside professional services	4,889			3,872		3,332
Regulatory assessments	4,479			4,948		4,260
Data processing	16,796			14,974		11,278
Office operations	9,238			9,901		10,697
Other	11,043			11,246		9,275
	160,344			156,377		151,555
Income before income tax expense	155,213			150,923		108,872
Income tax expense	65,719			53,102		37,956
Net income	$	89,494		$	97,821	$	70,916
Earnings per share:
Basic	$	1.91		$	2.11	$	1.54
Diluted	$	1.89		$	2.09	$	1.53
Dividends declared per share	$	0.61		$	0.58	$	0.54
See accompanying notes to consolidated financial statements.

63

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31,

(Dollar amounts in thousands)

	2017			2016			2015
Net income	$	89,494		$	97,821		$	70,916
Change in unrealized gains (losses) on securities available for sale	(1,144		)	(3,917		)	(1,434		)
Reclassification of amount realized through securities transactions	39			(56		)	(203		)
Tax effect	389			1,393			574
Other comprehensive income (loss), net of tax	(716		)	(2,580		)	(1,063		)
Comprehensive income	$	88,778		$	95,241		$	69,853
See accompanying notes to consolidated financial statements.

64

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Years ended December 31,

(Dollar amounts in thousands, except per share data)

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net			Unearned ESOP Shares			Total Shareholders’ Equity
Balance as of December 31, 2014	$	400		$	386,549		$	195,327		$	930		$	(14,983	)	$	568,223
Net income	—			—			70,916			—			—			70,916
Other comprehensive income (loss), net of tax	—			—			—			(1,063		)	—			(1,063		)
Dividends declared, ($0.54 per share)	—			—			(25,747		)	—			—			(25,747		)
ESOP shares earned, (184,194 shares)	—			4,284			—			—			1,467			5,751
Share-based compensation expense	—			5,477			—			—			—			5,477
Activity in employee stock plans, (138,855 shares)	1			1,283			—			—			—			1,284
Share repurchase, (357,950 shares)	(4		)	(7,985		)	—			—			—			(7,989		)
Acquisition of LegacyTexas Group, Inc., (7,850,070 shares)	79			187,145			—			—			—			187,224
Balance at December 31, 2015	476			576,753			240,496			(133		)	(13,516		)	804,076
Net income	—			—			97,821			—			—			97,821
Other comprehensive income (loss), net of tax	—			—			—			(2,580		)	—			(2,580		)
Dividends declared, ($0.58 per share)	—			—			(27,676		)	—			—			(27,676		)
ESOP shares earned, (120,411 shares)	—			2,889			—			—			1,066			3,955
Share-based compensation expense	—			6,014			—			—			—			6,014
Activity in employee stock plans, (230,372 shares)	3			3,752			—			—			—			3,755
Balance at December 31, 2016	479			589,408			310,641			(2,713		)	(12,450		)	885,365
Net income	—			—			89,494			—			—			89,494
Other comprehensive income (loss), net of tax	—			—			—			(716		)	—			(716		)
Dividends declared, ($0.61 per share)	—			—			(29,277		)	—			—			(29,277		)
ESOP shares earned, (52,953 shares)	—			2,304			—			—			530			2,834
Share-based compensation expense	—			7,462			—			—			—			7,462
Activity in employee stock plans, (241,192 shares)	2			4,710			—			—			—			4,712
Balance at December 31, 2017	$	481		$	603,884		$	370,858		$	(3,429	)	$	(11,920	)	$	959,874
See accompanying notes to consolidated financial statements.

65

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31,

(Dollar amounts in thousands)

	2017			2016			2015
Cash flows from operating activities
Net income	$	89,494		$	97,821		$	70,916
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	39,456			26,900			25,465
Depreciation and amortization	7,142			7,081			7,196
Deferred tax expense (benefit)	(4,115		)	(6,798		)	(692		)
Impact of Tax Cuts and Jobs Act on deferred taxes	13,493			—			—
Premium amortization and accretion of securities, net	4,337			4,359			4,267
Accretion related to acquired loans	(3,097		)	(4,613		)	(10,241		)
Net (gain) loss on securities transactions	39			(56		)	(203		)
ESOP compensation expense	2,834			3,955			5,751
Share-based compensation expense	7,462			6,014			5,477
Excess tax benefit on vesting of stock awards	1,578			—			—
Net gain on loans held for sale	(7,322		)	(8,225		)	(8,036		)
Loans originated or purchased for sale	(195,161		)	(218,288		)	(222,195		)
Proceeds from sale of loans held for sale	207,055			227,769			225,335
FHLB stock dividends	(548		)	(539		)	(152		)
Bank-owned life insurance income	(1,727		)	(1,744		)	(1,699		)
(Gain) loss on sale and disposition of repossessed assets, premises and equipment	2,099			(3,524		)	(293		)
Disposition of insurance subsidiary goodwill upon sale of subsidiary operations	—			2,217			—
Net change in deferred loan fees/costs	(8,631		)	391			(1,067		)
Net change in accrued interest receivable	(4,249		)	(3,238		)	(2,821		)
Net change in other assets	(1,299		)	(2,947		)	8,444
Net change in other liabilities	40,176			5,913			(16,250		)
Net cash provided by operating activities	189,016			132,448			89,202
Cash flows from investing activities
Available for sale securities:
Maturities, prepayments and calls	2,028,905			2,276,913			2,114,641
Purchases	(2,098,681		)	(2,334,558		)	(2,148,080		)
Proceeds from sale of AFS securities	—			7,700			36,984
Held to maturity securities:
Maturities, prepayments and calls	35,973			41,384			49,730
Purchases	—			(12,477		)	(15,933		)
Originations of Warehouse Purchase Program loans	(21,917,085		)	(19,966,527		)	(15,511,029		)
Proceeds from pay-offs of Warehouse Purchase Program loans	21,817,838			19,954,905			15,253,726
Net change in loans held for investment, excluding Warehouse Purchase Program	(620,066		)	(1,014,500		)	(1,030,016		)
Redemption (purchase) of FHLB and FRB stock and other	(20,976		)	20,348			(14,527		)
Cash received in excess of cash paid for acquisition of LegacyTexas Group, Inc.	—			—			128,598
Purchases of premises and equipment	(3,602		)	(8,420		)	(5,660		)
Proceeds from sale of assets	7,814			15,803			10,121
Net cash (used in) investing activities	(769,880		)	(1,019,429		)	(1,131,445		)

66

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Years ended December 31,

(Dollar amounts in thousands)

	2017			2016			2015
Cash flows from financing activities
Net change in deposits	402,207			1,138,765			940,862
Proceeds from FHLB advances	825,000			200,000			1,350,000
Repayments on FHLB advances	(615,519		)	(806,222		)	(773,003		)
Share repurchase	—			—			(7,989		)
Proceeds from borrowings	—			76,861			73,407
Repayments of borrowings	(2,015		)	(24,929		)	(32,953		)
Payment of dividends	(29,277		)	(27,676		)	(25,747		)
Activity in employee stock plans	4,712			3,755			1,284
Net cash provided by financing activities	585,108			560,554			1,525,861
Net change in cash and cash equivalents	4,244			(326,427		)	483,618
Beginning cash and cash equivalents	289,212			615,639			132,021
Ending cash and cash equivalents	$	293,456		$	289,212		$	615,639
Supplemental cash flow information:
Interest paid	$	54,808		$	34,625		$	20,861
Income taxes paid	57,482			60,854			36,835
Supplemental noncash disclosures:
Transfers from loans to other real estate owned	4,553			10,780			3,287
Common stock issued in consideration of LegacyTexas Group, Inc. acquisition	—			—			187,224
See accompanying notes to consolidated financial statements.

67

LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

Note 1 — Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation: The consolidated financial statements include LegacyTexas Financial Group, Inc. (the "Company"), whose business at December 31, 2017 primarily consisted of the operations of its wholly-owned subsidiary, LegacyTexas Bank (the "Bank"). In addition, the Company also offers title services through LegacyTexas Title Co., which is a wholly-owned subsidiary of the Bank. Intercompany transactions and balances are eliminated in consolidation.

At December 31, 2017, the Company provided financial services through 44 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. Its primary deposit products are demand, savings and certificate of deposit accounts, and its primary lending products are commercial real estate, commercial and industrial and consumer lending, including one- to four-family real estate loans. Most loans are secured by specific items of collateral, including business assets, commercial and residential real estate and consumer assets. Commercial loans are expected to be repaid from cash flow from operations of businesses.

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles ("US GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, valuation of other real estate owned, other-than-temporary impairment of securities, realization of deferred tax assets, and fair values of financial instruments are subject to change.

Cash Flows: Cash and cash equivalents include cash, deposits with other financial institutions with maturities less than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions, federal funds purchased, Federal Home Loan Bank advances and repurchase agreements.

Restrictions on Cash: The Company maintains deposits with other financial institutions in amounts that exceed federal deposit insurance coverage. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents. Cash balances equaling or exceeding escrow amounts are maintained at correspondent banks.

Securities: Securities that the Company has both the positive intent and ability to hold to maturity are classified as held to maturity and are carried at amortized cost. Securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, are classified as available for sale and are carried at fair value. Unrealized gains and losses on securities classified as available for sale have been accounted for as accumulated other comprehensive income (loss), net of taxes.

Gains and losses on the sale of securities classified as available for sale are recorded on the trade date using the specific-identification method. Amortization of premiums and discounts are recognized in interest income over the period to maturity. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayment, except for mortgage-backed securities where prepayments are anticipated.

The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis and more frequently when economic, market, or security specific concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than amortized cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Company has the intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition. The Company conducts regular reviews of the bond agency ratings of securities and considers whether the securities were issued by or have principal and interest payments guaranteed by the federal government or its agencies. These reviews focus on the underlying rating of the issuer and also include the insurance rating of securities that have an insurance component or guarantee. The ratings and financial condition of the issuers are monitored, as well as the financial condition and ratings of the insurers and guarantors.

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For periods in which other-than-temporary impairment of a debt security is recognized, the credit portion of the amount is determined by subtracting the present value of the stream of estimated cash flows as calculated in a discounted cash flow model and discounted at book yield from the prior period’s ending carrying value. The non-credit portion of the amount is determined by subtracting the credit portion of the impairment from the difference between the book value and fair value of the security. The credit related portion of the impairment is charged against income and the non-credit related portion is charged to equity as a component of accumulated other comprehensive income. The Company did not recognize any other-than-temporary impairment on its securities portfolio for the years ended December 31, 2017 and 2016.

Mortgage Loans Held for Sale: The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with Accounting Standards Codification ("ASC") 825, "Financial Instruments." This election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC 815, “Derivatives and Hedging.”

Warehouse Purchase Program Loans: The Warehouse Purchase Program allows unaffiliated mortgage originators to close one- to four-family real estate loans in their own name and manage their cash flow needs until the loans are sold to investors. The mortgage banking company customer closes mortgage loans consistent with underwriting standards established by the Bank and approved investors and, once all pertinent documents are received, the participation interest is delivered by the Bank to the investor selected by the originator and approved by us. Although not bound by any legally binding commitment, when a purchase decision is made, we purchase a 100% participation interest in the mortgage loans originated by our mortgage banking company customers. All Warehouse Purchase Program loans are collectively evaluated for impairment and are purchased under several contractual requirements, providing safeguards to the Company. These safeguards include the requirement that our mortgage company customers have a takeout commitment or similar arrangement for each loan. To date, the Company has not experienced a loss on these loans and no allowance for loan losses has been allocated to them.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Past due status is based on the contractual terms of the loan. Loans that are past due 30 days are considered delinquent. Interest income on loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Non-mortgage consumer loans are typically charged off no later than 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and larger individually classified impaired loans.

All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

For loans collateralized by real property and commercial and industrial loans, credit exposure is monitored by internally assigned grades used for classification of loans. A loan is considered “special mention” when management has determined that there is a potential weakness that deserves management's close attention. Loans rated as "special mention" are not adversely classified according to regulatory classifications and do not expose the Company to sufficient risk to warrant adverse classification. A loan is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. “Substandard” loans include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected, and the loan may or may not meet the criteria for impairment. Loans classified as “doubtful” have all of the weaknesses of those classified as “substandard” with the added characteristic that the weaknesses present makes “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” All other loans that do not fall into the above mentioned categories are considered “pass” loans. Updates to internally assigned grades are made monthly and/or upon significant developments.

For other consumer loans (non-real estate), credit exposure is monitored by payment history of the loans. Non-performing other consumer loans are on nonaccrual status and are generally greater than 90 days past due.

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Acquired Loans: Loans acquired through the completion of a transfer, including loans acquired in a business combination, that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized on the balance sheet and do not result in any yield adjustments, loss accruals or valuation allowances. Increases in expected cash flows, including prepayments, subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment. Valuation allowances on these impaired loans reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). Revolving loans, including lines of credit, are excluded from acquired credit impaired loan accounting.

For acquired loans not deemed credit-impaired at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. Subsequent to the acquisition date, methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans; however, a provision for credit losses will be recorded only to the extent the required allowance exceeds any remaining credit discounts.

Concentration of Credit Risk: Most of the Company’s business activity is with customers located within the North Texas region and a large portion of loans are secured by real estate in this area. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy of the North Texas area.

Allowance for Loan Losses: The allowance for loan losses and related provision expense are susceptible to change if the credit quality of our loan portfolio changes, which is evidenced by many factors, including but not limited to charge-offs and non-performing loan trends. Generally, consumer real estate lending has a lower credit risk profile compared to other consumer lending (such as automobile loans). Commercial real estate and commercial and industrial lending, however, can have higher risk profiles than consumer loans due to these loans being larger in amount and non-homogeneous in structure and term. Changes in economic conditions, the mix and size of the loan portfolio, and individual borrower conditions can dramatically impact our level of allowance for loan losses in relatively short periods of time.

The allowance for loan losses is maintained to cover incurred losses that are estimated in accordance with US GAAP. It is our estimate of credit losses inherent in our loan portfolio at each balance sheet date. Our methodology for analyzing the allowance for loan losses consists of general and specific components. For the general component, we stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and apply a loss ratio to these groups of loans to estimate the credit losses in the loan portfolio. We use both historical loss ratios and qualitative loss factors assigned to major loan collateral types to establish general component loss allocations, inclusive of estimated loss emergence periods. Qualitative loss factors are based on management's judgment of company, market, industry or business specific data and external economic indicators, which are not yet reflected in the historical loss ratios, and that could impact the Company's specific loan portfolios. The Allowance for Loan Loss Committee sets and adjusts qualitative loss factors by regularly reviewing changes in underlying loan composition and the seasonality of specific portfolios. The Allowance for Loan Loss Committee also considers credit quality and trends relating to delinquency, non-performing and adversely rated loans within the Company's loan portfolio when evaluating qualitative loss factors. Additionally, the Allowance for Loan Loss Committee adjusts qualitative factors to account for the potential impact of external economic factors, including the unemployment rate, vacancy and capitalization rates and other pertinent economic data specific to our primary market area and lending portfolios.

For the specific component, the allowance for loan losses includes loans where management has concerns about the borrower's ability to repay and on individually analyzed loans found to be impaired. Management evaluates current information and events regarding a borrower's ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according to the contractual terms of the loan agreement, is in doubt. If an impaired loan is collateral-dependent, the fair value of the collateral, less the estimated cost to sell, is used to determine the amount of impairment. If an impaired loan is not collateral-dependent, estimated discounted cash flows are used to determine the amount of impairment, if any. For impaired loans, the amount of the impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral or until the basis is collected. Impairment losses are reflected in the allowance for loan losses through a charge to the provision for credit losses. Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement.

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Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal.

Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. As a result, the Company does not separately identify consumer real estate loans less than $417 or individual consumer non-real estate secured loans for impairment disclosures. The Company considers these loans to be homogeneous in nature due to the smaller dollar amount and the similar underwriting criteria.

A loan that has been modified is considered a troubled debt restructuring (“TDR”) when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. Modifications to loan terms may include a modification of the contractual interest rate to a below-market rate (even if the modified rate is higher than the original rate), forgiveness of accrued interest, forgiveness of a portion of principal, an extended repayment period or a deed in lieu of foreclosure or other transfer of assets other than cash to fully or partially satisfy a debt. The Company's policy is to place all TDRs on nonaccrual for a minimum period of six months. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months and the collection of principal and interest under the revised terms is deemed probable. All TDRs are considered to be impaired loans.

FHLB stock and other restricted securities: FHLB, FRB and other restricted stock is carried at cost, classified as restricted securities and periodically evaluated for impairment based on the ultimate recoverability of the par value. Both cash and stock dividends are reported as interest income.

Bank-Owned Life Insurance: The Company has purchased life insurance policies on certain key employees. The purchase of these life insurance policies allows the Company to use tax-advantaged rates of return. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are generally depreciated using the straight-line method with useful lives ranging from 10 to 30 years. Furniture, fixtures and equipment are generally depreciated using the straight-line method with useful lives ranging from 3 to 7 years. The cost of leasehold improvements is amortized over the shorter of the lease term or useful life using the straight-line method.

Goodwill: Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. According to ASC 350-20, "Intangibles- Goodwill and Other," goodwill shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Deterioration in economic market conditions, changes in key personnel, increased estimates of the effects of recent regulatory or legislative changes, or additional regulatory or legislative changes may result in declines in projected business performance beyond management's current expectations. Such declines in business performance could cause the estimated fair value of goodwill to decline, which could result in an impairment charge to earnings in a future period related to goodwill.

The Company evaluates goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount, in accordance with ASC 350-20. During 2016, the Company changed its annual goodwill impairment testing date from December 31 to October 1. The Company believes that this new date is preferable as it provides additional time prior to the Company’s year-end to complete the annual goodwill impairment test, especially in the event of future acquisitions and growth. This change does not accelerate, delay, avoid or cause an impairment charge, nor does this change result in adjustments to previously issued financial statements.

The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining the need to perform the two-step test for goodwill impairment (the qualitative method). If the qualitative method cannot be used or if it determines, based on the qualified method, that the fair value is more likely than not less than the carrying amount, the Company uses the two-step test. Under the two-step test, the Company compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Step two of the goodwill impairment test compares the implied estimated fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill for that reporting unit exceeds the implied fair value of that unit's goodwill, an impairment loss is recognized in an amount

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equal to that excess. Additional information regarding goodwill and impairment testing can be found in Note 9 - Goodwill and Core Deposit Intangibles.

Identifiable Intangibles: Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. The Company's intangible assets relate to core deposits and customer relationships. Intangible assets with definite useful lives are amortized on an accelerated basis over their estimated life. Intangible assets, premises and equipment and other long-lived assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Foreclosed Assets: Assets acquired through loan foreclosure are initially recorded at the lower of the recorded investment in the loan at the time of foreclosure or the fair value less costs to sell, establishing a new cost basis. Any write-down in the carrying value of a property at the time of acquisition is charged-off to the allowance for loan losses. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Derivative Financial Instruments: The Company enters into the following derivative financial instruments: interest rate lock commitments, forward mortgage-backed securities trades and interest rate swaps and caps. These financial instruments are not designated as hedging instruments and are used for asset and liability management and commercial customers' financing needs. All derivatives are carried at fair value in either other assets or other liabilities. For additional information on derivative financial instruments, see Note 7 — Derivative Financial Instruments.

Fair Value of Financial Instruments: In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Fair value measurements and disclosures guidance establishes a three-level fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. For additional information on fair value measurements see Note 6 - Fair Value.

Repurchase/Resell Agreements: The Company sells certain securities under agreements to repurchase. The securities sold under these agreements are treated as collateralized borrowings and are recorded at amounts equal to the cash received. The contractual terms of the agreements to repurchase may require the Company to provide additional collateral if the fair value of the securities underlying the borrowings declines during the term of the agreement.

Advertising Expense: The Company expenses all advertising costs as they are incurred. Advertising expenses were $4,378, $3,861, and $3,773 in 2017, 2016 and 2015, respectively.

Share-Based Compensation: The Company has shareholder approved share-based compensation plans that are accounted for under ASC 718, Compensation - Stock Compensation, which requires companies to record compensation cost for share-based payment transactions with employees in return for employment service. Compensation cost is recognized for stock options and restricted stock awards based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with time-based vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. For awards with performance-based vesting conditions, compensation cost is recognized when the achievement of the performance condition is considered probable of achievement. If a performance condition is subsequently determined to be improbable of achievement, compensation cost is reversed.

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching contributions as determined by formula. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

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A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company did not have any material uncertain tax positions which would require accrual at December 31, 2017 or 2016.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense and did not have any amounts accrued for interest and penalties for the years ended December 31, 2017 or 2016. The Company files a consolidated income tax return with its subsidiaries. Federal income tax expense or benefit has been allocated to subsidiaries on a separate return basis.

Earnings per common share: The Company calculated earnings per common share in accordance with ASC 260, “Earnings Per Share,” which provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company has determined that its outstanding non-vested stock awards are participating securities. Accordingly, earnings per common share is computed using the two-class method prescribed under ASC 260.

Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per common share for the reported periods is provided in Note 3 — Earnings Per Common Share.

Comprehensive Income (Loss): Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, net of taxes, which are also recognized as a separate component of equity.

Employee stock ownership plan (ESOP): The Company accounts for its ESOP in accordance with ASC 718-40, "Employee Stock Ownership Plans." Accordingly, since the Company sponsors the ESOP with an employer loan, neither the ESOP’s loan payable nor the Company’s loan receivable are reported in the Company’s consolidated balance sheet. Likewise, the Company does not recognize interest income or interest cost on the loan.

Unallocated shares held by the ESOP are recorded as unearned ESOP shares in the consolidated statement of changes in shareholders’ equity. As shares are committed to be released for allocation, the Company recognizes compensation expense equal to the average market price of the shares for the period. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce principal and accrued interest payable on the ESOP loan.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Company or by the Company to shareholders.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over the transferred assets through either (a) an agreement that entitles and obligates the Company to repurchase or redeem them before their maturity or (b) the ability to unilaterally cause the holder to return specific assets.

Operating Segments: The Company has determined that all of its banking operations comprise one segment under ASC 280, Segment Reporting, since all offer similar products and services, operate with similar processes, and have similar customers. Additionally, the Company has determined that the Bank's title subsidiary does not meet the materiality threshold to require segment disclosure under ASC 280.

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Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation.

Adoption of New Accounting Standards:

In March 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2016-06, Contingent Put and Call Options in Debt Instruments. This ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. For public business entities, this ASU was effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The adoption of this ASU did not have an impact on the Company's financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting. This ASU eliminates the requirement for an investor to retrospectively apply the equity method when an investment that it had accounted for by another method qualifies for use of the equity method. This ASU was effective for fiscal years beginning after December 15, 2016, and interim periods therein. The adoption of this ASU did not impact the Company's financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, this ASU was effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. See Note 13 - Share-based Compensationfor information regarding the impact of this ASU on the Company's financial statements.

Effect of Newly Issued But Not Yet Effective Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU affects entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which deferred the effective date of ASU 2014-09 for public entities to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. We have completed our evaluation of the impact of ASU 2014-09 on components of our non-interest income and have not found any significant changes to our methodology of recognizing revenue. As required by ASU 2014-09, we will adopt the standard in the first quarter of 2018 and, at the time of this filing, we do not anticipate recording a cumulative effect adjustment to opening retained earnings because the adjustment was determined to be insignificant. We will include newly applicable revenue disclosures in our Form 10-Q for the quarter ended March 31, 2018.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurements of Financial Assets and Financial Liabilities. This ASU requires that all equity investments be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). This ASU also requires that an entity present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, this ASU requires that public business entities base their fair value disclosures for financial instruments that are not measured at fair value in the financial statements on the exit price notion. Currently, the Company values these financial instruments using an entry price notion consistent with the current guidance, and will be changing to the exit price notion in the first quarter of 2018 in

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compliance with this ASU. For public business entities, this ASU is effective for annual periods beginning after December 15, 2017, and interim periods therein. The adoption of this ASU will not have a significant impact on the Company's financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held to maturity debt securities. Under current US GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. This revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available for sale debt securities. For public business entities, this ASU is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investments. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The adoption of this ASU will not have a significant impact on the Company's financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets other than Inventory. This ASU eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today's two-step impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates today’s requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. For public business entities, this ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be impacted. Under current GAAP, premiums on callable debt securities are generally amortized over the contractual life of the security. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements and disclosures.

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting model to enable entities to better portray their risk management activities in their financial statements, by expanding an entity's ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This ASU eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, this ASU also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. For public business entities, this ASU is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2018. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 2 - Share Transactions

In August 2012, the Company's Board of Directors announced its intention to repurchase up to 5% of its total common shares outstanding, or approximately 1,978,871 shares. No shares of Company stock were repurchased under this program in 2017 or in 2016. During 2015, 357,950 shares were repurchased and retired at an average price of $22.32. At December 31, 2017, 1,537,121 shares remain available for future repurchases under the program.

77

LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 3 — Earnings Per Common Share

Basic earnings per common share is computed by dividing net income (which has been adjusted for distributed and undistributed earnings to participating securities) by the weighted-average number of common shares outstanding for the period, reduced for average unallocated ESOP shares and average unvested restricted stock awards. Unvested restricted stock awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method described in ASC 260-10-45-60B. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock awards and options) were exercised or converted to common stock, or resulted in the issuance of common stock that then shared in the Company’s earnings. Diluted earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period increased for the dilutive effect of unexercised stock options and unvested restricted stock awards. The dilutive effect of the unexercised stock options and unvested restricted stock awards is calculated under the treasury stock method utilizing the average market value of the Company’s stock for the period. A reconciliation of the numerator and denominator of the basic and diluted earnings per common share computation for the years ended December 31, 2017, 2016 and 2015 is as follows:

	Years Ended December 31,
	2017			2016			2015
Basic earnings per share:
Numerator:
Net income	$	89,494		$	97,821		$	70,916
Distributed and undistributed earnings to participating securities	(318		)	(497		)	(534		)
Income available to common shareholders	$	89,176		$	97,324		$	70,382
Denominator:
Weighted average common shares outstanding	47,998,439			47,721,179			47,659,389
Less: Average unallocated ESOP shares	(1,220,516		)	(1,301,356		)	(1,464,324		)
Average unvested restricted stock awards	(166,143		)	(235,749		)	(347,781		)
Average shares for basic earnings per share	46,611,780			46,184,074			45,847,284
Basic earnings per common share	$	1.91		$	2.11		$	1.54
Diluted earnings per share:
Numerator:
Income available to common shareholders	$	89,176		$	97,324		$	70,382
Denominator:
Average shares for basic earnings per share	46,611,780			46,184,074			45,847,284
Dilutive effect of share-based compensation plan	526,738			300,893			278,163
Average shares for diluted earnings per share	47,138,518			46,484,967			46,125,447
Diluted earnings per common share	$	1.89		$	2.09		$	1.53
Share awards excluded in the computation of diluted earnings per share because the exercise price was greater than the common stock average market price and were therefore anti-dilutive	623,666			1,384,784			1,012,771

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 4 - Securities

The amortized cost, related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss), and the fair value of securities available for sale ("AFS") were as follows:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency residential mortgage-backed securities 1	$	191,216	$	419	$	2,169	$	189,466
Agency commercial mortgage-backed securities 1	9,360		—		125		9,235
Agency residential collateralized mortgage obligations 1	187,637		4		3,425		184,216
US government and agency securities	1,590		81		—		1,671
Municipal bonds	35,196		241		308		35,129
Total securities	$	424,999	$	745	$	6,027	$	419,717
December 31, 2016
Agency residential mortgage-backed securities 1	$	220,744	$	635	$	2,828	$	218,551
Agency commercial mortgage-backed securities 1	9,422		—		75		9,347
Agency residential collateralized mortgage obligations 1	87,959		22		1,452		86,529
US government and agency securities	2,150		101		—		2,251
Municipal bonds	38,417		47		627		37,837
Total securities	$	358,692	$	805	$	4,982	$	354,515

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

The amortized cost (carrying amount), unrealized gains and losses, and fair value of securities held to maturity ("HTM") were as follows:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency residential mortgage-backed securities 1	$	57,334	$	616	$	646	$	57,304
Agency commercial mortgage-backed securities 1	27,435		589		98		27,926
Agency residential collateralized mortgage obligations 1	27,112		265		99		27,278
Municipal bonds	61,628		1,079		289		62,418
Total securities	$	173,509	$	2,549	$	1,132	$	174,926
December 31, 2016
Agency residential mortgage-backed securities 1	$	74,881	$	1,147	$	817	$	75,211
Agency commercial mortgage-backed securities 1	28,023		836		166		28,693
Agency residential collateralized mortgage obligations 1	40,707		697		33		41,371
Municipal bonds	66,776		1,635		705		67,706
Total securities	$	210,387	$	4,315	$	1,721	$	212,981

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

The amortized cost (carrying amount) and fair value of held to maturity debt securities and the fair value of available for sale debt securities at December 31, 2017 by contractual maturity are set forth below in the table below. Securities with contractual payments not due at a single maturity date, including mortgage backed securities and collateralized mortgage obligations, are shown separately.

	HTM				AFS
	Amortized Cost		Fair Value		Fair Value
Due in one year or less	$	1,365	$	1,373	$	1,526
Due after one to five years	10,699		10,959		12,726
Due after five to ten years	44,059		44,628		16,731
Due after ten years	5,505		5,458		5,817
Agency residential mortgage-backed securities	57,334		57,304		189,466
Agency commercial mortgage-backed securities	27,435		27,926		9,235
Agency residential collateralized mortgage obligations	27,112		27,278		184,216
Total	$	173,509	$	174,926	$	419,717

Securities with a carrying value of $256,451 and $224,674 at December 31, 2017 and 2016, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.

At December 31, 2017 and 2016, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies or U.S. Government Sponsored Enterprises, in an amount greater than 10% of shareholders’ equity.

Sales activity of securities for the years ended December 31, 2017, 2016 and 2015 was as follows. All securities sold were classified as available for sale.

	December 31,
	2017		2016		2015
Proceeds	$	—	$	7,700	$	36,984
Gross gains	—		72		278
Gross losses	—		7		50
Tax expense of securities gains/losses reclassified from accumulated other comprehensive income	—		23		80

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Securities with unrealized losses at December 31, 2017 and 2016, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

AFS	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency residential mortgage-backed securities 1	$	59,545	$	412	$	100,214	$	1,757	$	159,759	$	2,169
Agency commercial mortgage-backed securities 1	9,235		125		—		—		9,235		125
Agency residential collateralized mortgage obligations 1	128,869		1,860		49,171		1,565		178,040		3,425
Municipal bonds	10,114		72		6,583		236		16,697		308
Total temporarily impaired	$	207,763	$	2,469	$	155,968	$	3,558	$	363,731	$	6,027
December 31, 2016
Agency residential mortgage-backed securities 1	$	167,503	$	2,770	$	7,516	$	58	$	175,019	$	2,828
Agency commercial mortgage-backed securities 1	9,347		75		—		—		9,347		75
Agency residential collateralized mortgage obligations 1	72,822		1,420		2,649		32		75,471		1,452
Municipal bonds	26,911		512		3,412		115		30,323		627
Total temporarily impaired	$	276,583	$	4,777	$	13,577	$	205	$	290,160	$	4,982

HTM	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency residential mortgage-backed securities 1	$	20,397	$	206	$	16,909	$	440	$	37,306	$	646
Agency commercial mortgage-backed securities 1	3,685		26		3,484		72		7,169		98
Agency residential collateralized mortgage obligations 1	8,008		64		2,267		35		10,275		99
Municipal bonds	9,313		80		10,486		209		19,799		289
Total temporarily impaired	$	41,403	$	376	$	33,146	$	756	$	74,549	$	1,132
December 31, 2016
Agency residential mortgage-backed securities 1	$	41,375	$	817	$	—	$	—	$	41,375	$	817
Agency commercial mortgage-backed securities 1	7,273		166		—		—		7,273		166
Agency residential collateralized mortgage obligations 1	6,322		11		1,451		22		7,773		33
Municipal bonds	19,362		658		1,045		47		20,407		705
Total temporarily impaired	$	74,332	$	1,652	$	2,496	$	69	$	76,828	$	1,721

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

As of December 31, 2017, 259 securities had unrealized losses, 122 of which had been in an unrealized loss position for over 12 months at December 31, 2017. The Company does not believe these unrealized losses are other-than-temporary and expects full collection of the carrying amount of these securities. At December 31, 2017, the Company does not intend to sell the securities in an unrealized loss position, and it is not more-likely-than-not that the Company will be required to sell the securities prior to recovery of amortized cost. All principal and interest payments are being received on time and in full.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 5 - Loans

Loans consist of the following:

	December 31, 2017			December 31, 2016
Loans held for sale, at fair value	$	16,707		$	21,279
Loans held for investment:
Commercial real estate	$	3,019,339		$	2,670,455
Commercial and industrial	2,093,307			1,971,160
Construction and land	277,864			294,894
Consumer real estate	1,213,434			1,074,923
Other consumer	45,506			53,991
Gross loans held for investment, excluding Warehouse Purchase Program	6,649,450			6,065,423
Net of:
Deferred costs (fees) and discounts, net	6,380			(2,251		)
Allowance for loan losses	(71,301		)	(64,576		)
Net loans held for investment, excluding Warehouse Purchase Program	6,584,529			5,998,596
Warehouse Purchase Program	1,154,588			1,055,341
Total loans held for investment	$	7,739,117		$	7,053,937

Activity in the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015, segregated by portfolio segment and evaluation for impairment, is set forth below. The below activity does not include Warehouse Purchase Program loans, which are collectively evaluated for impairment and are purchased under several contractual requirements, providing safeguards to the Company. To date, the Company has not experienced a loss on its Warehouse Purchase Program loans and no allowance for loan losses has been allocated to them. At December 31, 2017, 2016 and 2015, the allowance for loan impairment related to purchased credit impaired ("PCI") loans totaled $269, $180, and $150, respectively.

For the year ended December 31, 2017	Commercial Real Estate			Commercial and Industrial			Construction and Land			Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	18,303		$	35,464		$	5,075		$	4,484		$	1,250		$	64,576
Charge-offs	(16		)	(32,846		)	(418		)	(96		)	(1,366		)	(34,742		)
Recoveries	205			405			75			42			640			1,367
Provision expense (benefit)	3,095			35,982			(88		)	408			703			40,100
Ending balance	$	21,587		$	39,005		$	4,644		$	4,838		$	1,227		$	71,301
Allowance ending balance:
Individually evaluated for impairment	$	—		$	10,527		$	—		$	230		$	34		$	10,791
Collectively evaluated for impairment	21,587			28,478			4,644			4,608			1,193			60,510
Loans:
Individually evaluated for impairment	4,134			84,005			—			2,992			35			91,166
Collectively evaluated for impairment	3,012,892			2,009,126			277,864			1,209,550			45,288			6,554,720
PCI loans	2,313			176			—			892			183			3,564
Ending balance	$	3,019,339		$	2,093,307		$	277,864		$	1,213,434		$	45,506		$	6,649,450

82

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

For the year ended December 31, 2016	Commercial Real Estate			Commercial and Industrial			Construction and Land		Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	14,123		$	24,975		$	3,013	$	3,992		$	990		$	47,093
Charge-offs	(79		)	(7,746		)	—		(107		)	(927		)	(8,859		)
Recoveries	21			472			—		109			340			942
Provision expense	4,238			17,763			2,062		490			847			25,400
Ending balance	$	18,303		$	35,464		$	5,075	$	4,484		$	1,250		$	64,576
Allowance ending balance:
Individually evaluated for impairment	$	300		$	4,521		$	—	$	138		$	52		$	5,011
Collectively evaluated for impairment	18,003			30,943			5,075		4,346			1,198			59,565
Loans:
Individually evaluated for impairment	5,195			86,664			11,385		3,300			75			106,619
Collectively evaluated for impairment	2,659,644			1,884,263			283,509		1,070,732			53,683			5,951,831
PCI loans	5,616			233			—		891			233			6,973
Ending balance	$	2,670,455		$	1,971,160		$	294,894	$	1,074,923		$	53,991		$	6,065,423

For the year ended December 31, 2015	Commercial Real Estate			Commercial and Industrial			Construction and Land		Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	11,830		$	9,068		$	174	$	4,069		$	408		$	25,549
Charge-offs	(167		)	(3,129		)	—		(321		)	(1,090		)	(4,707		)
Recoveries	29			246			—		85			426			786
Provision expense	2,431			18,790			2,839		159			1,246			25,465
Ending balance	$	14,123		$	24,975		$	3,013	$	3,992		$	990		$	47,093
Allowance ending balance:
Individually evaluated for impairment	$	366		$	1,470		$	—	$	81		$	61		$	1,978
Collectively evaluated for impairment	13,757			23,505			3,013		3,911			929			45,115
Loans:
Individually evaluated for impairment	11,580			16,906			33		4,767			120			33,406
Collectively evaluated for impairment	2,155,351			1,595,548			269,675		931,140			69,433			5,021,147
PCI loans	10,612			215			—		850			277			11,954
Ending balance	$	2,177,543		$	1,612,669		$	269,708	$	936,757		$	69,830		$	5,066,507

Changes in the allowance for off-balance sheet credit losses on lending-related commitments and guarantees on credit card debt, included in "accrued expenses and other liabilities" on the consolidated balance sheets, are summarized in the following table. Please see Note 17 - Commitments and Contingent Liabilities for more information.

	Years Ended December 31,
	2017			2016
Balance at beginning of period	$	1,573		$	73
Charge-offs on lending-related commitments	—			—
Provision (recovery) for credit losses on lending-related commitments	(644		)	1,500
Balance at end of period	$	929		$	1,573

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Impaired loans at December 31, 2017 and 2016, were as follows ¹:

December 31, 2017	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial real estate	$	4,411	$	4,134	$	—	$	4,134	$	—
Commercial and industrial	89,713		48,463		35,542		84,005		10,502
Consumer real estate	3,545		2,985		7		2,992		7
Other consumer	71		16		19		35		13
Total	$	97,740	$	55,598	$	35,568	$	91,166	$	10,522
December 31, 2016
Commercial real estate	$	5,388	$	4,429	$	766	$	5,195	$	272
Commercial and industrial	87,756		73,377		13,287		86,664		4,519
Construction and land	11,384		11,385		—		11,385		—
Consumer real estate	3,766		3,290		10		3,300		10
Other consumer	107		33		42		75		30
Total	$	108,401	$	92,514	$	14,105	$	106,619	$	4,831

¹  No Warehouse Purchase Program loans were impaired at December 31, 2017 or 2016. Loans reported do not include PCI loans.

Income on impaired loans at December 31, 2017, 2016 and 2015, was as follows¹ 

	December 31, 2017				December 31, 2016				December 31, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial real estate	$	4,421	$	8	$	5,240	$	9	$	8,178	$	24
Commercial and industrial	83,508		—		28,634		1		19,595		8
Construction and land	2,273		—		901		—		84		—
Consumer real estate	2,786		14		4,831		14		5,269		7
Other consumer	264		4		95		4		202		2
Total	$	93,252	$	26	$	39,701	$	28	$	33,328	$	41

¹  Loans reported do not include PCI loans.

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

No loans past due over 90 days were still accruing interest at December 31, 2017. At December 31, 2016, loans past due over 90 days still accruing interest totaled $141, which consisted entirely of PCI loans. At December 31, 2017, no PCI loans were considered non-performing loans. No Warehouse Purchase Program loans were non-performing at December 31, 2017 or 2016.

Non-performing loans were as follows:

	December 31,
	2017		2016
Commercial real estate	$	4,134	$	5,195
Commercial and industrial	84,003		86,664
Construction and land	—		11,385
Consumer real estate	6,190		7,987
Other consumer	76		158
Total	$	94,403	$	111,389

For the years ended December 31, 2017, 2016 and 2015, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $4,229, $1,746 and $1,594, respectively. No interest income was recorded on these loans for the years ended December 31, 2017, 2016 and 2015.

The outstanding balances of TDRs are shown below:

	December 31,
	2017		2016
Nonaccrual TDRs (1)	$	17,294	$	11,701
Performing TDRs (2)	768		454
Total	$	18,062	$	12,155
Outstanding commitments to lend additional funds to borrowers with TDR loans	—		—

¹  Nonaccrual TDR loans are included in the nonaccrual loan totals.

²  Performing TDR loans are loans that have been performing under the restructured terms for at least six months and the Company is accruing interest on these loans.

85

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

The following table provides the recorded balances of loans modified as a TDR during the years ended December 31, 2017, 2016 and 2015.

December 31, 2017	Principal Deferrals			Combination of Rate Reduction & Principal Deferral		Other			Total
Commercial and industrial	$	38		$	131	$	14,063	(1)	$	14,232
Total	$	38		$	131	$	14,063		$	14,232
December 31, 2016
Commercial and industrial	$	685		$	—	$	7,090	(1)	$	7,775
Consumer real estate	—			79		—			79
Other consumer	1			—		—			1
Total	$	686		$	79	$	7,090		$	7,855
December 31, 2015
Commercial real estate	$	100		$	—	$	—		$	100
Commercial and industrial	—			—		191			191
Consumer real estate	209		(2)	60		36			305
Other consumer	1			—		3			4
Total	$	310		$	60	$	230		$	600

¹  Reserve-based energy relationships where the primary modification consisted of suspension of required borrowing base payments.

²  Principal deferrals include Chapter 7 bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt. Such loans are placed on non-accrual status.

Loans modified as a TDR during the years ended December 31, 2017, 2016 and 2015, which experienced a subsequent payment default during the periods, are shown below. A payment default is defined as a loan that was 90 days or more past due.

	Years Ended December 31,
	2017		2016		2015
Consumer real estate	$	—	$	31	$	178

Loans acquired with evidence of credit quality deterioration at acquisition, for which it was probable that the Company would not be able to collect all contractual amounts due, were accounted for as PCI loans. The carrying amount of PCI loans included in the consolidated balance sheets and the related outstanding balances at December 31, 2017 and 2016 are set forth in the table below. The outstanding balance represents the total amount owed, including accrued but unpaid interest, and any amounts previously charged off.

	December 31,
	2017		2016
Carrying amount 1	$	3,295	$	6,793
Outstanding balance	3,992		7,597

¹ The carrying amounts are reported net of allowance for loan losses of $269 and $180 as of December 31, 2017 and 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Changes in the accretable yield for PCI loans for the years ended December 31, 2017 and 2016, are as follows:

	December 31,
	2017			2016
Balance at beginning of period	$	2,515		$	3,356
Reclassifications from nonaccretable	602			429
Disposals	(187		)	(359		)
Accretion	(651		)	(911		)
Balance at end of period	$	2,279		$	2,515

Below is an analysis of the age of recorded investment in loans that were past due at December 31, 2017 and 2016. No Warehouse Purchase Program loans were delinquent at December 31, 2017 or 2016 and therefore are not included in the following table.

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Loans Past Due		Current Loans 1		Total Loans
Commercial real estate	$	9,414	$	—	$	250	$	9,664	$	3,009,675	$	3,019,339
Commercial and industrial	918		284		7,350		8,552		2,084,755		2,093,307
Construction and land	9,354		—		—		9,354		268,510		277,864
Consumer real estate	16,436		2,928		1,367		20,731		1,192,703		1,213,434
Other consumer	891		34		2		927		44,579		45,506
Total	$	37,013	$	3,246	$	8,969	$	49,228	$	6,600,222	$	6,649,450
December 31, 2016
Commercial real estate	$	1,829	$	72	$	766	$	2,667	$	2,667,788	$	2,670,455
Commercial and industrial	20,910		495		46		21,451		1,949,709		1,971,160
Construction and land	19,517		283		—		19,800		275,094		294,894
Consumer real estate	10,487		1,916		1,199		13,602		1,061,321		1,074,923
Other consumer	1,523		31		6		1,560		52,431		53,991
Total	$	54,266	$	2,797	$	2,017	$	59,080	$	6,006,343	$	6,065,423

¹  Includes acquired PCI loans with a total carrying value of $3,338 and $6,729 at December 31, 2017 and 2016, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

The recorded investment in loans by credit quality indicators at December 31, 2017 and 2016, was as follows.

Real Estate and Commercial and Industrial Credit Exposure

Credit Risk Profile by Internally Assigned Grade

December 31, 2017	Commercial Real Estate		Commercial and Industrial		Construction and Land		Consumer Real Estate
Grade:1
Pass	$	2,980,656	$	1,953,496	$	277,864	$	1,203,236
Special Mention	30,656		43,161		—		1,408
Substandard	8,027		96,546		—		7,762
Doubtful	—		104		—		1,028
Total	$	3,019,339	$	2,093,307	$	277,864	$	1,213,434
December 31, 2016
Grade:1
Pass	$	2,648,842	$	1,712,171	$	283,423	$	1,062,549
Special Mention	7,972		155,110		—		2,083
Substandard	12,875		103,815		11,471		8,252
Doubtful	766		64		—		2,039
Total	$	2,670,455	$	1,971,160	$	294,894	$	1,074,923

¹  PCI loans are included in the substandard or doubtful categories for December 31, 2017 and 2016, respectively. These categories are generally consistent with the "substandard" and "doubtful" categories as defined by regulatory authorities.

Warehouse Purchase Program Credit Exposure

All Warehouse Purchase Program loans were graded pass as of December 31, 2017 and 2016.

Consumer Other Credit Exposure

Credit Risk Profile Based on Payment Activity

	December 31, 2017		December 31, 2016
Performing	$	45,430	$	53,833
Non-performing	76		158
Total	$	45,506	$	53,991

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 6 - Fair Value

ASC 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Prices or valuation techniques that require inputs that are both significant and unobservable in the market. These instruments are valued using the best information available, some of which is internally developed, and reflects a reporting entity’s own assumptions about the risk premiums that market participants would generally require and the assumptions they would use.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below.

	Fair Value Measurements Using Level 2
	December 31, 2017		December 31, 2016
Assets:
Agency residential mortgage-backed securities	$	189,466	$	218,551
Agency commercial mortgage-backed securities	9,235		9,347
Agency residential collateralized mortgage obligations	184,216		86,529
US government and agency securities	1,671		2,251
Municipal bonds	35,129		37,837
Total securities available for sale	$	419,717	$	354,515
Loans held for sale1	$	16,707	$	21,279
Derivative financial instruments:
Interest rate lock commitments	358		379
Forward mortgage-backed securities trades	7		36
Loan customer counterparty	—		—
Financial institution counterparty	1,735		1,369
Liabilities:
Derivative financial instruments:
Interest rate lock commitments	—		—
Forward mortgage-backed securities trades	18		80
Loan customer counterparty	1,735		1,369
Financial institution counterparty	—		—

¹  At December 31, 2017, loans held for sale had an aggregate outstanding principal balance of $16,242. There were no mortgage loans held for sale that were 90 days or greater past due or on non-accrual at December 31, 2017.

The following methodologies were used to measure the fair value of financial assets and liabilities valued on a recurring basis:

Securities available for sale - The fair values of securities available for sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

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(Dollar amounts in thousands, except per share data)(Continued)

Residential mortgage loans held for sale - Mortgage loans held for sale, which are sold on a servicing released basis, are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted to credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, the Company classifies these valuations as Level 2 in the fair value disclosures. Interest income on mortgage loans held for sale is recognized based on the contractual rates and reflected in interest income on loans held for sale in the consolidated income statement. The Company has no continuing involvement in any residential mortgage loans sold.

Derivative instruments:

Interest rate lock commitments ("IRLCs") - The estimated fair values of IRLCs utilize current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability (Pull-through rate). The fair value of IRLCs is subject to change primarily due to changes in interest rates and the estimated Pull-through rate. These commitments are classified as Level 2 in the fair value disclosures, as the valuations are based on observable market inputs.

Forward mortgage-backed securities trades - These forward mortgage-backed securities trades are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, the Company utilized the exchange price or dealer market price for the particular derivative contract; therefore these contracts are classified as Level 2. The estimated fair values are subject to change primarily due to changes in interest rates.

Loan customer counterparty and financial institution counterparty - The Company also enters into certain interest rate derivative positions that are not designated as hedging instruments. The estimated fair value of these commercial loan interest rate swaps are obtained from a pricing service that provides the swaps' unwind value (Level 2 inputs). Please see Note 6 — Derivative Financial Instruments for more information.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below. There were no liabilities measured at fair value on a non-recurring basis as of December 31, 2017 or 2016.

	Fair Value Measurements Using Level 3
	December 31, 2017		December 31, 2016
Assets:
Impaired loans	$	25,046	$	9,274
Foreclosed assets:
Commercial real estate	6,694		10,638
Construction and land	859		194
Consumer real estate	192		—
Other	687		6

Methodologies used to measure the fair value of financial assets and liabilities valued on a non-recurring basis are shown below:

Impaired loans - Impaired loans that are collateral dependent are measured for impairment using the fair value of the collateral adjusted by additional Level 3 inputs, such as discounts of market value, estimated marketing costs and estimated legal expenses. Impaired loans secured by real estate, receivables or inventory had discounts determined by management on an individual loan basis. Impaired loans that are not collateral dependent are measured for impairment by a discounted cash flow analysis using a net present value calculation that utilizes data from the loan file before and after the modification.

Foreclosed assets - These assets are measured at the lower of book or fair value less costs to sell using third party appraisals, listing agreements or sale contracts, which may be adjusted by additional Level 3 inputs, such as discounts of market value, estimated marketing costs and estimated legal expenses. Management may also consider additional adjustments on specific properties due to the age of the appraisal, expected holding period, lack of comparable sales, or if the other real estate owned is

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(Dollar amounts in thousands, except per share data)(Continued)

a special use property. At December 31, 2017, the Company had $400 in residential mortgage loans in the process of foreclosure.

The Credit Risk Management department evaluates the valuations on impaired loans and foreclosed assets at least quarterly. The valuations on impaired loans are reviewed at least quarterly by the Allowance for Loan Loss Committee and are considered in the calculation of the allowance for loan losses. Unobservable inputs, such as discounts to collateral, are monitored and adjusted if market conditions change.

Fair Value of Financial Instruments Not Recorded at Fair Value

The carrying amount and fair value information of financial instruments not recorded at fair value in their entirety on a recurring basis on the Company's consolidated balance sheets at December 31, 2017 and 2016, were as follows:

			Fair Value
December 31, 2017	Carrying Amount		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	293,456	$	293,456	$	—	$	—
Securities held to maturity	173,509		—		174,926		—
Loans held for investment, net	6,584,529		—		—		6,651,207
Loans held for investment - Warehouse Purchase Program	1,154,588		—		—		1,171,354
FHLB and other restricted securities, at cost	64,790		—		64,790		—
Accrued interest receivable	24,596		24,596		—		—
Financial liabilities
Deposits	$	6,767,683	$	—	$	—	$	6,326,572
FHLB advances	1,043,163		—		—		1,043,416
Repurchase agreements	84,676		—		—		81,041
Subordinated debt	134,522		—		—		141,972
Accrued interest payable	2,729		2,729		—		—
December 31, 2016
Financial assets
Cash and cash equivalents	$	289,212	$	289,212	$	—	$	—
Securities held to maturity	210,387		—		212,981		—
Loans held for investment, net	5,998,596		—		—		6,080,165
Loans held for investment - Warehouse Purchase Program	1,055,341		—		—		1,055,219
FHLB and other restricted securities, at cost	43,266		—		43,266		—
Accrued interest receivable	20,347		20,347		—		—
Financial liabilities
Deposits	$	6,365,476	$	—	$	—	$	5,989,933
FHLB advances	833,682		—		—		830,930
Repurchase agreement	86,691		—		—		84,265
Subordinated debt	134,032		—		—		121,743
Accrued interest payable	2,111		2,111		—		—

The following methods and assumptions were used to estimate the fair values of each class of financial instrument presented:

Cash and cash equivalents - Due to their short term nature, the carrying amount approximates the estimated fair value.

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(Dollar amounts in thousands, except per share data)(Continued)

Securities held to maturity - The fair values of these securities is determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

Loans held for investment (including Warehouse Purchase Program loans) - Fair value is based on discounted cash flows using current market offering rates and estimated life.

FHLB stock and other restricted securities - The fair value on these securities is their cost basis due to restrictions on transferability.

Accrued interest receivable - Due to their short term nature, the carrying amount approximates the estimated fair value.

Deposits - Fair value is calculated using the FHLB advance curve to discount cash flows based on the estimated life of the deposits.

FHLB advances - Fair value is calculated using the FHLB advance curve to discount cash flows based on the contractual repayment schedule.

Repurchase agreement - The fair value is based on discounting the estimated cash flows using the current rate at which similar borrowings would be made with similar terms and remaining maturities.

Subordinated debt - The estimated fair value is based on current market rates on similar debt in the market.

Accrued interest payable - Due to their short term nature, the carrying amount approximates the estimated fair value.

The fair value of off-balance sheet items is based on the current fees or costs that would be charged to enter into or terminate such arrangements and are not considered significant to this presentation.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 7 — Derivative Financial Instruments

The following table provides the outstanding notional balances and fair values of outstanding derivative positions at December 31, 2017 and 2016.

	December 31, 2017						December 31, 2016
	Outstanding Notional Balance		Asset Derivative Fair Value		Liability Derivative Fair Value		Outstanding Notional Balance		Asset Derivative Fair Value		Liability Derivative Fair Value
IRLCs	$	10,337	$	358	$	—	$	10,952	$	379	$	—
Forward mortgage-backed securities trades	19,788		7		18		18,613		36		80
Commercial loan interest rate swaps and caps:
Loan customer counterparty	114,594		—		1,735		112,294		—		1,369
Financial institution counterparty	114,594		1,735		—		112,294		1,369		—

IRLCs - In the normal course of business, the Company enters into IRLCs with consumers to originate mortgage loans at a specified interest rate. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by the Company.

Forward mortgage-backed securities trades - The Company manages the changes in fair value associated with changes in interest rates related to IRLCs by using forward sold commitments known as forward mortgage-backed securities trades. These instruments are typically entered into at the time the IRLC is made.

Interest rate swaps and caps - These derivative positions relate to transactions in which we enter into an interest rate swap or cap with a customer, while at the same time entering into an offsetting interest rate swap or cap with another financial institution. An interest rate swap transaction allows our customer to effectively convert a variable rate loan to a fixed rate. In connection with each swap, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. In connection with each interest rate cap, we sell a cap to the customer and agree to pay interest if the underlying index exceeds the strike price defined in the cap agreement.  Simultaneously we purchase a cap with matching terms from another financial institution which agrees to pay us if the underlying index exceeds the strike price.

The commercial loan customer counterparty weighted average received and paid interest rates for interest rate swaps outstanding at December 31, 2017 and 2016 are presented in the following table.

	Weighted-Average Interest Rate
	December 31, 2017				December 31, 2016
	Received		Paid		Received		Paid
Loan customer counterparty	2.52	%	2.54	%	3.12	%	2.36	%

Our credit exposure on interest rate swaps is limited to the net favorable value of all swaps by each counterparty, which was approximately $32 at December 31, 2017. This credit exposure is partly mitigated as transactions with customers are generally secured by the collateral, if any, securing the underlying transaction being hedged. Our credit exposure, net of collateral pledged, relating to interest rate swaps with upstream financial institution counter-parties was approximately $1,752 at December 31, 2017.  A credit support annex is in place and allows the bank to call collateral from upstream financial institution counter-parties. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values. Our cash collateral pledged for interest rate swaps and included in our interest-bearing deposits, which totaled $1,950 and $1,950 at December 31, 2017 and 2016 respectively, is in excess of our credit exposure.

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(Dollar amounts in thousands, except per share data)(Continued)

The initial and subsequent changes in the fair value of IRLCs and the forward sales of mortgage-back securities are recorded in net gain on sale of mortgage loans. These gains and losses were not attributable to instrument-specific credit risk. For interest rate swaps and caps, because we act as an intermediary for our customer, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on our results of operations. Income (loss) for the years ended December 31, 2017, 2016 and 2015 was as follows:

Derivatives not designated as hedging instruments	Years Ended December 31,
	2017			2016			2015
IRLC's	$	(21	)	$	(43	)	$	8
Forward mortgage-backed securities trades	(479		)	13			(195		)

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(Dollar amounts in thousands, except per share data)(Continued)

Note 8 — Premises and Equipment

Premises and equipment were as follows:

	December 31,
	2017			2016
Land	$	22,140		$	23,636
Buildings	57,079			59,298
Furniture, fixtures and equipment	20,218			19,561
Leasehold improvements	10,055			7,674
	109,492			110,169
Less: accumulated depreciation	(39,799		)	(35,943		)
Total	$	69,693		$	74,226

Depreciation expense was $6,389, $6,186 and $6,550 for 2017, 2016 and 2015, respectively.

Operating Leases: The Company leases certain bank or loan production office properties and equipment under operating leases. Certain leases contain renewal options that may be exercised. Rent expense was $7,322, $7,928 and $6,895 for 2017, 2016 and 2015, respectively.

Rent commitments, before considering applicable renewal options, as of December 31, 2017, were as follows:

	Balance
2018	$	5,725
2019	5,069
2020	4,696
2021	4,443
2022	3,735
Thereafter	16,303
Total	$	39,971

The Company leases office space in certain locations to other unaffiliated tenants. Rental income of $1,102 was recognized during 2017. This rental income is recorded in the consolidated statement of income as an offset to occupancy expense. Aggregate future minimum rental payments to be received under non-cancelable subleases at December 31, 2017, were $105. At December 31, 2017, the Company had no commitments for future locations and held one parcel of land for future development. The Company sold a parcel of land in January 2017, resulting in a gain of $1,304.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 9 - Goodwill and Core Deposit Intangibles

Changes in the carrying amount of the Company's goodwill and core deposit intangibles (“CDI”) for years ended December 31, 2017 and 2016, were as follows:

	Goodwill			Core Deposit Intangibles
Balance as of December 31, 2015	$	180,776		$	1,030
Disposition of insurance subsidiary goodwill upon the sale of subsidiary operations	(2,217		)	—
Amortization of core deposit intangible	—			(365		)
Balance as of December 31, 2016	178,559			665
Amortization of core deposit intangible	—			(263		)
Balance as of December 31, 2017	$	178,559		$	402

CDI are amortized on an accelerated basis over their estimated lives with a weighted average amortization period of 8 years. The CDI amortization expense is reported in other non-interest expense on the Company's consolidated statements of income. The estimated aggregate future amortization expense for CDI remaining as of December 31, 2017 is as follows:

	Balance
2018	$	156
2019	101
2020	73
2021	48
2022	24
Thereafter	—

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(Dollar amounts in thousands, except per share data)(Continued)

Note 10 - Deposits

Time deposits of $250 or more totaled $1,009,855 and $951,688 at December 31, 2017 and 2016, respectively. The $250 FDIC insurance coverage limit applies per depositor, per insured depository institution, for each account ownership category.

At December 31, 2017 and 2016, the Company had $400,716 and $355,455 in reciprocal deposits, respectively. These consisted entirely of certificates of deposit made under the Company's participation in the Certificate of Deposit Account Registry Service® (CDARS®) and Insured Cash Sweep (ICS) money market product. Through CDARS®, the Company can provide a depositor the ability to place up to $50,000 on deposit with the Company while receiving FDIC insurance on the entire deposit by placing customer funds in excess of the FDIC deposit limits with other financial institutions in the CDARS® network. In return, these financial institutions place customer funds with the Company on a reciprocal basis. Similarly, customer funds in our ICS money market product are swept from a transaction account at the Company into money market accounts at multiple banks to allow access to FDIC insurance coverage through multiple accounts, up to $75,000. Regulators consider reciprocal deposits to be brokered deposits.

At December 31, 2017, scheduled maturities of time deposits for the next five years with the weighted average rate at the end of the period were as follows:

	Balance		Weighted Average Rate
2018	$	860,102	1.16	%
2019	383,687		1.57
2020	41,093		1.47
2021	59,074		1.59
2022 and thereafter	23,434		1.57
Total	$	1,367,390	1.31	%

At December 31, 2017 and 2016, the Company's deposits included public funds totaling $972,226 and $1,001,820, respectively. At December 31, 2017 and 2016, overdrawn deposits of $473 and $340 were reclassified as unsecured consumer loans.

Interest expense on deposits is summarized as follows:

	Years Ended December 31,
	2017		2016		2015
Interest-bearing demand	$	5,475	$	3,974	$	3,297
Savings and money market	16,845		7,288		3,644
Time	14,374		9,772		6,186
Total	$	36,694	$	21,034	$	13,127

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(Dollar amounts in thousands, except per share data)(Continued)

Note 11 - Borrowed Funds

Borrowed funds are summarized as follows:

	December 31,
	2017				2016
	Amount		Rate1		Amount		Rate1
Federal Home Loan Bank advances	$	1,043,163	1.51	%	$	833,682	0.71	%
Repurchase Agreements
Credit Suisse structured repurchase agreement	25,000		3.02		25,000		3.02
Overnight repurchase agreements with depositors	59,676		1.18		61,691		0.15
Subordinated Debt
Fixed to floating rate note maturing on December 1, 2025	125,000		5.50		125,000		5.58
Junior subordinated debentures	15,464		3.29		15,464		2.66

¹  Rate at period-end, with the exception of the fixed to floating rate subordinated debt note, which is a weighted average rate calculated using period-end rates.

Federal Home Loan Bank ("FHLB") Advances

At December 31, 2017, advances from the FHLB had interest rates ranging from 1.30% to 6.00%. At December 31, 2016, advances from the FHLB had interest rates ranging from 0.46% to 6.00%. At December 31, 2017, the Company had $200,000 in variable rate FHLB advances.

In 2010, certain FHLB fixed-rate advances were modified. The early repayment of the debt resulted in a prepayment penalty, which is being amortized to interest expense as an adjustment to the cost of the new FHLB advances. The prepayment penalty, net of accumulated amortization, was $0 and $27 at December 31, 2017 and 2016. The amortization expense resulting from the prepayment penalty was fully amortized in September 2017.

The FHLB advances were collateralized by mortgage and commercial loans with collateral values of $2,106,571 and $1,877,506 under a blanket lien arrangement at December 31, 2017 and 2016, respectively. Additionally, securities safekept at FHLB and FHLB stock are used as collateral for advances. Based on this collateral, the Company was eligible to borrow an additional $2,084,944 and $1,821,693 at December 31, 2017 and 2016, respectively. The current agreement provided for a maximum borrowing amount of approximately $4,072,477 and $3,601,739 at December 31, 2017 and 2016, respectively.

Repurchase Agreements

Repurchase agreements ("repos") which are classified as securities transactions, are not insured by the FDIC, are not guaranteed, and may lose value. A repo is an agreement between two parties whereby one party (a bank as counterparty) sells the other (as customer) a security at a specified price with a commitment to buy the security back at a fixed time and price. Repos are accounted for as collateralized borrowings and are recorded at amounts equal to cash received.

Inherent in repurchase agreements is a risk that the fair value of the collateral pledged on the agreements could decline below the amount obligated under the agreements. To mitigate this risk to the customer, the Company, as the bank counterparty, marks securities sold under repos to fair value on a daily basis and provides 115% market value protection on overnight repos and 112% market value protection on its structured repo.

In April 2008, the Company entered into a 10-year term structured repurchase callable agreement for $25,000 to leverage the balance sheet and increase liquidity. The interest rate adjusts quarterly to 6.25% less the 90 day LIBOR, subject to a lifetime cap of 3.02%. At December 31, 2017, the Company also had $59,676 in overnight repurchase agreements with depositors.

Subordinated Debt

In November 2015, the Company issued $75,000 of Fixed-to-Floating Rate Subordinated Notes (the “Notes”) that mature on December 1, 2025 (the “Maturity Date”). In September 2016, the Company issued an additional $50,000 of Notes that mature on the Maturity Date. The Notes, which qualify as Tier 2 capital for regulatory purposes, have an interest rate of 5.50% and 5.69%, respectively, per annum, payable semi-annually on each December 1 and June 1 through December 1, 2020. From and

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including December 1, 2020 through maturity or earlier redemption, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month LIBOR rate plus 3.99%, payable on March 1, June 1, September 1, and December 1 of each year through the maturity date or earlier redemption. The Company may, at its option, beginning on December 1, 2020 and on any scheduled interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption. Any partial redemption will be made pro rata among all of the holders.

The Notes were sold at an underwriting discount and the discount, as well as debt issuance costs, are netted against the subordinated debt liability on the balance sheet in accordance with ASU 2015-03. The unamortized underwriting discount and debt issuance costs totaled $2,405 at December 31, 2017. The Notes are subordinated in right of payment to all of the Company's senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company's subsidiaries.

Upon the acquisition of LegacyTexas Group, Inc., the Company acquired $15,000 (15,000 shares with a liquidation amount of $1 per security) of Floating Rate Cumulative Trust Preferred Securities ("TruPS") and $464 of common stock through an unconsolidated subsidiary, Legacy Capital Trust III ("Trust III"). Trust III invested the total proceeds from the sale of TruPS and common stock (totaling $15,464) in floating rate Junior Subordinated Debentures (the "Trust III Debentures") issued by the Company. The terms of the Trust III Debentures are such that they qualify as Tier I capital for regulatory purposes. Interest on the Trust III Debentures is payable quarterly on March 15, June 15, September 15 and December 15 of each year, at a rate equal to the three month LIBOR rate plus 1.70% (3.29% at December 31, 2017). Principal is due at maturity on December 15, 2036. The TruPS are guaranteed by the Company and are subject to redemption. The Company may redeem the Trust III Debentures, in whole or in part, on any March 15, June 15, September 15 and December 15 at an amount equal to the principal amount being redeemed plus accrued and unpaid interest to the redemption date. At December 31, 2017 and 2016, the Trust III Debentures were reduced by a purchase accounting fair value discount of $3,537 and $3,723, respectively.

Also upon the acquisition of LegacyTexas Group, Inc., the Company acquired $15,000 of TruPS and $464 of common stock through an unconsolidated subsidiary. The subsidiary invested the total proceeds from the sale of the TruPS and common stock in floating rate Junior Subordinated Debentures issued by LegacyTexas Group, Inc. On April 7, 2015, the Company paid this debt in full.

Other Borrowing Information

At December 31, 2017, borrowed funds, reported gross of purchase accounting fair value discounts, prepayment penalties and debt issuance costs, were structured to contractually pay down as follows:

	FHLB Advances		Repurchase Agreements		Subordinated Debt		Total
2018	$	1,037,754	$	84,676	$	—	$	1,122,430
2019	2,313		—		—		2,313
2020	932		—		—		932
2021	856		—		—		856
2022	695		—		—		695
Thereafter	613		—		140,464		141,077
	$	1,043,163	$	84,676	$	140,464	$	1,268,303

Upon the acquisition of LegacyTexas Group, Inc., the Company assumed long-term notes totaling $8,900. These notes were paid off during the first quarter of 2015.

At December 31, 2017 and 2016, the Company had borrowing availability representing the collateral value assigned to the securities pledged to the discount window through the FRB of $78,616 and $46,725, respectively. Additionally, uncommitted, unsecured Fed Fund lines of credit totaling $250,000 and $255,000 were available at December 31, 2017 and 2016, respectively, from multiple correspondent banks.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 12 — Benefits

Employee Stock Ownership (“ESOP”) and 401(k) Plan: The Company offers a KSOP plan composed of an ESOP and 401(k) plan. Employees may participate under the 401(k) portion of the KSOP as of the date they first complete an hour of service with the Bank.  Employees are eligible to receive a matching contribution of 100% of employee contributions up to a maximum of 5% of the employee's qualifying compensation. Matching expense for 2017, 2016 and 2015 was $2,571, $2,479 and $2,130, respectively.

The ESOP portion of the KSOP was established in connection with the Company's 2006 minority stock offering. In 2006 the ESOP purchased shares of common stock financed by a term loan from the Company. This note was fully repaid in September 2016, and all shares have been allocated to participant accounts. In 2010, in connection with our second step conversion to a full stock company, the ESOP purchased 1,588,587 shares of common stock with proceeds from a 30 year note in the amount of $15,886 from the Company. At December 31, 2017, the ESOP held 2,298,076 shares, of which 1,105,983 shares were allocated to participants and 1,192,093 were unallocated. The fair value of unallocated shares at December 31, 2017 was $50,318.

The Company's Board of Directors determines the amount of contribution to the ESOP annually but is required to make contributions sufficient to service the ESOP's debt. Dividends on unallocated shares held by the ESOP are applied to the ESOP note payable. Shares are released for allocation to eligible employees as the ESOP debt is repaid. Eligible employees receive an allocation of released shares at the end of the calendar year on a relative compensation basis. Employees are eligible if they meet the minimum service and eligibility requirements. The dividends paid on allocated shares are paid to employee accounts. Contributions to the ESOP were $842, $1,468, and $2,060 during 2017, 2016 and 2015, and expense was $2,074, $3,174 and $4,914 for December 31, 2017, 2016 and 2015, respectively.

Deferred Compensation Plan: The Company has entered into certain non-qualified deferred compensation agreements with members of the executive management team, directors and certain employees. These agreements, which are subject to the rules of section 409(a) of the Internal Revenue Code, relate to the voluntary deferral of compensation received and do not have an employer contribution. The accrued liability as of December 31, 2017 and 2016 was $3,393 and $3,344, respectively.

Included in other assets is a universal life insurance policy, as well as variable and fixed annuity contracts, totaling $3,588 and $3,534 at December 31, 2017 and 2016, respectively. The Company is the owner and beneficiary of the policy, which pays interest on the funds invested. The life insurance policy is recorded at the net cash surrender value, or the amount that can be realized.

Bank-Owned Life Insurance: The Company is the sole owner of life insurance policies pertaining to certain employees and directors. The selected insured employees and directors agreed to a share of the death benefit while they remain actively employed with the Company or serve on its board. In the event of death while actively employed with the Company, the employee's or director's designated beneficiary will receive an income tax free death benefit paid.

The Company also is the sole owner of other life insurance policies that do not share the death benefit with the employees. The total balance of the bank-owned life insurance policies, reported as an asset, at December 31, 2017 and 2016 totaled $57,684 and $56,477.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 13 - Share-based Compensation

The 2017 Omnibus Incentive Plan (the "2017 Plan") was approved at the Company's 2017 annual meeting of shareholders, held on May 22, 2017. Prior to approval of the 2017 Plan by shareholders, the Company had in effect the 2012 and 2007 Equity Incentive Plans (the “Prior Plans” and together with the 2017 Plan, the “Plans”). No further awards will be made under the Prior Plans and shares reserved to make new awards under the Prior Plans have been released; however, shares reserved to fund issued and outstanding awards under the Prior Plans continue to be reserved to provide for those awards.  All awards outstanding under the Prior Plans remain outstanding in accordance with their terms.  Each outstanding award under the Prior Plans continue to be governed solely by the terms of the documents evidencing such award, and no provision of the 2017 Plan is deemed to affect or otherwise modify the rights or obligations of the holders of such awards with respect to their acquisition of Company shares. The 2017 Plan permits the granting of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and cash awards to participants. Eligible participants under the 2017 Plan include employees and directors (including advisory and emeritus directors) of the Company and its subsidiaries. There are 3,250,000 total shares authorized under the 2017 Plan, with a fungible share rate of 2.5-for-1 for full-value awards (stock-based awards other than stock options and stock appreciation rights). As of December 31, 2017, 10,500 shares had been issued under the 2017 Plan.

Compensation cost charged to income for share-based compensation, which is reported in non-interest expense as salaries and employee benefits expense, is presented below:

	Years ended December 31,
	2017		2016		2015
Restricted stock	$	3,581	$	3,477	$	3,459
Stock options	3,881		2,537		2,018
Income tax benefit	2,612		2,105		1,917

A summary of activity in the restricted stock portion of the Company's Plans for 2017, 2016 and 2015 is presented below:

	Time-Vested Shares				Performance-Based Shares
	Shares		Weighted- Average Grant Date Fair Value per Share 1		Shares		Weighted- Average Grant Date Fair Value per Share 2
Non-vested at January 1, 2015	297,603		$	20.45	82,400		$	23.89
Granted	80,000		21.23		—		—
Vested	(131,142	)	19.98		(20,600	)	23.89
Non-vested at December 31, 2015	246,461		20.98		61,800		25.02
Granted	55,180		29.29		40,200		29.29
Vested	(101,465	)	20.70		(20,600	)	25.02
Non-vested at December 31, 2016	200,176		23.79		81,400		43.06
Granted	19,208		38.92		12,208		39.90
Vested	(90,796	)	21.67		(20,600	)	41.32
Non-vested at December 31, 2017	128,588		$	27.27	73,008		$	42.21

¹  For restricted stock awards with time-based vesting conditions, the grant date fair value is based upon the closing stock price as quoted on the Nasdaq Stock Market on the grant date.

²  For restricted stock awards with performance-based vesting conditions, the value of the award is based upon the closing stock price as quoted on the Nasdaq Stock Market on the date of vesting. Until the final value is determined on the vesting date, the Company

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estimates the fair value based upon the closing stock price as quoted on the Nasdaq Stock Market near the last business day of each month.

As of December 31, 2017, there was $2,887 of total unrecognized compensation expense related to non-vested restricted shares awarded under the Company's Plans. That expense is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of shares vested during the years ended December 31, 2017 and 2016, was $2,819 and $2,615, respectively.

Under the terms of the 2017 Plan, stock options may not be granted with an exercise price less than the fair market value of the Company’s common stock on the date the option is granted and may not be exercised later than ten years after the grant date. The fair market value is the closing stock price as quoted on the Nasdaq Stock Market on the date of grant.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the stock option in effect at the time of the grant. The expected term of stock options is based on employees' actual vesting behavior and expected volatilities are based on historical volatilities of the Company’s common stock. Expected dividends are the estimated dividend rate over the expected term of the stock options.

The weighted average fair value of stock options granted during 2017, 2016 and 2015 was $10.76, $7.77 and $6.82, respectively. The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	2017		2016		2015
Risk-free interest rate	2.18	%	1.37	%	1.80	%
Expected term of stock options (years)	6.2		6.3		6.2
Expected stock price volatility	31.85	%	32.07	%	31.14	%
Expected dividends	1.61	%	1.93	%	1.95	%

A summary of activity in the stock option portion of the Company's Plans as of the years ended December 31, 2017, 2016 and 2015 is presented below:

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Options	Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2015	1,370,873		$	20.27	8.0	$	5,679
Granted	633,000		25.66
Exercised	(58,855	)	16.12
Forfeited	(79,268	)	20.89
Outstanding at December 31, 2015	1,865,750		22.21		7.9	6,401
Granted	392,838		29.15
Exercised	(175,192	)	19.08
Forfeited	(75,316	)	25.57
Outstanding at December 31, 2016	2,008,080		23.71		9.5	38,850
Granted	513,375		37.15
Exercised	(221,984	)	21.23
Forfeited	(92,228	)	28.80
Outstanding at December 31, 2017	2,207,243		$	26.88	10.1	$	33,848
Fully vested and expected to vest	2,191,740		$	26.82	10.1	$	33,725
Exercisable at December 31, 2017	966,527		$	22.11	7.5	$	19,425

As of December 31, 2017, there was $8,013 of total unrecognized compensation expense related to non-vested stock options. That expense is expected to be recognized over a weighted-average period of 1.9 years. At December 31, 2017, the Company applied an estimated forfeiture rate of 5% based on historical activity. The intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the market price of our common stock as of the reporting date. The total intrinsic value of stock options exercised was $4,084, $2,251 and $644 for years ended December 31, 2017, 2016 and 2015, respectively.

Effective January 1, 2017, the Company changed the accounting for income taxes upon the vesting of stock options and restricted stock to be in accordance with ASC 718, as modified by ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. Prior to the implementation of ASU 2016-09, the tax effects of income tax deductions in excess of compensation cost (windfalls) were recorded in additional paid-in capital, and the tax effects of compensation cost in excess of income tax deductions (shortfalls) were recorded in additional paid-in capital to the extent of previously recognized windfalls, with the remainder recorded in income tax expense. Under ASU 2016-09, all tax effects of windfalls and shortfalls related to share-based payments are recorded through the income statement. Prior period balances were not adjusted.

For the year ended December 31, 2017, we recognized income tax deductions in excess of compensation cost of $4,510 for share-based payment awards, which resulted in a tax benefit of $1,578 recorded as a reduction of income tax expense. The classification of excess tax benefits on the statement of cash flows will be shown as an operating activity.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 14 — Income Taxes

The Tax Cuts and Jobs Act (the "Act",) which was enacted on December 22, 2017, made key changes to the U.S. tax law, including the reduction of the U.S. federal corporate tax rate from 35% to 21%. As ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21%. The Company is still analyzing certain aspects of the Act, and refining its calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax asset was $13,493. Additionally, related to the deferred tax effects on the unrealized holding gains and losses for available for sale securities, the effect of the Act was recorded as a component of tax expense related to continuing operations during 2017, which is consistent with ASC 740's general prohibition on backward tracing.

The Company's pre-tax income is subject to federal income tax and state margin tax at a combined rate of 36% for 2017, 2016 and 2015. Income tax expense for 2017, 2016 and 2015, was as follows:

	2017			2016			2015
Current expense	$	56,341		$	59,900		$	38,648
Deferred expense	(4,115		)	(6,798		)	(692		)
Impact of Tax Cuts and Jobs Act - net future deductions	12,752			—			—
Impact of Tax Cuts and Jobs Act - unrealized loss on AFS securities	741			—			—
Total income tax expense	$	65,719		$	53,102		$	37,956

At December 31, 2017 and 2016, deferred tax assets and liabilities were due to the following:

	December 31,
	2017			2016
Deferred tax assets:
Allowance for loan losses	$	15,168		$	22,602
Deferred compensation arrangements	762			1,261
Self-funded health insurance	251			241
Non-accrual interest	503			966
Restricted stock and stock options	2,577			3,132
Accrued expenses	623			1,255
Fair value mark on purchased loans	965			2,348
Net unrealized loss on securities available for sale	1,111			1,465
Other	1,909			2,121
	23,869			35,391
Deferred tax liabilities:
Depreciation	(270		)	(336		)
Partnerships — CRA-purposed private equity funds	(941		)	(1,697		)
Fair value mark on subordinated debt	(743		)	(1,303		)
Other	(1,675		)	(2,824		)
	(3,629		)	(6,160		)
Net deferred tax asset	$	20,240		$	29,231

The net deferred tax asset is recorded on the consolidated balance sheets under “other assets.” Management performed an analysis related to the Company's deferred tax asset for each of the years ended December 31, 2017 and 2016 and, based upon these analyses, no valuation allowance was deemed necessary as of December 31, 2017 or 2016.

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(Dollar amounts in thousands, except per share data)(Continued)

Effective tax rates differ from the federal statutory rate of 35% in 2017, 2016 and 2015, applied to income before income taxes due to the following:

	At and for the Year Ended December 31,
	2017			2016			2015
Federal statutory rate times financial statement income	$	54,325		$	52,823		$	38,105
Effect of:
State taxes, net of federal benefit	239			267			37
Bank-owned life insurance income	(423		)	(436		)	(419		)
Municipal interest income	(978		)	(1,041		)	(1,025		)
ESOP shares released	541			757			1,207
Restricted stock and stock options	(1,578		)	—			—
Sale of LegacyTexas Insurance Services, Inc.	—			640			—
DTA write-down due to the Tax Cuts and Jobs Act	13,493			—			—
Other	100			92			51
Total income tax expense	$	65,719		$	53,102		$	37,956
Effective Tax Rate before deferred tax write-down	33.65		%	35.18		%	34.86		%
Effective Tax Rate	42.34		%	35.18		%	34.86		%

The Company files income tax returns in the U.S. federal jurisdiction and several U.S. state jurisdictions. The Company is generally no longer subject to U.S. federal income tax examinations for tax years prior to 2014.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 15 — Related Party Transactions

Loans to executive officers, directors, and their affiliates during 2017 were as follows:

	Balance
Beginning balance	$	15,337
New loans	—
Effect of changes in composition of related parties	—
Repayments	(933		)
Ending balance	$	14,404

None of the above loans were considered non-performing or potential problem loans. These loans are made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than normal risk of collectability. Deposits from executive officers, directors, and their affiliates at December 31, 2017 and 2016 were $39,615 and $48,761, respectively.

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(Dollar amounts in thousands, except per share data)(Continued)

Note 16 — Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off‑balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

The Bank and the Company are regulated by the Texas Department of Banking ("TDOB") and the Board of Governors of the Federal Reserve System ("FRB"). The ability of a subsidiary bank to pay dividends depends on its earnings and capital levels and may be limited by their regulator's directives or orders. A bank generally must obtain regulatory approval of a dividend if the total dividends declared during the current year, including the proposed dividend, exceed net income for the current year and retained net income for the prior two years.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is adequately capitalized, regulatory approval is required to accept brokered deposits. If an institution is undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2017 and 2016, the most recent regulatory notification categorized the Bank and the Company as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category. Management believes that, at December 31, 2017, the Bank and the Company met all capital adequacy requirements to which they were subject.

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(Dollar amounts in thousands, except per share data)(Continued)

	Actual				Required for Capital Adequacy Purposes				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2017
Total risk-based capital
Company	$	991,713	11.87	%	$	668,142	8.00	%	$	835,178	10.00	%
Bank	939,655		11.25		668,096		8.00		835,120		10.00
Tier 1 risk-based capital
Company	796,887		9.54		501,107		6.00		501,107		6.00
Bank	867,424		10.39		501,072		6.00		668,096		8.00
Common equity tier 1 risk-based capital
Company	784,960		9.40		375,830		4.50		n/a1		n/a1
Bank	867,424		10.39		375,804		4.50		542,828		6.50
Tier 1 leverage
Company	796,887		9.17		347,731		4.00		n/a1		n/a1
the Bank	867,424		9.98		347,808		4.00		434,759		5.00
As of December 31, 2016
Total risk-based capital
Company	$	910,040	11.71	%	$	621,870	8.00	%	$	777,338	10.00	%
Bank	869,523		11.19		621,840		8.00		777,300		10.00
Tier 1 risk-based capital
Company	721,600		9.28		466,403		6.00		466,403		6.00
Bank	803,374		10.34		466,380		6.00		621,840		8.00
Common equity tier 1 risk-based capital
Company	709,858		9.13		349,802		4.50		n/a1		n/a1
Bank	803,374		10.34		349,785		4.50		505,245		6.50
Tier 1 leverage
Company	721,600		8.73		330,782		4.00		n/a1		n/a1
Bank	803,374		9.71		330,873		4.00		413,591		5.00

¹  Not applicable

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(Dollar amounts in thousands, except per share data)(Continued)

Note 17 - Commitments and Contingent Liabilities

In the normal course of business, the Company enters into various transactions which, in accordance with US GAAP, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit which involve, to varying degrees, elements of credit and interest rate risk. Credit losses up to the face amount of these instruments could occur, although material losses are not anticipated. The Company's credit policies applied to loan originations are also applied to these commitment requests, including obtaining collateral at the exercise of the commitment.

The contractual amounts of financial instruments with off‑balance sheet risk at December 31, 2017 and 2016, are summarized below. Please see Part II-Item 7- "Off-Balance Sheet Arrangements, Contractual Obligation and Commitments" of this Form 10-K for information related to commitment maturities.

	December 31,
	2017		2016
Unused commitments to extend credit	$	1,600,794	$	1,642,528
Unused capacity on Warehouse Purchase Program loans	738,412		892,659
Standby letters of credit	34,091		29,198
Total unused commitments/capacity	$	2,373,297	$	2,564,385

Unused commitments to extend credit - The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Since many commitments expire without being drawn upon, the total contractual amount of commitments does not necessarily represent future cash requirements of the Company. Substantially all of the Company's commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of future loan funding.

Unused capacity on Warehouse Purchase Program loans - In regard to unused capacity on Warehouse Purchase Program loans, the Company has established maximum purchase facility amounts, but reserves the right, at any time, to refuse to buy any mortgage loans offered for sale by each customer, for any reason in the Company's sole and absolute discretion.

Standby letters of credit - Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

In addition to the commitments above, the Company guarantees the credit card debt of certain customers to the merchant bank that issues the credit cards. These guarantees are in place for as long as the guaranteed credit card is open. At December 31, 2017 and 2016, these credit card guarantees totaled $5,257 and $3,335, respectively. This amount represents the maximum potential amount of future payments under the guarantee, which the Company is responsible for in the event of customer non-payment.

The Company funds an allowance for credit losses on off-balance sheet lending-related commitments and guarantees on credit card debt through a charge to provision for credit losses on the Company's consolidated statement of income. At December 31, 2017 and 2016, this allowance for credit losses on off-balance sheet lending-related commitments and guarantees on credit card debt, included in "other liabilities" on the Company's consolidated balance sheets, totaled $929 and $1,573 respectively.

In addition to the commitments above, the Company had overdraft protection available in the amounts of $84,727 and $85,709 at December 31, 2017 and 2016, respectively.

The Company, at December 31, 2017, had FHLB letters of credit of $944,370 pledged to secure public deposits, repurchase agreements, and for other purposes required or permitted by law.

At December 31, 2017, the Company had $1,680 of unfunded commitments recorded in other liabilities in its consolidated balance sheet related to investments in community development-oriented private equity funds used for Community Reinvestment Act purposes. The total investment in these equity funds was $11,223, with an average ownership of 6.2%.

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(Dollar amounts in thousands, except per share data)(Continued)

Liability for Mortgage Loan Repurchase Losses

Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. The Company may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.

The Company maintains a repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability, reported in other liabilities on the consolidated balance sheets, reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income. The liability was $131 and $143 at December 31, 2017 and 2016, respectively.

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 18 - Parent Company Only Condensed Financial Information

Condensed financial information of the Company is as follows:

CONDENSED BALANCE SHEETS

December 31,

	2017		2016
ASSETS
Cash on deposit at subsidiary	$	26,692	$	16,962
Investment in banking subsidiary	1,042,338		978,880
Receivable from banking subsidiary	12,278		10,317
ESOP note receivable and other assets	13,814		13,999
Total assets	$	1,095,122	$	1,020,158
LIABILITIES AND SHAREHOLDERS’ EQUITY
Borrowings	$	134,522	$	134,032
Other liabilities	726		761
Shareholders’ equity	959,874		885,365
Total liabilities and shareholders’ equity	$	1,095,122	$	1,020,158

CONDENSED STATEMENTS OF INCOME

December 31,

	2017		2016		2015
Cash dividends from subsidiary	$	35,000	$	—	$	24,500
Excess of earnings over dividend from subsidiary	61,341		103,572		48,677
Interest income on ESOP loan	449		487		565
Interest income on subordinated debt	13		11		17
Other income	—		—		5
	96,803		104,070		73,764
Interest expense	7,819		6,040		1,046
Operating expenses	3,754		3,236		3,009
Earnings before income tax benefit	85,230		94,794		69,709
Income tax benefit	4,264		3,027		1,207
Net income	$	89,494	$	97,821	$	70,916

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

CONDENSED STATEMENTS OF CASH FLOWS

December 31,

	2017			2016			2015
Cash flows from operating activities
Net income	$	89,494		$	97,821		$	70,916
Adjustments to reconcile net income to net cash from operating activities:
Excess of earnings over dividend from subsidiary	(61,341		)	(103,572		)	(48,677		)
Amortization	490			530			171
Activity in share-based compensation plans	5,501			3,152			3,068
Net change in other assets	(207		)	(481		)	6,931
Net change in other liabilities	(35		)	(38		)	(14,544		)
Net cash provided by (used in) operating activities	33,902			(2,588		)	17,865
Cash flows from investing activities
Capital contribution (to) from subsidiary	—			(49,000		)	(40,000		)
Cash and cash equivalents acquired from LegacyTexas Group, Inc.	—			—			201
Payments received on ESOP notes receivable	393			981			1,495
Net cash provided by (used in) investing activities	393			(48,019		)	(38,304		)
Cash flows from financing activities
Proceeds from borrowings	—			73,439			73,407
Repayments of borrowings	—			(24,929		)	(24,364		)
Share repurchase	—			—			(7,989		)
Net issuance of common stock under employee stock plans	4,712			3,755			1,284
Payment of dividends	(29,277		)	(27,676		)	(25,747		)
Net cash provided by (used in) financing activities	(24,565		)	24,589			16,591
Net change in cash and cash equivalents	9,730			(26,018		)	(3,848		)
Beginning cash and cash equivalents	16,962			42,980			46,828
Ending cash and cash equivalents	$	26,692		$	16,962		$	42,980

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LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

NOTE 19 - Quarterly Financial Data (Unaudited)

	Interest Income		Interest Expense		Net Interest Income		Provision for Credit Losses			Securities Gains and (Losses)			Net Income			Earnings per Share
																Basic	Diluted
2017
First quarter	$	87,536	$	10,988	$	76,548	$	22,301	1	$	(19	)	$	18,190		0.39	0.38
Second quarter	88,747		13,027		75,720		6,255			—			27,935			0.60	0.59
Third quarter	94,463		15,499		78,964		7,157			(20		)	28,709			0.61	0.61
Fourth quarter	96,111		15,912		80,199		3,743			—			14,660		2	0.31	0.31
2016
First quarter	$	72,608	$	7,257	$	65,351	$	8,800		$	—		$	22,082		0.48	0.48
Second quarter	77,336		7,982		69,354		6,800			65			23,217			0.50	0.50
Third quarter	82,911		9,431		73,480		3,467			(3		)	27,217			0.59	0.58
Fourth quarter	84,497		10,413		74,084		7,833			(6		)	25,305			0.54	0.54

¹  Includes the impact of a charge-off totaling $16,360 on a corporate healthcare finance relationship, which was reported in the Company's commercial and industrial loan portfolio.

²  Includes the impact of a $13,493 income tax adjustment to the Company's deferred tax asset related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

113

LEGACYTEXAS FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)(Continued)

Note 20 — Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on December 31, 2017 through the issuance of those consolidated financial statements included in this Annual Report on Form 10-K dated February 8, 2018.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures: An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”)) as of December 31, 2017, was carried out under the supervision and with the participation of our Chief Executive Officer, Principal Financial Officer and several other members of our senior management. Our Chief Executive Officer and Principal Financial Officer concluded that, as of December 31, 2017, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Principal Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Management’s Report on Internal Control Over Financial Reporting: Management of the Company is responsible for establishing and maintaining an effective system of internal control over financial reporting. The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and circumvention or overriding of controls. Accordingly, even an effective system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the Company’s systems of internal control over financial reporting as of December 31, 2017. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management believes that, as of December 31, 2017, the Company maintained effective internal control over financial reporting based on those criteria. The Company’s independent registered public accounting firm that audited the financial statements included in this annual report on Form 10-K has issued an attestation report on the Company’s internal control over financial reporting. The attestation report of Ernst & Young LLP appears below.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of LegacyTexas Financial Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited LegacyTexas Financial Group, Inc.’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, LegacyTexas Financial Group, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of LegacyTexas Financial Group, Inc. (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated February 8, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control

115

over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Dallas, Texas

February 8, 2018

(c) Changes in Internal Control Over Financial Reporting: During the quarter ended December 31, 2017, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

On February 6, 2018, the Company reviewed and approved, effective for the 2018 plan year, the current version of its Executive Annual Incentive Plan (the "EIP") originally adopted by the Company on February 28, 2013. Under the EIP, senior executive officers of the Company are eligible to receive annual cash incentive awards based on the achievement of pre-established corporate performance goals. The EIP is reviewed annually by the Company's Compensation Committee of the Board of Directors to ensure proper alignment with the Company's business objectives. The EIP will remain in effect each year until terminated or modified by the Company. The EIP, a copy of which is attached hereto as Exhibit 10.3, is incorporated herein by reference.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers. The information concerning our directors required by this item is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year. Information required by this item regarding the audit committee of the Company’s Board of Directors, including information regarding the audit committee financial expert serving on the audit committee, is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year. Information about our executive officers is contained under the caption “Executive Officers” in Part I of this Form 10-K, and is incorporated herein by this reference.

Section 16(a)Beneficial Ownership Reporting Compliance. The information concerning compliance with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 by our directors, officers and ten percent shareholders required by this item is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

Code of Ethics. We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and persons performing similar functions, and to all of our other employees and our directors. A copy of our code of ethics is available on our Internet website address, www.legacytexasfinancialgroup.com.

Nominating Committee Procedures. There have been no material changes to the procedures by which shareholders may recommend nominees to our Board of Directors since last described to shareholders.

Item 11. Executive Compensation

The information concerning compensation required by this item is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information concerning security ownership of certain beneficial owners and management and our equity incentive plan required by this item is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year. Information regarding our equity compensation plans is included in Item 5 of this Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information concerning certain relationships and related transactions and director independence required by this item is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year.

Item 14. Principal Accountant Fees and Services

The information concerning principal accountant fees and services is incorporated herein by reference from our definitive proxy statement for our Annual Meeting of Shareholders being held on May 21, 2018, a copy of which will be filed not later than 120 days after the end of our fiscal year.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1)	Financial Statements: See Part II—Item 8. Financial Statements and Supplementary Data.
(a)(2)	Financial Statement Schedules: All financial statement schedules have been omitted as the information is included in the notes to the consolidated financial statements or is not required under the related instructions or is not applicable.
(a)(3)	Exhibits: See below.
(b)	Exhibits:

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated as of November 25, 2013, by and between the Registrant and LegacyTexas Group, Inc. (incorporated herein by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 25, 2013 (File No. 001-34737))
2.2	Amendment No. One to the Agreement and Plan of Merger, dated as of February 19, 2014, by and between the Registrant and LegacyTexas Group, Inc. (incorporated herein by reference to Exhibit 2.3 of the Registrant’s Annual Report on Form 10-K filed with the SEC on February 26, 2014 (File No. 001-34737))
2.3	Amendment No. Two to the Agreement and Plan of Merger, dated as of August 29, 2014, by and between the Registrant and LegacyTexas Group, Inc. (incorporated herein by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on August 29, 2014 (File No. 001-34737))
3.1	Charter of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2017 (File No. 001-34737))
3.2	Bylaws of the Registrant, as amended (incorporated herein by reference to Exhibit 3.2 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on July 25, 2017 (File No. 001-34737))
4.1	Certificate of Registrant’s Common Stock (incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on January 6, 2015 (File No. 001-34737))
4.2	The Registrant hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of the holders of each issue of long-term debt of the Registrant and its consolidated subsidiaries.
10.1	ViewPoint Bank Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 0-24566-01))
10.2	Amended and Restated ViewPoint Bank Supplemental Executive Retirement Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 0-24566-01))
10.3	2018 Executive Annual Incentive Plan
10.4	Change in Control and Severance Benefits Agreement entered into between the Registrant and Mays Davenport (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on November 25, 2013 (File No. 001-34737)).
10.5	Form of Change In Control and Severance Benefits Agreement entered into between the Registrant and the following executive officers: Scott A. Almy, Charles D. Eikenberg, Thomas S. Swiley, and Mark L. Williamson (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on December 2, 2013 (File No. 001-34737)).

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10.6	Amended and Restated Executive Employment Agreement entered into by the Registrant on December 2, 2013 with Kevin J. Hanigan (incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the SEC on December 2, 2013 (File No. 001-34737)).
10.7	Registrant's 2007 Equity Incentive Plan (incorporated herein by reference to Appendix A to the proxy statement filed with the SEC on March 30, 2007 (File No. 001-32992))
10.8	Registrant's 2012 Equity Incentive Plan (incorporated herein by reference to Appendix A to the Registrant's proxy statement filed with the SEC on April 4, 2012 (File No. 001-34737))
10.9	Form of Incentive Stock Option Agreement under the 2012 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-8 filed with the SEC on June 14, 2012 (File No. 333-182122))
10.10	Form of Non-Qualified Stock Option Agreement under the 2012 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-8 filed with the SEC on June 14, 2012 (File No. 333-182122))
10.11	Form of Restricted Stock Agreement (Time-Based) under the 2012 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-8 filed with the SEC on June 14, 2012 (File No. 333-182122))
10.12	Form of Restricted Stock Agreement (Performance-Based) under the 2012 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-8 filed with the SEC on June 14, 2012 (File No. 333-182122))
10.13	Form of 2012 Equity Incentive Plan Restricted Stock Award and Non-Solicitation Agreement (incorporated herein by reference to Exhibit 10.10 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on July 26, 2016 (File No. 001-34737))
10.14	Form of 2012 Equity Incentive Plan Non-Employee Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.11 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on July 26, 2016 (File No. 001-34737))
10.15	Registrant's 2017 Omnibus Incentive Plan (incorporated herein by reference to Appendix A to the Registrant's proxy statement filed with the SEC on April 14, 2017 (File No. 001-34737))
10.16	Form of Incentive Stock Option Agreement under the 2017 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on November 7, 2017 (File No. 333-221398))
10.17	Form of Non-Qualified Stock Option Agreement under the 2017 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 99.3 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on November 7, 2017 (File No. 333-221398))
10.18	Form of Restricted Stock Agreement (Management) under the 2017 Omnibus Incentive Plan (Time-Based vesting) (incorporated herein by reference to Exhibit 99.4 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on November 7, 2017 (File No. 333-221398))
10.19	Form of Restricted Stock Agreement (Management) under the 2017 Omnibus Incentive Plan (Performance-Based vesting) (incorporated herein by reference to Exhibit 99.5 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on November 7, 2017 (File No. 333-221398))
10.20	Form of Restricted Stock Agreement (Non-Employee Director) under the 2017 Omnibus Incentive Plan (Time-Based vesting) (incorporated herein by reference to Exhibit 99.6 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on November 7, 2017 (File No. 333-221398))
11	Statement regarding computation of per share earnings (See Note 3 of the Notes to Consolidated Audited Financial Statements included in this Form 10-K).
21	Subsidiaries of the Registrant
23	Consent of Independent Registered Public Accounting Firm
24	Power of Attorney (on signature page)

119

31.1	Rule 13a — 14(a)/15d — 14(a) Certification (Chief Executive Officer)
31.2	Rule 13a — 14(a)/15d — 14(a) Certification (Principal Financial Officer)
32	Section 1350 Certifications
101	Financial statements from Annual Report on Form 10-K of the Registrant for the year ended December 31, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Audited Financial Statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		LEGACYTEXAS FINANCIAL GROUP, INC. (Registrant)
Date:	February 8, 2018	By:	/s/ Kevin J. Hanigan
			Kevin J. Hanigan
			President and Chief Executive Officer (Principal Executive Officer)

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Kevin J. Hanigan and J. Mays Davenport his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign any amendment to LegacyTexas Financial Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Anthony J. LeVecchio	Date:	February 8, 2018
Anthony J. LeVecchio, Chairman of the Board and Director
/s/ Arcilia Acosta	Date:	February 8, 2018
Arcilia Acosta, Director
/s/ George A. Fisk	Date:	February 8, 2018
George A. Fisk, Director
/s/ Bruce W. Hunt	Date:	February 8, 2018
Bruce W. Hunt, Director
/s/ James Brian McCall	Date:	February 8, 2018
James Brian McCall, Director
/s/ Karen H. O'Shea	Date:	February 8, 2018
Karen H. O'Shea, Director
/s/ Greg Wilkinson	Date:	February 8, 2018
Greg Wilkinson, Director
/s/ J. Mays Davenport	Date:	February 8, 2018
J. Mays Davenport, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.3

EXHIBIT 10.3

Executive Annual Incentive Plan

Objectives

The purpose of the LegacyTexas Financial Group, Inc. (“LegacyTexas” or the “Bank”) Executive Annual Incentive Plan (the “EIP”) is to motivate and reward senior executives for their contributions to the performance and success of the Bank. LegacyTexas's incentive plan focuses on the financial measures that are critical to the company's growth and profitability. This document summarizes the elements and features of the Plan. The objectives for LegacyTexas's Incentive Plan are as follows:

• Recognize and reward achievement of Bank's annual business goals.

• Motivate and reward superior performance.

• Attract and retain talent needed to grow the Bank.

• Be competitive with market.

• Encourage teamwork and collaboration among the Bank's leadership and across business groups.

• Increase engagement and commitment to the Bank.

• Ensure appropriate risk balance in plan design and governance policies.

Plan Year

The annual incentive plan follows the Bank's fiscal year, January 1^st to December 31^st.

Eligibility/Participation

Eligibility- Senior executive officers are eligible to participate. To participate in the plan, the employee should meet the following requirements:

• Employees hired after January 1^st of the plan year will receive a pro-rata award based on the number of weeks employed during the plan year.

• Participants must be employed at the time of incentive distribution to receive an incentive award except death, disability and retirement.

Participation- Every year the participants will be proposed by CEO and approved by the Compensation Committee. The participants include the named executive officers (“NEOs”) and others as determined by the Compensation Committee.

Incentive Award Opportunity

Each participant will have a target award (expressed as a percentage of base earnings) and range that defines their incentive opportunity. Actual awards will be allocated based on specific performance goals defined for each participant and will range from 0% to 200% of target incentives. The table below summarizes target incentives for each plan year.

Annual Incentive Targets

(Percentages in Parentheses Refer to % of Targeted Award; Other Percentages Refer to % of Salary)

Role	Below Threshold	Threshold (50%)	Target (100%)	Maximum (200%)
CEO	0%	40%	80%	160%
Other NEOs	0%	25%	50%	100%

Performance Gate/Trigger

The threshold “gate” for participation in the Short term incentive plan is 85% of budgeted net income, excluding one-time, non-recurring charges such as those associated with a merger or acquisition. Any exclusions are approved by the Compensation Committee and ratified by the Board of Directors. Once the gate is achieved, the plan is “turned on” and payouts are then determined based on performance against four defined performance measures. No payments will be made if the gate is not met. The four relative performance goals are 1) net interest margin, 2) efficiency ratio, 3) return on average equity and 4) non-performing assets to average total assets (see table below). Performance of these metrics is measured on a relative basis against the KBW NASDAQ Regional Bank Index, excluding non-exchange traded banks (e.g., OTCBB, Pink Sheet).

Performance Measures

The Incentive Plan will reward Bank performance as measured by Net Interest Margin, Efficiency Ratio, ROAE, NPA/Avg. Assets, and Non-Interest Bearing Deposits / Total Deposits.

Performance as to the Net Interest Margin, Efficiency Ratio, ROAE, and NPA/Avg. Assets measures will be measured on a relative basis against an Industry Index defined as the KBW NASDAQ Regional Bank Index excluding non-exchange traded banks (e.g. OTCBB, Pink Sheet). The index component companies will be determined at the end of performance period (e.g. 12/31/2018). Performance as to Non-Interest Bearing Deposits / Total Deposits will be measured on an absolute basis against the threshold/target/stretch goals established below for each of the years 2018-2021 respectively. The deposit measure shall be calculated using average deposits during the month of December during any plan year.

Performance Measure	Performance Results and Payout			Weight
	Threshold (50% payout)	Target (100% payout)	Stretch (200% payout)
Net Interest Margin	35th Percentile	50th Percentile	90th Percentile	22.5%
Efficiency Ratio				22.5%
Return on Average Equity				22.5%
NPAs/Average Assets				22.5%
Strategic Progress: Non-Interest Bearing Deposits/Total Deposits	See Table Below For Deposit Performance Goals 2018			10%
Total				100%

Performance Year	Non-Interest Bearing Deposit Performance Goals and Payout
	Threshold (50% payout)	Target (100% payout)	Stretch (200% payout)
2018	23%	24%	25%

Payouts

Performance will be assessed at the end of the fiscal year, with 100% of the awards calculated formulaically. Due to the financial data availability, the index financials will be measured based on trailing twelve months as of September 30 of the prior calendar year, while LegacyTexas' financials will be measured as of December 31. Actual payouts for each performance goal will be pro-rated between threshold and maximum levels to reward incremental improvement.

Performance of each specific goal (e.g. Net Interest Margin, Efficiency Ratio, ROAE, NPA / Avg. Assets, and Non-Interest Bearing Deposits / Total Deposits) is calculated independently to determine the payout for the goal. Calculations for each specific goal is rounded down to the nearest dollar. The sum of the awards for each performance measure determines the total incentive award. Payouts will be made in cash as soon as possible after the closing of Company financials each year and the Committee review and approve the results.

Payouts will be made in cash at the completion of the annual performance period (January - December). Participants must be employed at the time of award in order to receive payment. Incentive compensation will be tracked and paid annually approximately 75 days following the conclusion of the company's fiscal year. In no event will a payment be paid later than March 15 of the following year.

Each participant's payout is calculated on Base Earnings. Base earnings reflect the base salary actually earned during the course of the plan year. The actual incentive calculation is then based on each participant's performance goals as outlined above.

Committee Discretion

The Compensation Committee reserves the right to apply negative discretion to the plan as needed to reflect business environment, market conditions that may affect the Bank's performance and incentive plan funding as well as overall risk and regulatory issues. The Committee also reserves the right to amend, modify and adjust payouts as necessary.

Illustration of Sample Performance Scorecard

Below is an illustration of how the plan might work. We assume net income exceeded 85 percent of budget to “turn the plan on”. Our illustration uses a sample base salary of $270,000 in 2018 and an incentive target of 50% ($135,000). Threshold payout opportunity equals 50% of target while stretch payout opportunity equals 200% of target.

Performance Goals			Performance and Payout
Performance Measures	Weight	$	Actual Performance	Payout Allocation  (0% - 200%)	Payout ($)
Net Interest Margin	22.5%	$30,375	50th percentile (target)	100%	$30,375
Efficiency Ratio	22.5%	$30,375	35th percentile (threshold)	50%	$15,188
ROAE	22.5%	$30,375	80th percentile (stretch)	175%	$53,156
NPA / Avg. Assets	22.5%	$30,375	57th percentile (between target and stretch)	117.5%	$36,691
Strategic Progress: Non-Interest Bearing Deposits	10%	$13,500	24% (target)	100%	$13,500
Total	100%	$135,000			$147,909

This participant's payout of $147,909 is 110% of target.

Terms and Conditions

Participation

Senior executives are eligible to participate in the Plan. New employees will receive a prorated award.

Effective Date

This program is a continuation of that plan originally adopted in 2013. The plan is effective January 1, 2018 to reflect plan year January 1^st to December 31^st, 2018. The Plan will be reviewed annually by the Bank's Compensation Committee and Executive Management to ensure proper alignment with the Bank's business objectives. LegacyTexas retains the rights as described below to amend, modify or discontinue the Plan at any time during the specified period. The Incentive Plan will remain in effect each year until terminated or modified by LegacyTexas.

Program Administration

The Program is authorized by the Board of Directors and administered by the Compensation Committee. The Compensation Committee has the sole authority to interpret the Plan and to make or nullify any rules and procedures, as necessary, for proper administration. Any determination by the Compensation Committee will be final and binding on all participants.

Program Changes or Discontinuance

LegacyTexas has developed the Plan on the basis of existing business, market and economic conditions; current services; and staff assignments. If substantial changes occur that affect these conditions, services, assignments, or forecasts, LegacyTexas may add to, amend, modify or discontinue any of the terms or conditions of the Plan at any time. The Compensation Committee may, at its sole discretion, waive, change or amend any of the Plan as it deems appropriate.

Incentive Award Payments

Awards will be paid in cash before the end of the first quarter following the Plan year. Awards will be paid out as a percentage of a participant's base earnings for the Plan year. Incentive awards will be considered taxable income to participants in the year paid and will be subject to withholding for required income and other applicable taxes. Any rights accruing to a participant or his/her beneficiary under the Plan shall be solely those of an unsecured general creditor of LegacyTexas. Nothing contained in the Plan, and no action taken pursuant to the provisions hereof, will create or be construed to create a trust of any kind, or a pledge, or a fiduciary relationship between LegacyTexas or the Committee and the participant or any other person. Nothing herein will be construed to require LegacyTexas or the CEO to maintain any fund or to segregate any amount for a participant's benefit. In the event that an individual, who is due an incentive payout under the plan, terminates their employment with the Bank after the plan year and prior to the date the incentive is paid, that individual's incentive will be included in the pool and allocated to other participants of the plan.

Program Funding

The Plan is funded and accrued based on Bank performance results for a given year. Achieving higher levels of performance will increase the Plan payouts to participants. Similarly, achieving less than target performance will reduce the Plan payouts. If the Bank does not achieve its threshold bank performance goal or the trigger performance requirement, the Plan will not be paid.

New Hires, Reduced Work Schedules, Promotions, and Transfers

Participants who are not employed by LegacyTexas at the beginning of the Plan year will receive a pro rata incentive award based on their length of employment during a given year. Part time employees are eligible to participate. Their award percentage will reflect their base earnings based on actual hours worked. A participant whose work schedule changes during the year will be eligible for prorated treatment that reflects his/her time in the different schedules. If a participant changes his/her role or is promoted during the Plan year, he/she will be eligible for the new role's target incentive award opportunity on a pro rata basis (i.e. the award will be prorated based on the number of weeks employed in the respective positions.)

In the event of an approved leave of absence, the award opportunity level for the year will be adjusted to reflect the time in active status. For example, a participant on leave status for 13 weeks during a Plan year will have his or her calculated award reduced by one-fourth (13 weeks/52 weeks) to reflect the period of leave.

Termination of Employment

If a Plan participant is terminated by the Bank, no incentive award will be paid. To encourage employees to remain in the employment of LegacyTexas, a participant must be an active employee of the Bank on the date the incentive is paid to receive an award. (See exceptions for death, disability and retirement below.)

Disability, Death or Retirement

If a participant is disabled by an accident or illness, and is disabled long enough to be placed on long-term disability, his/her bonus award for the Plan period shall be pro-rated for the time served.

In the event of death, LegacyTexas will pay to the participant's estate the pro-rated award that would have been earned by the participant for the time served.

Individuals who retire will receive the pro-rated payment for the time served.

Ethics and Interpretation

If there is any ambiguity as to the meaning of any terms or provisions of this plan or any questions as to the correct interpretation of any information contained therein, the Bank's interpretation expressed by the Compensation Committee will be final and binding.

The altering, inflating, and/or inappropriate manipulation of performance/financial results or any other infraction of recognized ethical business standards, will subject the employee to disciplinary action up to and including termination of employment. In addition, any incentive compensation as provided by this plan to which the employee would otherwise be entitled will be revoked.

Participants who have willfully engaged in any activity, injurious to the Bank, will upon termination of employment, death, or retirement, forfeit any incentive award earned during the award period in which the termination occurred.

Clawback (Subject to change based upon the requirements of governing law or regulation)

If the Compensation Committee determines that fraud, material error, gross negligence, or intentional misconduct by a Covered Officer, as that term is defined below, contributed to the Company’s restatement of its financial statements (“Covered Misconduct”), the Compensation Committee shall, in its discretion, refer such matter and its recommendation as to an appropriate remedy to the full Board of Directors for consideration. The Board, upon review of the Compensation Committee’s recommendations and such independent inquiry or investigation as it determines to be adviseable, shall (i) confirm that Covered Misconduct occurred; (ii) confirm the period in which the Covered Misconduct occurred (the “Covered Period”); and (iii) determine such action as it deems necessary to remedy the Covered Misconduct and prevent its recurrence. To the extent permitted by applicable law, the Compensation Committee and the Board may require reimbursement of any bonus or incentive compensation paid to the Covered Officer, or cancel unvested restricted stock or other stock or stock-based awards previously granted to the Covered Officer, in the amount by which such compensation exceeded any lower payment that would have been made based on the restated financial results and to the extent such payments are compensation for services performed by the Covered Officer during the Covered Period. The Compensation Committee and the Board shall have full discretion to decline

to seek recovery under this Policy. In exercising such discretion, the Compensation Committee and the Board may consider the following factors: (A) the likelihood of success in achieving the recovery, given the anticipated cost and management effort required, (B) whether the assertion of a claim for recovery may prejudice the interests of the Company, including in any related proceeding or investigation, (C) the passage of time since the Covered Misconduct, (D) any pending legal proceeding relating to the Covered Misconduct. Before the Compensation Committee or the Board determines to seek recovery pursuant to this Policy, the Covered Officer will be provided written notice and the opportunity to be heard at a meeting of the Compensation Committee (which may be in-person or telephonic, as determined by the Compensation Committee). This policy applies to the following “Covered Officers”: the Company’s Chief Executive Officer, Chief Financial Officer, Chief Lending Officer and any other Company officer that is designated a “Named Executive Officer,” as determined in accordance with Item 402(a)(3) or Item 402(m)(2) of Regulation S-K under the Securities Exchange Act of 1934.

Miscellaneous

The Plan will not be deemed to give any participant the right to be retained in the employ of LegacyTexas, nor will the Plan interfere with the right of LegacyTexas to discharge any participant at any time.

In the absence of an authorized, written employment contract, the relationship between employees and LegacyTexas is one of at-will employment. The Plan does not alter the relationship.

This incentive plan and the transactions and payments hereunder shall, in all respect, be governed by, and construed and enforced in accordance with the laws of the state of Texas.

Each provision in this Plan is severable, and if any provision is held to be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not, in any way, be affected or impaired thereby.

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Direct Subsidiaries	Jurisdiction of Organization	Parent Entity
LegacyTexas Bank	Texas	LegacyTexas Financial Group, Inc.
Indirect Subsidiaries	Jurisdiction of Organization	Parent Entity
LegacyTexas Title Co.	Texas	LegacyTexas Bank

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-172615) pertaining to the ViewPoint Financial Group 2007 Equity Incentive Plan,

(2) Registration Statement (Form S-8 No. 333-182122) pertaining to the ViewPoint Financial Group, Inc. 2012 Equity Incentive Plan,

(3) Registration Statement (Form S-3 No. 333-208026) pertaining to the LegacyTexas Financial Group, Inc. “shelf” registration; and

(4) Registration Statement (Form S-8 No. 333-221398) pertaining to the LegacyTexas Financial Group, Inc. 2017 Omnibus Incentive Plan

of our reports dated February 8, 2018, with respect to the consolidated financial statements of LegacyTexas Financial Group, Inc. (formerly ViewPoint Financial Group, Inc.) and the effectiveness of internal control over financial reporting of LegacyTexas Financial Group, Inc., included in this Annual Report (Form 10-K) of LegacyTexas Financial Group, Inc. for the year ended December 31, 2017.

/s/ Ernst & Young LLP

Dallas, Texas

February 8, 2018

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Kevin J. Hanigan, certify that:

1. I have reviewed this Annual Report on Form 10-K of LegacyTexas Financial Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	February 8, 2018	By:	/s/ Kevin J. Hanigan
			Kevin J. Hanigan,
			President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, J. Mays Davenport, certify that:

1. I have reviewed this Annual Report on Form 10-K of LegacyTexas Financial Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	February 8, 2018	By:	/s/ J. Mays Davenport
			J. Mays Davenport,
			Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

In connection with the Annual Report of LegacyTexas Financial Group, Inc. on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Kevin J. Hanigan, President and Chief Executive Officer of the Company, and J. Mays Davenport, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.

Date:	February 8, 2018	By:	/s/ Kevin J. Hanigan
			Kevin J. Hanigan,
			President and Chief Executive Officer
Date:	February 8, 2018	By:	/s/ J. Mays Davenport
			J. Mays Davenport,
			Executive Vice President and Chief Financial Officer

XML

DOCUMENT AND ENTITY INFORMATION - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Feb. 06, 2018	Jun. 30, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	LegacyTexas Financial Group, Inc.
Entity Central Index Key	0001487052
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		48,199,611
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 1,785.9

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
ASSETS
Cash and due from financial institutions	$ 61,713	$ 59,823
Short-term interest-bearing deposits in other financial institutions	231,743	229,389
Total cash and cash equivalents	293,456	289,212
Securities available for sale, at fair value	419,717	354,515
Securities held to maturity, (fair value: December 31, 2017 — $174,926, December 31, 2016 — $212,981)	173,509	210,387
Loans held for sale, at fair value	16,707	21,279
Loans held for investment:
Loans held for investment (net of allowance for loan losses of $71,301 at December 31, 2017 and $64,576 at December 31, 2016)	6,584,529	5,998,596
Loans held for investment - Warehouse Purchase Program	1,154,588	1,055,341
Total loans held for investment	7,739,117	7,053,937
Federal Home Loan Bank (FHLB) stock and other restricted securities, at cost	64,790	43,266
Bank-owned life insurance	57,684	56,477
Premises and equipment, net	69,693	74,226
Goodwill	178,559	178,559
Other assets	72,964	80,397
Total assets	9,086,196	8,362,255
Deposits
Non-interest-bearing demand	1,635,622	1,383,951
Interest-bearing demand	1,029,375	903,314
Savings and money market	2,735,296	2,710,307
Time	1,367,390	1,367,904
Total deposits	6,767,683	6,365,476
FHLB advances	1,043,163	833,682
Repurchase agreements	84,676	86,691
Subordinated debt	134,522	134,032
Accrued expenses and other liabilities	96,278	57,009
Total liabilities	8,126,322	7,476,890
Commitments and contingent liabilities (See Note 17)
Shareholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized; 0 shares issued — December 31, 2017 and December 31, 2016	0	0
Common stock, $.01 par value; 90,000,000 shares authorized; 48,117,390 shares issued — December 31, 2017 and 47,876,198 shares issued — December 31, 2016	481	479
Additional paid-in capital	603,884	589,408
Retained earnings	370,858	310,641
Accumulated other comprehensive income (loss), net	(3,429)	(2,713)
Unearned Employee Stock Ownership Plan (ESOP) shares; 1,192,093 shares at December 31, 2017 and 1,245,046 shares at December 31, 2016	(11,920)	(12,450)
Total shareholders’ equity	959,874	885,365
Total liabilities and shareholders’ equity	$ 9,086,196	$ 8,362,255

XML

CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Fair value of securities held-to-maturity	$ 174,926	$ 212,981
Allowance for loan losses on loans held for investment	$ 71,301	$ 64,576
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	90,000,000	90,000,000
Common stock, shares issued (in shares)	48,117,390	47,876,198
Unearned Employee Stock Ownership Plan (ESOP) shares (in shares)	1,192,093	1,245,046

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest and dividend income
Loans, including fees	$ 347,438	$ 301,542	$ 248,665
Taxable securities	10,800	9,254	9,307
Nontaxable securities	2,907	3,052	2,995
Interest-bearing deposits in other financial institutions	4,009	1,878	631
FHLB and FRB stock and other	1,703	1,626	1,094
Total interest and dividend income	366,857	317,352	262,692
Interest expense
Deposits	36,694	21,034	13,127
FHLB advances	9,650	7,167	6,552
Repurchase agreements and other borrowings	9,082	6,882	1,936
Total interest expense	55,426	35,083	21,615
Net interest income	311,431	282,269	241,077
Provision for credit losses	39,456	26,900	25,465
Net interest income after provision for credit losses	271,975	255,369	215,612
Non-interest income
Service charges and other fees	35,742	36,690	30,936
Net gain on sale of mortgage loans held for sale	7,322	8,225	8,036
Bank-owned life insurance income	1,727	1,744	1,699
Net gain (loss) on securities transactions	(39)	56	203
Gain (loss) on sale and disposition of assets	(1,572)	3,356	873
Other	402	1,860	3,068
Total non-interest income	43,582	51,931	44,815
Non-interest expense
Salaries and employee benefits	95,136	92,568	92,527
Merger and acquisition costs	0	0	1,553
Advertising	4,378	3,861	3,773
Occupancy and equipment	14,385	15,007	14,860
Outside professional services	4,889	3,872	3,332
Regulatory assessments	4,479	4,948	4,260
Data processing	16,796	14,974	11,278
Office operations	9,238	9,901	10,697
Other	11,043	11,246	9,275
Total non-interest expense	160,344	156,377	151,555
Income before income tax expense	155,213	150,923	108,872
Income tax expense	65,719	53,102	37,956
Net income	$ 89,494	$ 97,821	$ 70,916
Earnings per share:
Basic (in dollars per share)	$ 1.91	$ 2.11	$ 1.54
Diluted (in dollars per share)	1.89	2.09	1.53
Dividends declared (in dollars per share)	$ 0.61	$ 0.58	$ 0.54

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 89,494	$ 97,821	$ 70,916
Change in unrealized gains (losses) on securities available for sale	(1,144)	(3,917)	(1,434)
Reclassification of amount realized through securities transactions	39	(56)	(203)
Tax effect	389	1,393	574
Other comprehensive income (loss), net of tax	(716)	(2,580)	(1,063)
Comprehensive income	$ 88,778	$ 95,241	$ 69,853

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss), Net	Unearned ESOP Shares
Balance at Dec. 31, 2014	$ 568,223	$ 400	$ 386,549	$ 195,327	$ 930	$ (14,983)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	70,916			70,916
Other comprehensive income (loss), net of tax	(1,063)				(1,063)
Dividends declared ($0.54 per share, $0.58 per share and $0.61 per share as of December 31, 2015, 2016 & 2017 respectively)	(25,747)			(25,747)
ESOP shares earned, (184,194 shares, 120,411 shares and 52,953 shares as of December 31 2015, 2016 & 2017 respectively)	5,751		4,284			1,467
Share-based compensation expense	5,477		5,477
Activity in employee stock plans (138,855 shares, 230,372 shares and 241,192 shares as of December 31, 2015, 2016 & 2017 respectively)	1,284	1	1,283
Share repurchase, (357,950 shares)	(7,989)	(4)	(7,985)
Acquisition of LegacyTexas Group, Inc., (7,850,070 shares)	187,224	79	187,145
Balance at Dec. 31, 2015	804,076	476	576,753	240,496	(133)	(13,516)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	97,821			97,821
Other comprehensive income (loss), net of tax	(2,580)				(2,580)
Dividends declared ($0.54 per share, $0.58 per share and $0.61 per share as of December 31, 2015, 2016 & 2017 respectively)	(27,676)			(27,676)
ESOP shares earned, (184,194 shares, 120,411 shares and 52,953 shares as of December 31 2015, 2016 & 2017 respectively)	3,955		2,889			1,066
Share-based compensation expense	6,014		6,014
Activity in employee stock plans (138,855 shares, 230,372 shares and 241,192 shares as of December 31, 2015, 2016 & 2017 respectively)	3,755	3	3,752
Balance at Dec. 31, 2016	885,365	479	589,408	310,641	(2,713)	(12,450)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	89,494			89,494
Other comprehensive income (loss), net of tax	(716)				(716)
Dividends declared ($0.54 per share, $0.58 per share and $0.61 per share as of December 31, 2015, 2016 & 2017 respectively)	(29,277)			(29,277)
ESOP shares earned, (184,194 shares, 120,411 shares and 52,953 shares as of December 31 2015, 2016 & 2017 respectively)	2,834		2,304			530
Share-based compensation expense	7,462		7,462
Activity in employee stock plans (138,855 shares, 230,372 shares and 241,192 shares as of December 31, 2015, 2016 & 2017 respectively)	4,712	2	4,710
Balance at Dec. 31, 2017	$ 959,874	$ 481	$ 603,884	$ 370,858	$ (3,429)	$ (11,920)

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (PARENTHETICAL) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 0.61	$ 0.58	$ 0.54
ESOP shares earned (in shares)	52,953	120,411	184,194
Activity in employee stock plans (in shares)	241,192	230,372	138,855
Number of shares repurchased (in shares)			357,950
Stock issued for acquisition (in shares)			7,850,070

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Net income	$ 89,494	$ 97,821	$ 70,916
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	39,456	26,900	25,465
Depreciation and amortization	7,142	7,081	7,196
Deferred tax expense (benefit)	(4,115)	(6,798)	(692)
Impact of Tax Cuts and Jobs Act on deferred taxes	13,493	0	0
Premium amortization and accretion of securities, net	4,337	4,359	4,267
Accretion related to acquired loans	(3,097)	(4,613)	(10,241)
Net (gain) loss on securities transactions	39	(56)	(203)
ESOP compensation expense	2,834	3,955	5,751
Share-based compensation expense	7,462	6,014	5,477
Excess tax benefit on vesting of stock awards	1,578	0	0
Net gain on loans held for sale	(7,322)	(8,225)	(8,036)
Loans originated or purchased for sale	(195,161)	(218,288)	(222,195)
Proceeds from sale of loans held for sale	207,055	227,769	225,335
FHLB stock dividends	(548)	(539)	(152)
Bank-owned life insurance income	(1,727)	(1,744)	(1,699)
(Gain) loss on sale and disposition of repossessed assets, premises and equipment	2,099	(3,524)	(293)
Disposition of insurance subsidiary goodwill upon sale of subsidiary operations	0	2,217	0
Net change in deferred loan fees/costs	(8,631)	391	(1,067)
Net change in accrued interest receivable	(4,249)	(3,238)	(2,821)
Net change in other assets	(1,299)	(2,947)	8,444
Net change in other liabilities	40,176	5,913	(16,250)
Net cash provided by operating activities	189,016	132,448	89,202
Available for sale securities:
Maturities, prepayments and calls	2,028,905	2,276,913	2,114,641
Purchases	(2,098,681)	(2,334,558)	(2,148,080)
Proceeds from sale of AFS securities	0	7,700	36,984
Held to maturity securities:
Maturities, prepayments and calls	35,973	41,384	49,730
Purchases	0	(12,477)	(15,933)
Originations of Warehouse Purchase Program loans	(21,917,085)	(19,966,527)	(15,511,029)
Proceeds from pay-offs of Warehouse Purchase Program loans	21,817,838	19,954,905	15,253,726
Net change in loans held for investment, excluding Warehouse Purchase Program	(620,066)	(1,014,500)	(1,030,016)
Redemption (purchase) of FHLB and FRB stock and other	(20,976)	20,348	(14,527)
Cash received in excess of cash paid for acquisition of LegacyTexas Group, Inc.	0	0	128,598
Purchases of premises and equipment	(3,602)	(8,420)	(5,660)
Proceeds from sale of assets	7,814	15,803	10,121
Net cash (used in) investing activities	(769,880)	(1,019,429)	(1,131,445)
Cash flows from financing activities
Net change in deposits	402,207	1,138,765	940,862
Proceeds from FHLB advances	825,000	200,000	1,350,000
Repayments on FHLB advances	(615,519)	(806,222)	(773,003)
Share repurchase	0	0	(7,989)
Proceeds from borrowings	0	76,861	73,407
Repayments of borrowings	(2,015)	(24,929)	(32,953)
Payment of dividends	(29,277)	(27,676)	(25,747)
Activity in employee stock plans	4,712	3,755	1,284
Net cash provided by financing activities	585,108	560,554	1,525,861
Net change in cash and cash equivalents	4,244	(326,427)	483,618
Beginning cash and cash equivalents	289,212	615,639	132,021
Ending cash and cash equivalents	293,456	289,212	615,639
Supplemental cash flow information:
Interest paid	54,808	34,625	20,861
Income taxes paid	57,482	60,854	36,835
Supplemental noncash disclosures:
Transfers from loans to other real estate owned	4,553	10,780	3,287
Common stock issued in consideration of LegacyTexas Group, Inc. acquisition	$ 0	$ 0	$ 187,224

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation: The consolidated financial statements include LegacyTexas Financial Group, Inc. (the "Company"), whose business at December 31, 2017 primarily consisted of the operations of its wholly-owned subsidiary, LegacyTexas Bank (the "Bank"). In addition, the Company also offers title services through LegacyTexas Title Co., which is a wholly-owned subsidiary of the Bank. Intercompany transactions and balances are eliminated in consolidation.

At December 31, 2017, the Company provided financial services through 44 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. Its primary deposit products are demand, savings and certificate of deposit accounts, and its primary lending products are commercial real estate, commercial and industrial and consumer lending, including one- to four-family real estate loans. Most loans are secured by specific items of collateral, including business assets, commercial and residential real estate and consumer assets. Commercial loans are expected to be repaid from cash flow from operations of businesses.

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles ("US GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, valuation of other real estate owned, other-than-temporary impairment of securities, realization of deferred tax assets, and fair values of financial instruments are subject to change.

Cash Flows: Cash and cash equivalents include cash, deposits with other financial institutions with maturities less than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions, federal funds purchased, Federal Home Loan Bank advances and repurchase agreements.

Restrictions on Cash: The Company maintains deposits with other financial institutions in amounts that exceed federal deposit insurance coverage. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents. Cash balances equaling or exceeding escrow amounts are maintained at correspondent banks.

Securities: Securities that the Company has both the positive intent and ability to hold to maturity are classified as held to maturity and are carried at amortized cost. Securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, are classified as available for sale and are carried at fair value. Unrealized gains and losses on securities classified as available for sale have been accounted for as accumulated other comprehensive income (loss), net of taxes.

Gains and losses on the sale of securities classified as available for sale are recorded on the trade date using the specific-identification method. Amortization of premiums and discounts are recognized in interest income over the period to maturity. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayment, except for mortgage-backed securities where prepayments are anticipated.

The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis and more frequently when economic, market, or security specific concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than amortized cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Company has the intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition. The Company conducts regular reviews of the bond agency ratings of securities and considers whether the securities were issued by or have principal and interest payments guaranteed by the federal government or its agencies. These reviews focus on the underlying rating of the issuer and also include the insurance rating of securities that have an insurance component or guarantee. The ratings and financial condition of the issuers are monitored, as well as the financial condition and ratings of the insurers and guarantors.

For periods in which other-than-temporary impairment of a debt security is recognized, the credit portion of the amount is determined by subtracting the present value of the stream of estimated cash flows as calculated in a discounted cash flow model and discounted at book yield from the prior period’s ending carrying value. The non-credit portion of the amount is determined by subtracting the credit portion of the impairment from the difference between the book value and fair value of the security. The credit related portion of the impairment is charged against income and the non-credit related portion is charged to equity as a component of accumulated other comprehensive income. The Company did not recognize any other-than-temporary impairment on its securities portfolio for the years ended December 31, 2017 and 2016.

Mortgage Loans Held for Sale: The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with Accounting Standards Codification ("ASC") 825, "Financial Instruments." This election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC 815, “Derivatives and Hedging.”

Warehouse Purchase Program Loans: The Warehouse Purchase Program allows unaffiliated mortgage originators to close one- to four-family real estate loans in their own name and manage their cash flow needs until the loans are sold to investors. The mortgage banking company customer closes mortgage loans consistent with underwriting standards established by the Bank and approved investors and, once all pertinent documents are received, the participation interest is delivered by the Bank to the investor selected by the originator and approved by us. Although not bound by any legally binding commitment, when a purchase decision is made, we purchase a 100% participation interest in the mortgage loans originated by our mortgage banking company customers. All Warehouse Purchase Program loans are collectively evaluated for impairment and are purchased under several contractual requirements, providing safeguards to the Company. These safeguards include the requirement that our mortgage company customers have a takeout commitment or similar arrangement for each loan. To date, the Company has not experienced a loss on these loans and no allowance for loan losses has been allocated to them.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Past due status is based on the contractual terms of the loan. Loans that are past due 30 days are considered delinquent. Interest income on loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Non-mortgage consumer loans are typically charged off no later than 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and larger individually classified impaired loans.

All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

For loans collateralized by real property and commercial and industrial loans, credit exposure is monitored by internally assigned grades used for classification of loans. A loan is considered “special mention” when management has determined that there is a potential weakness that deserves management's close attention. Loans rated as "special mention" are not adversely classified according to regulatory classifications and do not expose the Company to sufficient risk to warrant adverse classification. A loan is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. “Substandard” loans include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected, and the loan may or may not meet the criteria for impairment. Loans classified as “doubtful” have all of the weaknesses of those classified as “substandard” with the added characteristic that the weaknesses present makes “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” All other loans that do not fall into the above mentioned categories are considered “pass” loans. Updates to internally assigned grades are made monthly and/or upon significant developments.

For other consumer loans (non-real estate), credit exposure is monitored by payment history of the loans. Non-performing other consumer loans are on nonaccrual status and are generally greater than 90 days past due.

Acquired Loans: Loans acquired through the completion of a transfer, including loans acquired in a business combination, that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized on the balance sheet and do not result in any yield adjustments, loss accruals or valuation allowances. Increases in expected cash flows, including prepayments, subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment. Valuation allowances on these impaired loans reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). Revolving loans, including lines of credit, are excluded from acquired credit impaired loan accounting.

For acquired loans not deemed credit-impaired at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. Subsequent to the acquisition date, methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans; however, a provision for credit losses will be recorded only to the extent the required allowance exceeds any remaining credit discounts.

Concentration of Credit Risk: Most of the Company’s business activity is with customers located within the North Texas region and a large portion of loans are secured by real estate in this area. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy of the North Texas area.

Allowance for Loan Losses: The allowance for loan losses and related provision expense are susceptible to change if the credit quality of our loan portfolio changes, which is evidenced by many factors, including but not limited to charge-offs and non-performing loan trends. Generally, consumer real estate lending has a lower credit risk profile compared to other consumer lending (such as automobile loans). Commercial real estate and commercial and industrial lending, however, can have higher risk profiles than consumer loans due to these loans being larger in amount and non-homogeneous in structure and term. Changes in economic conditions, the mix and size of the loan portfolio, and individual borrower conditions can dramatically impact our level of allowance for loan losses in relatively short periods of time.

The allowance for loan losses is maintained to cover incurred losses that are estimated in accordance with US GAAP. It is our estimate of credit losses inherent in our loan portfolio at each balance sheet date. Our methodology for analyzing the allowance for loan losses consists of general and specific components. For the general component, we stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and apply a loss ratio to these groups of loans to estimate the credit losses in the loan portfolio. We use both historical loss ratios and qualitative loss factors assigned to major loan collateral types to establish general component loss allocations, inclusive of estimated loss emergence periods. Qualitative loss factors are based on management's judgment of company, market, industry or business specific data and external economic indicators, which are not yet reflected in the historical loss ratios, and that could impact the Company's specific loan portfolios. The Allowance for Loan Loss Committee sets and adjusts qualitative loss factors by regularly reviewing changes in underlying loan composition and the seasonality of specific portfolios. The Allowance for Loan Loss Committee also considers credit quality and trends relating to delinquency, non-performing and adversely rated loans within the Company's loan portfolio when evaluating qualitative loss factors. Additionally, the Allowance for Loan Loss Committee adjusts qualitative factors to account for the potential impact of external economic factors, including the unemployment rate, vacancy and capitalization rates and other pertinent economic data specific to our primary market area and lending portfolios.

For the specific component, the allowance for loan losses includes loans where management has concerns about the borrower's ability to repay and on individually analyzed loans found to be impaired. Management evaluates current information and events regarding a borrower's ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according to the contractual terms of the loan agreement, is in doubt. If an impaired loan is collateral-dependent, the fair value of the collateral, less the estimated cost to sell, is used to determine the amount of impairment. If an impaired loan is not collateral-dependent, estimated discounted cash flows are used to determine the amount of impairment, if any. For impaired loans, the amount of the impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral or until the basis is collected. Impairment losses are reflected in the allowance for loan losses through a charge to the provision for credit losses. Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal.

Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. As a result, the Company does not separately identify consumer real estate loans less than $417 or individual consumer non-real estate secured loans for impairment disclosures. The Company considers these loans to be homogeneous in nature due to the smaller dollar amount and the similar underwriting criteria.

A loan that has been modified is considered a troubled debt restructuring (“TDR”) when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. Modifications to loan terms may include a modification of the contractual interest rate to a below-market rate (even if the modified rate is higher than the original rate), forgiveness of accrued interest, forgiveness of a portion of principal, an extended repayment period or a deed in lieu of foreclosure or other transfer of assets other than cash to fully or partially satisfy a debt. The Company's policy is to place all TDRs on nonaccrual for a minimum period of six months. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months and the collection of principal and interest under the revised terms is deemed probable. All TDRs are considered to be impaired loans.

FHLB stock and other restricted securities: FHLB, FRB and other restricted stock is carried at cost, classified as restricted securities and periodically evaluated for impairment based on the ultimate recoverability of the par value. Both cash and stock dividends are reported as interest income.

Bank-Owned Life Insurance: The Company has purchased life insurance policies on certain key employees. The purchase of these life insurance policies allows the Company to use tax-advantaged rates of return. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are generally depreciated using the straight-line method with useful lives ranging from 10 to 30 years. Furniture, fixtures and equipment are generally depreciated using the straight-line method with useful lives ranging from 3 to 7 years. The cost of leasehold improvements is amortized over the shorter of the lease term or useful life using the straight-line method.

Goodwill: Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. According to ASC 350-20, "Intangibles- Goodwill and Other," goodwill shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Deterioration in economic market conditions, changes in key personnel, increased estimates of the effects of recent regulatory or legislative changes, or additional regulatory or legislative changes may result in declines in projected business performance beyond management's current expectations. Such declines in business performance could cause the estimated fair value of goodwill to decline, which could result in an impairment charge to earnings in a future period related to goodwill.

The Company evaluates goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount, in accordance with ASC 350-20. During 2016, the Company changed its annual goodwill impairment testing date from December 31 to October 1. The Company believes that this new date is preferable as it provides additional time prior to the Company’s year-end to complete the annual goodwill impairment test, especially in the event of future acquisitions and growth. This change does not accelerate, delay, avoid or cause an impairment charge, nor does this change result in adjustments to previously issued financial statements.

The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining the need to perform the two-step test for goodwill impairment (the qualitative method). If the qualitative method cannot be used or if it determines, based on the qualified method, that the fair value is more likely than not less than the carrying amount, the Company uses the two-step test. Under the two-step test, the Company compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Step two of the goodwill impairment test compares the implied estimated fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill for that reporting unit exceeds the implied fair value of that unit's goodwill, an impairment loss is recognized in an amount equal to that excess. Additional information regarding goodwill and impairment testing can be found in Note 9 - Goodwill and Core Deposit Intangibles.

Identifiable Intangibles: Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. The Company's intangible assets relate to core deposits and customer relationships. Intangible assets with definite useful lives are amortized on an accelerated basis over their estimated life. Intangible assets, premises and equipment and other long-lived assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Foreclosed Assets: Assets acquired through loan foreclosure are initially recorded at the lower of the recorded investment in the loan at the time of foreclosure or the fair value less costs to sell, establishing a new cost basis. Any write-down in the carrying value of a property at the time of acquisition is charged-off to the allowance for loan losses. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Derivative Financial Instruments: The Company enters into the following derivative financial instruments: interest rate lock commitments, forward mortgage-backed securities trades and interest rate swaps and caps. These financial instruments are not designated as hedging instruments and are used for asset and liability management and commercial customers' financing needs. All derivatives are carried at fair value in either other assets or other liabilities. For additional information on derivative financial instruments, see Note 7 — Derivative Financial Instruments.

Fair Value of Financial Instruments: In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Fair value measurements and disclosures guidance establishes a three-level fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. For additional information on fair value measurements see Note 6 - Fair Value.

Repurchase/Resell Agreements: The Company sells certain securities under agreements to repurchase. The securities sold under these agreements are treated as collateralized borrowings and are recorded at amounts equal to the cash received. The contractual terms of the agreements to repurchase may require the Company to provide additional collateral if the fair value of the securities underlying the borrowings declines during the term of the agreement.

Advertising Expense: The Company expenses all advertising costs as they are incurred. Advertising expenses were $4,378, $3,861, and $3,773 in 2017, 2016 and 2015, respectively.

Share-Based Compensation: The Company has shareholder approved share-based compensation plans that are accounted for under ASC 718, Compensation - Stock Compensation, which requires companies to record compensation cost for share-based payment transactions with employees in return for employment service. Compensation cost is recognized for stock options and restricted stock awards based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with time-based vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. For awards with performance-based vesting conditions, compensation cost is recognized when the achievement of the performance condition is considered probable of achievement. If a performance condition is subsequently determined to be improbable of achievement, compensation cost is reversed.

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching contributions as determined by formula. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company did not have any material uncertain tax positions which would require accrual at December 31, 2017 or 2016.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense and did not have any amounts accrued for interest and penalties for the years ended December 31, 2017 or 2016. The Company files a consolidated income tax return with its subsidiaries. Federal income tax expense or benefit has been allocated to subsidiaries on a separate return basis.

Earnings per common share: The Company calculated earnings per common share in accordance with ASC 260, “Earnings Per Share,” which provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company has determined that its outstanding non-vested stock awards are participating securities. Accordingly, earnings per common share is computed using the two-class method prescribed under ASC 260.

Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per common share for the reported periods is provided in Note 3 — Earnings Per Common Share.

Comprehensive Income (Loss): Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, net of taxes, which are also recognized as a separate component of equity.

Employee stock ownership plan (ESOP): The Company accounts for its ESOP in accordance with ASC 718-40, "Employee Stock Ownership Plans." Accordingly, since the Company sponsors the ESOP with an employer loan, neither the ESOP’s loan payable nor the Company’s loan receivable are reported in the Company’s consolidated balance sheet. Likewise, the Company does not recognize interest income or interest cost on the loan.

Unallocated shares held by the ESOP are recorded as unearned ESOP shares in the consolidated statement of changes in shareholders’ equity. As shares are committed to be released for allocation, the Company recognizes compensation expense equal to the average market price of the shares for the period. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce principal and accrued interest payable on the ESOP loan.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Company or by the Company to shareholders.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over the transferred assets through either (a) an agreement that entitles and obligates the Company to repurchase or redeem them before their maturity or (b) the ability to unilaterally cause the holder to return specific assets.

Operating Segments: The Company has determined that all of its banking operations comprise one segment under ASC 280, Segment Reporting, since all offer similar products and services, operate with similar processes, and have similar customers. Additionally, the Company has determined that the Bank's title subsidiary does not meet the materiality threshold to require segment disclosure under ASC 280.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation.

Adoption of New Accounting Standards:

In March 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2016-06, Contingent Put and Call Options in Debt Instruments. This ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. For public business entities, this ASU was effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The adoption of this ASU did not have an impact on the Company's financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting. This ASU eliminates the requirement for an investor to retrospectively apply the equity method when an investment that it had accounted for by another method qualifies for use of the equity method. This ASU was effective for fiscal years beginning after December 15, 2016, and interim periods therein. The adoption of this ASU did not impact the Company's financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, this ASU was effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. See Note 13 - Share-based Compensationfor information regarding the impact of this ASU on the Company's financial statements.

Effect of Newly Issued But Not Yet Effective Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU affects entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which deferred the effective date of ASU 2014-09 for public entities to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. We have completed our evaluation of the impact of ASU 2014-09 on components of our non-interest income and have not found any significant changes to our methodology of recognizing revenue. As required by ASU 2014-09, we will adopt the standard in the first quarter of 2018 and, at the time of this filing, we do not anticipate recording a cumulative effect adjustment to opening retained earnings because the adjustment was determined to be insignificant. We will include newly applicable revenue disclosures in our Form 10-Q for the quarter ended March 31, 2018.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurements of Financial Assets and Financial Liabilities. This ASU requires that all equity investments be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). This ASU also requires that an entity present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, this ASU requires that public business entities base their fair value disclosures for financial instruments that are not measured at fair value in the financial statements on the exit price notion. Currently, the Company values these financial instruments using an entry price notion consistent with the current guidance, and will be changing to the exit price notion in the first quarter of 2018 in compliance with this ASU. For public business entities, this ASU is effective for annual periods beginning after December 15, 2017, and interim periods therein. The adoption of this ASU will not have a significant impact on the Company's financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held to maturity debt securities. Under current US GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. This revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available for sale debt securities. For public business entities, this ASU is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investments. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The adoption of this ASU will not have a significant impact on the Company's financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets other than Inventory. This ASU eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today's two-step impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates today’s requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. For public business entities, this ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be impacted. Under current GAAP, premiums on callable debt securities are generally amortized over the contractual life of the security. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements and disclosures.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting model to enable entities to better portray their risk management activities in their financial statements, by expanding an entity's ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This ASU eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, this ASU also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. For public business entities, this ASU is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2018. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

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Share Transactions

12 Months Ended

Dec. 31, 2017

Stockholders' Equity Note [Abstract]

Share Transactions

Share Transactions

In August 2012, the Company's Board of Directors announced its intention to repurchase up to 5% of its total common shares outstanding, or approximately 1,978,871 shares. No shares of Company stock were repurchased under this program in 2017 or in 2016. During 2015, 357,950 shares were repurchased and retired at an average price of $22.32. At December 31, 2017, 1,537,121 shares remain available for future repurchases under the program.

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Earnings Per Common Share

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income (which has been adjusted for distributed and undistributed earnings to participating securities) by the weighted-average number of common shares outstanding for the period, reduced for average unallocated ESOP shares and average unvested restricted stock awards. Unvested restricted stock awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method described in ASC 260-10-45-60B. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock awards and options) were exercised or converted to common stock, or resulted in the issuance of common stock that then shared in the Company’s earnings. Diluted earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period increased for the dilutive effect of unexercised stock options and unvested restricted stock awards. The dilutive effect of the unexercised stock options and unvested restricted stock awards is calculated under the treasury stock method utilizing the average market value of the Company’s stock for the period. A reconciliation of the numerator and denominator of the basic and diluted earnings per common share computation for the years ended December 31, 2017, 2016 and 2015 is as follows:

	Years Ended December 31,
	2017			2016			2015
Basic earnings per share:
Numerator:
Net income	$	89,494		$	97,821		$	70,916
Distributed and undistributed earnings to participating securities	(318		)	(497		)	(534		)
Income available to common shareholders	$	89,176		$	97,324		$	70,382
Denominator:
Weighted average common shares outstanding	47,998,439			47,721,179			47,659,389
Less: Average unallocated ESOP shares	(1,220,516		)	(1,301,356		)	(1,464,324		)
Average unvested restricted stock awards	(166,143		)	(235,749		)	(347,781		)
Average shares for basic earnings per share	46,611,780			46,184,074			45,847,284
Basic earnings per common share	$	1.91		$	2.11		$	1.54
Diluted earnings per share:
Numerator:
Income available to common shareholders	$	89,176		$	97,324		$	70,382
Denominator:
Average shares for basic earnings per share	46,611,780			46,184,074			45,847,284
Dilutive effect of share-based compensation plan	526,738			300,893			278,163
Average shares for diluted earnings per share	47,138,518			46,484,967			46,125,447
Diluted earnings per common share	$	1.89		$	2.09		$	1.53
Share awards excluded in the computation of diluted earnings per share because the exercise price was greater than the common stock average market price and were therefore anti-dilutive	623,666			1,384,784			1,012,771

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Securities

12 Months Ended

Dec. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

The amortized cost, related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss), and the fair value of securities available for sale ("AFS") were as follows:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency residential mortgage-backed securities 1	$	191,216	$	419	$	2,169	$	189,466
Agency commercial mortgage-backed securities 1	9,360		—		125		9,235
Agency residential collateralized mortgage obligations 1	187,637		4		3,425		184,216
US government and agency securities	1,590		81		—		1,671
Municipal bonds	35,196		241		308		35,129
Total securities	$	424,999	$	745	$	6,027	$	419,717
December 31, 2016
Agency residential mortgage-backed securities 1	$	220,744	$	635	$	2,828	$	218,551
Agency commercial mortgage-backed securities 1	9,422		—		75		9,347
Agency residential collateralized mortgage obligations 1	87,959		22		1,452		86,529
US government and agency securities	2,150		101		—		2,251
Municipal bonds	38,417		47		627		37,837
Total securities	$	358,692	$	805	$	4,982	$	354,515

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

The amortized cost (carrying amount), unrealized gains and losses, and fair value of securities held to maturity ("HTM") were as follows:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency residential mortgage-backed securities 1	$	57,334	$	616	$	646	$	57,304
Agency commercial mortgage-backed securities 1	27,435		589		98		27,926
Agency residential collateralized mortgage obligations 1	27,112		265		99		27,278
Municipal bonds	61,628		1,079		289		62,418
Total securities	$	173,509	$	2,549	$	1,132	$	174,926
December 31, 2016
Agency residential mortgage-backed securities 1	$	74,881	$	1,147	$	817	$	75,211
Agency commercial mortgage-backed securities 1	28,023		836		166		28,693
Agency residential collateralized mortgage obligations 1	40,707		697		33		41,371
Municipal bonds	66,776		1,635		705		67,706
Total securities	$	210,387	$	4,315	$	1,721	$	212,981

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

The amortized cost (carrying amount) and fair value of held to maturity debt securities and the fair value of available for sale debt securities at December 31, 2017 by contractual maturity are set forth below in the table below. Securities with contractual payments not due at a single maturity date, including mortgage backed securities and collateralized mortgage obligations, are shown separately.

	HTM				AFS
	Amortized Cost		Fair Value		Fair Value
Due in one year or less	$	1,365	$	1,373	$	1,526
Due after one to five years	10,699		10,959		12,726
Due after five to ten years	44,059		44,628		16,731
Due after ten years	5,505		5,458		5,817
Agency residential mortgage-backed securities	57,334		57,304		189,466
Agency commercial mortgage-backed securities	27,435		27,926		9,235
Agency residential collateralized mortgage obligations	27,112		27,278		184,216
Total	$	173,509	$	174,926	$	419,717

Securities with a carrying value of $256,451 and $224,674 at December 31, 2017 and 2016, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.

At December 31, 2017 and 2016, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies or U.S. Government Sponsored Enterprises, in an amount greater than 10% of shareholders’ equity.

Sales activity of securities for the years ended December 31, 2017, 2016 and 2015 was as follows. All securities sold were classified as available for sale.

	December 31,
	2017		2016		2015
Proceeds	$	—	$	7,700	$	36,984
Gross gains	—		72		278
Gross losses	—		7		50
Tax expense of securities gains/losses reclassified from accumulated other comprehensive income	—		23		80

Securities with unrealized losses at December 31, 2017 and 2016, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

AFS	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency residential mortgage-backed securities 1	$	59,545	$	412	$	100,214	$	1,757	$	159,759	$	2,169
Agency commercial mortgage-backed securities 1	9,235		125		—		—		9,235		125
Agency residential collateralized mortgage obligations 1	128,869		1,860		49,171		1,565		178,040		3,425
Municipal bonds	10,114		72		6,583		236		16,697		308
Total temporarily impaired	$	207,763	$	2,469	$	155,968	$	3,558	$	363,731	$	6,027
December 31, 2016
Agency residential mortgage-backed securities 1	$	167,503	$	2,770	$	7,516	$	58	$	175,019	$	2,828
Agency commercial mortgage-backed securities 1	9,347		75		—		—		9,347		75
Agency residential collateralized mortgage obligations 1	72,822		1,420		2,649		32		75,471		1,452
Municipal bonds	26,911		512		3,412		115		30,323		627
Total temporarily impaired	$	276,583	$	4,777	$	13,577	$	205	$	290,160	$	4,982

HTM	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency residential mortgage-backed securities 1	$	20,397	$	206	$	16,909	$	440	$	37,306	$	646
Agency commercial mortgage-backed securities 1	3,685		26		3,484		72		7,169		98
Agency residential collateralized mortgage obligations 1	8,008		64		2,267		35		10,275		99
Municipal bonds	9,313		80		10,486		209		19,799		289
Total temporarily impaired	$	41,403	$	376	$	33,146	$	756	$	74,549	$	1,132
December 31, 2016
Agency residential mortgage-backed securities 1	$	41,375	$	817	$	—	$	—	$	41,375	$	817
Agency commercial mortgage-backed securities 1	7,273		166		—		—		7,273		166
Agency residential collateralized mortgage obligations 1	6,322		11		1,451		22		7,773		33
Municipal bonds	19,362		658		1,045		47		20,407		705
Total temporarily impaired	$	74,332	$	1,652	$	2,496	$	69	$	76,828	$	1,721

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

As of December 31, 2017, 259 securities had unrealized losses, 122 of which had been in an unrealized loss position for over 12 months at December 31, 2017. The Company does not believe these unrealized losses are other-than-temporary and expects full collection of the carrying amount of these securities. At December 31, 2017, the Company does not intend to sell the securities in an unrealized loss position, and it is not more-likely-than-not that the Company will be required to sell the securities prior to recovery of amortized cost. All principal and interest payments are being received on time and in full.

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Loans

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

Loans

Loans

Loans consist of the following:

	December 31, 2017			December 31, 2016
Loans held for sale, at fair value	$	16,707		$	21,279
Loans held for investment:
Commercial real estate	$	3,019,339		$	2,670,455
Commercial and industrial	2,093,307			1,971,160
Construction and land	277,864			294,894
Consumer real estate	1,213,434			1,074,923
Other consumer	45,506			53,991
Gross loans held for investment, excluding Warehouse Purchase Program	6,649,450			6,065,423
Net of:
Deferred costs (fees) and discounts, net	6,380			(2,251		)
Allowance for loan losses	(71,301		)	(64,576		)
Net loans held for investment, excluding Warehouse Purchase Program	6,584,529			5,998,596
Warehouse Purchase Program	1,154,588			1,055,341
Total loans held for investment	$	7,739,117		$	7,053,937

Activity in the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015, segregated by portfolio segment and evaluation for impairment, is set forth below. The below activity does not include Warehouse Purchase Program loans, which are collectively evaluated for impairment and are purchased under several contractual requirements, providing safeguards to the Company. To date, the Company has not experienced a loss on its Warehouse Purchase Program loans and no allowance for loan losses has been allocated to them. At December 31, 2017, 2016 and 2015, the allowance for loan impairment related to purchased credit impaired ("PCI") loans totaled $269, $180, and $150, respectively.

For the year ended December 31, 2017	Commercial Real Estate			Commercial and Industrial			Construction and Land			Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	18,303		$	35,464		$	5,075		$	4,484		$	1,250		$	64,576
Charge-offs	(16		)	(32,846		)	(418		)	(96		)	(1,366		)	(34,742		)
Recoveries	205			405			75			42			640			1,367
Provision expense (benefit)	3,095			35,982			(88		)	408			703			40,100
Ending balance	$	21,587		$	39,005		$	4,644		$	4,838		$	1,227		$	71,301
Allowance ending balance:
Individually evaluated for impairment	$	—		$	10,527		$	—		$	230		$	34		$	10,791
Collectively evaluated for impairment	21,587			28,478			4,644			4,608			1,193			60,510
Loans:
Individually evaluated for impairment	4,134			84,005			—			2,992			35			91,166
Collectively evaluated for impairment	3,012,892			2,009,126			277,864			1,209,550			45,288			6,554,720
PCI loans	2,313			176			—			892			183			3,564
Ending balance	$	3,019,339		$	2,093,307		$	277,864		$	1,213,434		$	45,506		$	6,649,450

For the year ended December 31, 2016	Commercial Real Estate			Commercial and Industrial			Construction and Land		Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	14,123		$	24,975		$	3,013	$	3,992		$	990		$	47,093
Charge-offs	(79		)	(7,746		)	—		(107		)	(927		)	(8,859		)
Recoveries	21			472			—		109			340			942
Provision expense	4,238			17,763			2,062		490			847			25,400
Ending balance	$	18,303		$	35,464		$	5,075	$	4,484		$	1,250		$	64,576
Allowance ending balance:
Individually evaluated for impairment	$	300		$	4,521		$	—	$	138		$	52		$	5,011
Collectively evaluated for impairment	18,003			30,943			5,075		4,346			1,198			59,565
Loans:
Individually evaluated for impairment	5,195			86,664			11,385		3,300			75			106,619
Collectively evaluated for impairment	2,659,644			1,884,263			283,509		1,070,732			53,683			5,951,831
PCI loans	5,616			233			—		891			233			6,973
Ending balance	$	2,670,455		$	1,971,160		$	294,894	$	1,074,923		$	53,991		$	6,065,423

For the year ended December 31, 2015	Commercial Real Estate			Commercial and Industrial			Construction and Land		Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	11,830		$	9,068		$	174	$	4,069		$	408		$	25,549
Charge-offs	(167		)	(3,129		)	—		(321		)	(1,090		)	(4,707		)
Recoveries	29			246			—		85			426			786
Provision expense	2,431			18,790			2,839		159			1,246			25,465
Ending balance	$	14,123		$	24,975		$	3,013	$	3,992		$	990		$	47,093
Allowance ending balance:
Individually evaluated for impairment	$	366		$	1,470		$	—	$	81		$	61		$	1,978
Collectively evaluated for impairment	13,757			23,505			3,013		3,911			929			45,115
Loans:
Individually evaluated for impairment	11,580			16,906			33		4,767			120			33,406
Collectively evaluated for impairment	2,155,351			1,595,548			269,675		931,140			69,433			5,021,147
PCI loans	10,612			215			—		850			277			11,954
Ending balance	$	2,177,543		$	1,612,669		$	269,708	$	936,757		$	69,830		$	5,066,507

Changes in the allowance for off-balance sheet credit losses on lending-related commitments and guarantees on credit card debt, included in "accrued expenses and other liabilities" on the consolidated balance sheets, are summarized in the following table. Please see Note 17 - Commitments and Contingent Liabilities for more information.

	Years Ended December 31,
	2017			2016
Balance at beginning of period	$	1,573		$	73
Charge-offs on lending-related commitments	—			—
Provision (recovery) for credit losses on lending-related commitments	(644		)	1,500
Balance at end of period	$	929		$	1,573

Impaired loans at December 31, 2017 and 2016, were as follows ¹:

December 31, 2017	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial real estate	$	4,411	$	4,134	$	—	$	4,134	$	—
Commercial and industrial	89,713		48,463		35,542		84,005		10,502
Consumer real estate	3,545		2,985		7		2,992		7
Other consumer	71		16		19		35		13
Total	$	97,740	$	55,598	$	35,568	$	91,166	$	10,522
December 31, 2016
Commercial real estate	$	5,388	$	4,429	$	766	$	5,195	$	272
Commercial and industrial	87,756		73,377		13,287		86,664		4,519
Construction and land	11,384		11,385		—		11,385		—
Consumer real estate	3,766		3,290		10		3,300		10
Other consumer	107		33		42		75		30
Total	$	108,401	$	92,514	$	14,105	$	106,619	$	4,831

¹  No Warehouse Purchase Program loans were impaired at December 31, 2017 or 2016. Loans reported do not include PCI loans.

Income on impaired loans at December 31, 2017, 2016 and 2015, was as follows¹ 

	December 31, 2017				December 31, 2016				December 31, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial real estate	$	4,421	$	8	$	5,240	$	9	$	8,178	$	24
Commercial and industrial	83,508		—		28,634		1		19,595		8
Construction and land	2,273		—		901		—		84		—
Consumer real estate	2,786		14		4,831		14		5,269		7
Other consumer	264		4		95		4		202		2
Total	$	93,252	$	26	$	39,701	$	28	$	33,328	$	41

¹  Loans reported do not include PCI loans.

No loans past due over 90 days were still accruing interest at December 31, 2017. At December 31, 2016, loans past due over 90 days still accruing interest totaled $141, which consisted entirely of PCI loans. At December 31, 2017, no PCI loans were considered non-performing loans. No Warehouse Purchase Program loans were non-performing at December 31, 2017 or 2016.

Non-performing loans were as follows:

	December 31,
	2017		2016
Commercial real estate	$	4,134	$	5,195
Commercial and industrial	84,003		86,664
Construction and land	—		11,385
Consumer real estate	6,190		7,987
Other consumer	76		158
Total	$	94,403	$	111,389

For the years ended December 31, 2017, 2016 and 2015, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $4,229, $1,746 and $1,594, respectively. No interest income was recorded on these loans for the years ended December 31, 2017, 2016 and 2015.

The outstanding balances of TDRs are shown below:

	December 31,
	2017		2016
Nonaccrual TDRs (1)	$	17,294	$	11,701
Performing TDRs (2)	768		454
Total	$	18,062	$	12,155
Outstanding commitments to lend additional funds to borrowers with TDR loans	—		—

¹  Nonaccrual TDR loans are included in the nonaccrual loan totals.

²  Performing TDR loans are loans that have been performing under the restructured terms for at least six months and the Company is accruing interest on these loans.

The following table provides the recorded balances of loans modified as a TDR during the years ended December 31, 2017, 2016 and 2015.

December 31, 2017	Principal Deferrals			Combination of Rate Reduction & Principal Deferral		Other			Total
Commercial and industrial	$	38		$	131	$	14,063	(1)	$	14,232
Total	$	38		$	131	$	14,063		$	14,232
December 31, 2016
Commercial and industrial	$	685		$	—	$	7,090	(1)	$	7,775
Consumer real estate	—			79		—			79
Other consumer	1			—		—			1
Total	$	686		$	79	$	7,090		$	7,855
December 31, 2015
Commercial real estate	$	100		$	—	$	—		$	100
Commercial and industrial	—			—		191			191
Consumer real estate	209		(2)	60		36			305
Other consumer	1			—		3			4
Total	$	310		$	60	$	230		$	600

¹  Reserve-based energy relationships where the primary modification consisted of suspension of required borrowing base payments.

²  Principal deferrals include Chapter 7 bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt. Such loans are placed on non-accrual status.

Loans modified as a TDR during the years ended December 31, 2017, 2016 and 2015, which experienced a subsequent payment default during the periods, are shown below. A payment default is defined as a loan that was 90 days or more past due.

	Years Ended December 31,
	2017		2016		2015
Consumer real estate	$	—	$	31	$	178

Loans acquired with evidence of credit quality deterioration at acquisition, for which it was probable that the Company would not be able to collect all contractual amounts due, were accounted for as PCI loans. The carrying amount of PCI loans included in the consolidated balance sheets and the related outstanding balances at December 31, 2017 and 2016 are set forth in the table below. The outstanding balance represents the total amount owed, including accrued but unpaid interest, and any amounts previously charged off.

	December 31,
	2017		2016
Carrying amount 1	$	3,295	$	6,793
Outstanding balance	3,992		7,597

¹ The carrying amounts are reported net of allowance for loan losses of $269 and $180 as of December 31, 2017 and 2016.

Changes in the accretable yield for PCI loans for the years ended December 31, 2017 and 2016, are as follows:

	December 31,
	2017			2016
Balance at beginning of period	$	2,515		$	3,356
Reclassifications from nonaccretable	602			429
Disposals	(187		)	(359		)
Accretion	(651		)	(911		)
Balance at end of period	$	2,279		$	2,515

Below is an analysis of the age of recorded investment in loans that were past due at December 31, 2017 and 2016. No Warehouse Purchase Program loans were delinquent at December 31, 2017 or 2016 and therefore are not included in the following table.

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Loans Past Due		Current Loans 1		Total Loans
Commercial real estate	$	9,414	$	—	$	250	$	9,664	$	3,009,675	$	3,019,339
Commercial and industrial	918		284		7,350		8,552		2,084,755		2,093,307
Construction and land	9,354		—		—		9,354		268,510		277,864
Consumer real estate	16,436		2,928		1,367		20,731		1,192,703		1,213,434
Other consumer	891		34		2		927		44,579		45,506
Total	$	37,013	$	3,246	$	8,969	$	49,228	$	6,600,222	$	6,649,450
December 31, 2016
Commercial real estate	$	1,829	$	72	$	766	$	2,667	$	2,667,788	$	2,670,455
Commercial and industrial	20,910		495		46		21,451		1,949,709		1,971,160
Construction and land	19,517		283		—		19,800		275,094		294,894
Consumer real estate	10,487		1,916		1,199		13,602		1,061,321		1,074,923
Other consumer	1,523		31		6		1,560		52,431		53,991
Total	$	54,266	$	2,797	$	2,017	$	59,080	$	6,006,343	$	6,065,423

¹  Includes acquired PCI loans with a total carrying value of $3,338 and $6,729 at December 31, 2017 and 2016, respectively.

The recorded investment in loans by credit quality indicators at December 31, 2017 and 2016, was as follows.

Real Estate and Commercial and Industrial Credit Exposure

Credit Risk Profile by Internally Assigned Grade

December 31, 2017	Commercial Real Estate		Commercial and Industrial		Construction and Land		Consumer Real Estate
Grade:1
Pass	$	2,980,656	$	1,953,496	$	277,864	$	1,203,236
Special Mention	30,656		43,161		—		1,408
Substandard	8,027		96,546		—		7,762
Doubtful	—		104		—		1,028
Total	$	3,019,339	$	2,093,307	$	277,864	$	1,213,434
December 31, 2016
Grade:1
Pass	$	2,648,842	$	1,712,171	$	283,423	$	1,062,549
Special Mention	7,972		155,110		—		2,083
Substandard	12,875		103,815		11,471		8,252
Doubtful	766		64		—		2,039
Total	$	2,670,455	$	1,971,160	$	294,894	$	1,074,923

¹  PCI loans are included in the substandard or doubtful categories for December 31, 2017 and 2016, respectively. These categories are generally consistent with the "substandard" and "doubtful" categories as defined by regulatory authorities.

Warehouse Purchase Program Credit Exposure

All Warehouse Purchase Program loans were graded pass as of December 31, 2017 and 2016.

Consumer Other Credit Exposure

Credit Risk Profile Based on Payment Activity

	December 31, 2017		December 31, 2016
Performing	$	45,430	$	53,833
Non-performing	76		158
Total	$	45,506	$	53,991

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Fair Value

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

ASC 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Prices or valuation techniques that require inputs that are both significant and unobservable in the market. These instruments are valued using the best information available, some of which is internally developed, and reflects a reporting entity’s own assumptions about the risk premiums that market participants would generally require and the assumptions they would use.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below.

	Fair Value Measurements Using Level 2
	December 31, 2017		December 31, 2016
Assets:
Agency residential mortgage-backed securities	$	189,466	$	218,551
Agency commercial mortgage-backed securities	9,235		9,347
Agency residential collateralized mortgage obligations	184,216		86,529
US government and agency securities	1,671		2,251
Municipal bonds	35,129		37,837
Total securities available for sale	$	419,717	$	354,515
Loans held for sale1	$	16,707	$	21,279
Derivative financial instruments:
Interest rate lock commitments	358		379
Forward mortgage-backed securities trades	7		36
Loan customer counterparty	—		—
Financial institution counterparty	1,735		1,369
Liabilities:
Derivative financial instruments:
Interest rate lock commitments	—		—
Forward mortgage-backed securities trades	18		80
Loan customer counterparty	1,735		1,369
Financial institution counterparty	—		—

¹  At December 31, 2017, loans held for sale had an aggregate outstanding principal balance of $16,242. There were no mortgage loans held for sale that were 90 days or greater past due or on non-accrual at December 31, 2017.

The following methodologies were used to measure the fair value of financial assets and liabilities valued on a recurring basis:

Securities available for sale - The fair values of securities available for sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

Residential mortgage loans held for sale - Mortgage loans held for sale, which are sold on a servicing released basis, are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted to credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, the Company classifies these valuations as Level 2 in the fair value disclosures. Interest income on mortgage loans held for sale is recognized based on the contractual rates and reflected in interest income on loans held for sale in the consolidated income statement. The Company has no continuing involvement in any residential mortgage loans sold.

Derivative instruments:

Interest rate lock commitments ("IRLCs") - The estimated fair values of IRLCs utilize current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability (Pull-through rate). The fair value of IRLCs is subject to change primarily due to changes in interest rates and the estimated Pull-through rate. These commitments are classified as Level 2 in the fair value disclosures, as the valuations are based on observable market inputs.

Forward mortgage-backed securities trades - These forward mortgage-backed securities trades are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, the Company utilized the exchange price or dealer market price for the particular derivative contract; therefore these contracts are classified as Level 2. The estimated fair values are subject to change primarily due to changes in interest rates.

Loan customer counterparty and financial institution counterparty - The Company also enters into certain interest rate derivative positions that are not designated as hedging instruments. The estimated fair value of these commercial loan interest rate swaps are obtained from a pricing service that provides the swaps' unwind value (Level 2 inputs). Please see Note 6 — Derivative Financial Instruments for more information.

Assets and Liabilities Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below. There were no liabilities measured at fair value on a non-recurring basis as of December 31, 2017 or 2016.

	Fair Value Measurements Using Level 3
	December 31, 2017		December 31, 2016
Assets:
Impaired loans	$	25,046	$	9,274
Foreclosed assets:
Commercial real estate	6,694		10,638
Construction and land	859		194
Consumer real estate	192		—
Other	687		6

Methodologies used to measure the fair value of financial assets and liabilities valued on a non-recurring basis are shown below:

Impaired loans - Impaired loans that are collateral dependent are measured for impairment using the fair value of the collateral adjusted by additional Level 3 inputs, such as discounts of market value, estimated marketing costs and estimated legal expenses. Impaired loans secured by real estate, receivables or inventory had discounts determined by management on an individual loan basis. Impaired loans that are not collateral dependent are measured for impairment by a discounted cash flow analysis using a net present value calculation that utilizes data from the loan file before and after the modification.

Foreclosed assets - These assets are measured at the lower of book or fair value less costs to sell using third party appraisals, listing agreements or sale contracts, which may be adjusted by additional Level 3 inputs, such as discounts of market value, estimated marketing costs and estimated legal expenses. Management may also consider additional adjustments on specific properties due to the age of the appraisal, expected holding period, lack of comparable sales, or if the other real estate owned is a special use property. At December 31, 2017, the Company had $400 in residential mortgage loans in the process of foreclosure.

The Credit Risk Management department evaluates the valuations on impaired loans and foreclosed assets at least quarterly. The valuations on impaired loans are reviewed at least quarterly by the Allowance for Loan Loss Committee and are considered in the calculation of the allowance for loan losses. Unobservable inputs, such as discounts to collateral, are monitored and adjusted if market conditions change.

Fair Value of Financial Instruments Not Recorded at Fair Value

The carrying amount and fair value information of financial instruments not recorded at fair value in their entirety on a recurring basis on the Company's consolidated balance sheets at December 31, 2017 and 2016, were as follows:

			Fair Value
December 31, 2017	Carrying Amount		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	293,456	$	293,456	$	—	$	—
Securities held to maturity	173,509		—		174,926		—
Loans held for investment, net	6,584,529		—		—		6,651,207
Loans held for investment - Warehouse Purchase Program	1,154,588		—		—		1,171,354
FHLB and other restricted securities, at cost	64,790		—		64,790		—
Accrued interest receivable	24,596		24,596		—		—
Financial liabilities
Deposits	$	6,767,683	$	—	$	—	$	6,326,572
FHLB advances	1,043,163		—		—		1,043,416
Repurchase agreements	84,676		—		—		81,041
Subordinated debt	134,522		—		—		141,972
Accrued interest payable	2,729		2,729		—		—
December 31, 2016
Financial assets
Cash and cash equivalents	$	289,212	$	289,212	$	—	$	—
Securities held to maturity	210,387		—		212,981		—
Loans held for investment, net	5,998,596		—		—		6,080,165
Loans held for investment - Warehouse Purchase Program	1,055,341		—		—		1,055,219
FHLB and other restricted securities, at cost	43,266		—		43,266		—
Accrued interest receivable	20,347		20,347		—		—
Financial liabilities
Deposits	$	6,365,476	$	—	$	—	$	5,989,933
FHLB advances	833,682		—		—		830,930
Repurchase agreement	86,691		—		—		84,265
Subordinated debt	134,032		—		—		121,743
Accrued interest payable	2,111		2,111		—		—

The following methods and assumptions were used to estimate the fair values of each class of financial instrument presented:

Cash and cash equivalents - Due to their short term nature, the carrying amount approximates the estimated fair value.

Securities held to maturity - The fair values of these securities is determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

Loans held for investment (including Warehouse Purchase Program loans) - Fair value is based on discounted cash flows using current market offering rates and estimated life.

FHLB stock and other restricted securities - The fair value on these securities is their cost basis due to restrictions on transferability.

Accrued interest receivable - Due to their short term nature, the carrying amount approximates the estimated fair value.

Deposits - Fair value is calculated using the FHLB advance curve to discount cash flows based on the estimated life of the deposits.

FHLB advances - Fair value is calculated using the FHLB advance curve to discount cash flows based on the contractual repayment schedule.

Repurchase agreement - The fair value is based on discounting the estimated cash flows using the current rate at which similar borrowings would be made with similar terms and remaining maturities.

Subordinated debt - The estimated fair value is based on current market rates on similar debt in the market.

Accrued interest payable - Due to their short term nature, the carrying amount approximates the estimated fair value.

The fair value of off-balance sheet items is based on the current fees or costs that would be charged to enter into or terminate such arrangements and are not considered significant to this presentation.

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Derivative Financial Instruments

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The following table provides the outstanding notional balances and fair values of outstanding derivative positions at December 31, 2017 and 2016.

	December 31, 2017						December 31, 2016
	Outstanding Notional Balance		Asset Derivative Fair Value		Liability Derivative Fair Value		Outstanding Notional Balance		Asset Derivative Fair Value		Liability Derivative Fair Value
IRLCs	$	10,337	$	358	$	—	$	10,952	$	379	$	—
Forward mortgage-backed securities trades	19,788		7		18		18,613		36		80
Commercial loan interest rate swaps and caps:
Loan customer counterparty	114,594		—		1,735		112,294		—		1,369
Financial institution counterparty	114,594		1,735		—		112,294		1,369		—

IRLCs - In the normal course of business, the Company enters into IRLCs with consumers to originate mortgage loans at a specified interest rate. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by the Company.

Forward mortgage-backed securities trades - The Company manages the changes in fair value associated with changes in interest rates related to IRLCs by using forward sold commitments known as forward mortgage-backed securities trades. These instruments are typically entered into at the time the IRLC is made.

Interest rate swaps and caps - These derivative positions relate to transactions in which we enter into an interest rate swap or cap with a customer, while at the same time entering into an offsetting interest rate swap or cap with another financial institution. An interest rate swap transaction allows our customer to effectively convert a variable rate loan to a fixed rate. In connection with each swap, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. In connection with each interest rate cap, we sell a cap to the customer and agree to pay interest if the underlying index exceeds the strike price defined in the cap agreement.  Simultaneously we purchase a cap with matching terms from another financial institution which agrees to pay us if the underlying index exceeds the strike price.

The commercial loan customer counterparty weighted average received and paid interest rates for interest rate swaps outstanding at December 31, 2017 and 2016 are presented in the following table.

	Weighted-Average Interest Rate
	December 31, 2017				December 31, 2016
	Received		Paid		Received		Paid
Loan customer counterparty	2.52	%	2.54	%	3.12	%	2.36	%

Our credit exposure on interest rate swaps is limited to the net favorable value of all swaps by each counterparty, which was approximately $32 at December 31, 2017. This credit exposure is partly mitigated as transactions with customers are generally secured by the collateral, if any, securing the underlying transaction being hedged. Our credit exposure, net of collateral pledged, relating to interest rate swaps with upstream financial institution counter-parties was approximately $1,752 at December 31, 2017.  A credit support annex is in place and allows the bank to call collateral from upstream financial institution counter-parties. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values. Our cash collateral pledged for interest rate swaps and included in our interest-bearing deposits, which totaled $1,950 and $1,950 at December 31, 2017 and 2016 respectively, is in excess of our credit exposure.

The initial and subsequent changes in the fair value of IRLCs and the forward sales of mortgage-back securities are recorded in net gain on sale of mortgage loans. These gains and losses were not attributable to instrument-specific credit risk. For interest rate swaps and caps, because we act as an intermediary for our customer, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on our results of operations. Income (loss) for the years ended December 31, 2017, 2016 and 2015 was as follows:

Derivatives not designated as hedging instruments	Years Ended December 31,
	2017			2016			2015
IRLC's	$	(21	)	$	(43	)	$	8
Forward mortgage-backed securities trades	(479		)	13			(195		)

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Premises and Equipment

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Premises and Equipment

Premises and Equipment

Premises and equipment were as follows:

	December 31,
	2017			2016
Land	$	22,140		$	23,636
Buildings	57,079			59,298
Furniture, fixtures and equipment	20,218			19,561
Leasehold improvements	10,055			7,674
	109,492			110,169
Less: accumulated depreciation	(39,799		)	(35,943		)
Total	$	69,693		$	74,226

Depreciation expense was $6,389, $6,186 and $6,550 for 2017, 2016 and 2015, respectively.

Operating Leases: The Company leases certain bank or loan production office properties and equipment under operating leases. Certain leases contain renewal options that may be exercised. Rent expense was $7,322, $7,928 and $6,895 for 2017, 2016 and 2015, respectively.

Rent commitments, before considering applicable renewal options, as of December 31, 2017, were as follows:

	Balance
2018	$	5,725
2019	5,069
2020	4,696
2021	4,443
2022	3,735
Thereafter	16,303
Total	$	39,971

The Company leases office space in certain locations to other unaffiliated tenants. Rental income of $1,102 was recognized during 2017. This rental income is recorded in the consolidated statement of income as an offset to occupancy expense. Aggregate future minimum rental payments to be received under non-cancelable subleases at December 31, 2017, were $105. At December 31, 2017, the Company had no commitments for future locations and held one parcel of land for future development. The Company sold a parcel of land in January 2017, resulting in a gain of $1,304.

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Goodwill and Core Deposit Intangibles

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Core Deposit Intangibles

Goodwill and Core Deposit Intangibles

Changes in the carrying amount of the Company's goodwill and core deposit intangibles (“CDI”) for years ended December 31, 2017 and 2016, were as follows:

	Goodwill			Core Deposit Intangibles
Balance as of December 31, 2015	$	180,776		$	1,030
Disposition of insurance subsidiary goodwill upon the sale of subsidiary operations	(2,217		)	—
Amortization of core deposit intangible	—			(365		)
Balance as of December 31, 2016	178,559			665
Amortization of core deposit intangible	—			(263		)
Balance as of December 31, 2017	$	178,559		$	402

CDI are amortized on an accelerated basis over their estimated lives with a weighted average amortization period of 8 years. The CDI amortization expense is reported in other non-interest expense on the Company's consolidated statements of income. The estimated aggregate future amortization expense for CDI remaining as of December 31, 2017 is as follows:

	Balance
2018	$	156
2019	101
2020	73
2021	48
2022	24
Thereafter	—

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Deposits

12 Months Ended

Dec. 31, 2017

Banking and Thrift [Abstract]

Deposits

Deposits

Time deposits of $250 or more totaled $1,009,855 and $951,688 at December 31, 2017 and 2016, respectively. The $250 FDIC insurance coverage limit applies per depositor, per insured depository institution, for each account ownership category.

At December 31, 2017 and 2016, the Company had $400,716 and $355,455 in reciprocal deposits, respectively. These consisted entirely of certificates of deposit made under the Company's participation in the Certificate of Deposit Account Registry Service® (CDARS®) and Insured Cash Sweep (ICS) money market product. Through CDARS®, the Company can provide a depositor the ability to place up to $50,000 on deposit with the Company while receiving FDIC insurance on the entire deposit by placing customer funds in excess of the FDIC deposit limits with other financial institutions in the CDARS® network. In return, these financial institutions place customer funds with the Company on a reciprocal basis. Similarly, customer funds in our ICS money market product are swept from a transaction account at the Company into money market accounts at multiple banks to allow access to FDIC insurance coverage through multiple accounts, up to $75,000. Regulators consider reciprocal deposits to be brokered deposits.

At December 31, 2017, scheduled maturities of time deposits for the next five years with the weighted average rate at the end of the period were as follows:

	Balance		Weighted Average Rate
2018	$	860,102	1.16	%
2019	383,687		1.57
2020	41,093		1.47
2021	59,074		1.59
2022 and thereafter	23,434		1.57
Total	$	1,367,390	1.31	%

At December 31, 2017 and 2016, the Company's deposits included public funds totaling $972,226 and $1,001,820, respectively. At December 31, 2017 and 2016, overdrawn deposits of $473 and $340 were reclassified as unsecured consumer loans.

Interest expense on deposits is summarized as follows:

	Years Ended December 31,
	2017		2016		2015
Interest-bearing demand	$	5,475	$	3,974	$	3,297
Savings and money market	16,845		7,288		3,644
Time	14,374		9,772		6,186
Total	$	36,694	$	21,034	$	13,127

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Borrowed Funds

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Borrowed Funds

Borrowed Funds

Borrowed funds are summarized as follows:

	December 31,
	2017				2016
	Amount		Rate1		Amount		Rate1
Federal Home Loan Bank advances	$	1,043,163	1.51	%	$	833,682	0.71	%
Repurchase Agreements
Credit Suisse structured repurchase agreement	25,000		3.02		25,000		3.02
Overnight repurchase agreements with depositors	59,676		1.18		61,691		0.15
Subordinated Debt
Fixed to floating rate note maturing on December 1, 2025	125,000		5.50		125,000		5.58
Junior subordinated debentures	15,464		3.29		15,464		2.66

¹  Rate at period-end, with the exception of the fixed to floating rate subordinated debt note, which is a weighted average rate calculated using period-end rates.

Federal Home Loan Bank ("FHLB") Advances

At December 31, 2017, advances from the FHLB had interest rates ranging from 1.30% to 6.00%. At December 31, 2016, advances from the FHLB had interest rates ranging from 0.46% to 6.00%. At December 31, 2017, the Company had $200,000 in variable rate FHLB advances.

In 2010, certain FHLB fixed-rate advances were modified. The early repayment of the debt resulted in a prepayment penalty, which is being amortized to interest expense as an adjustment to the cost of the new FHLB advances. The prepayment penalty, net of accumulated amortization, was $0 and $27 at December 31, 2017 and 2016. The amortization expense resulting from the prepayment penalty was fully amortized in September 2017.

The FHLB advances were collateralized by mortgage and commercial loans with collateral values of $2,106,571 and $1,877,506 under a blanket lien arrangement at December 31, 2017 and 2016, respectively. Additionally, securities safekept at FHLB and FHLB stock are used as collateral for advances. Based on this collateral, the Company was eligible to borrow an additional $2,084,944 and $1,821,693 at December 31, 2017 and 2016, respectively. The current agreement provided for a maximum borrowing amount of approximately $4,072,477 and $3,601,739 at December 31, 2017 and 2016, respectively.

Repurchase Agreements

Repurchase agreements ("repos") which are classified as securities transactions, are not insured by the FDIC, are not guaranteed, and may lose value. A repo is an agreement between two parties whereby one party (a bank as counterparty) sells the other (as customer) a security at a specified price with a commitment to buy the security back at a fixed time and price. Repos are accounted for as collateralized borrowings and are recorded at amounts equal to cash received.

Inherent in repurchase agreements is a risk that the fair value of the collateral pledged on the agreements could decline below the amount obligated under the agreements. To mitigate this risk to the customer, the Company, as the bank counterparty, marks securities sold under repos to fair value on a daily basis and provides 115% market value protection on overnight repos and 112% market value protection on its structured repo.

In April 2008, the Company entered into a 10-year term structured repurchase callable agreement for $25,000 to leverage the balance sheet and increase liquidity. The interest rate adjusts quarterly to 6.25% less the 90 day LIBOR, subject to a lifetime cap of 3.02%. At December 31, 2017, the Company also had $59,676 in overnight repurchase agreements with depositors.

Subordinated Debt

In November 2015, the Company issued $75,000 of Fixed-to-Floating Rate Subordinated Notes (the “Notes”) that mature on December 1, 2025 (the “Maturity Date”). In September 2016, the Company issued an additional $50,000 of Notes that mature on the Maturity Date. The Notes, which qualify as Tier 2 capital for regulatory purposes, have an interest rate of 5.50% and 5.69%, respectively, per annum, payable semi-annually on each December 1 and June 1 through December 1, 2020. From and including December 1, 2020 through maturity or earlier redemption, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month LIBOR rate plus 3.99%, payable on March 1, June 1, September 1, and December 1 of each year through the maturity date or earlier redemption. The Company may, at its option, beginning on December 1, 2020 and on any scheduled interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption. Any partial redemption will be made pro rata among all of the holders.

The Notes were sold at an underwriting discount and the discount, as well as debt issuance costs, are netted against the subordinated debt liability on the balance sheet in accordance with ASU 2015-03. The unamortized underwriting discount and debt issuance costs totaled $2,405 at December 31, 2017. The Notes are subordinated in right of payment to all of the Company's senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company's subsidiaries.

Upon the acquisition of LegacyTexas Group, Inc., the Company acquired $15,000 (15,000 shares with a liquidation amount of $1 per security) of Floating Rate Cumulative Trust Preferred Securities ("TruPS") and $464 of common stock through an unconsolidated subsidiary, Legacy Capital Trust III ("Trust III"). Trust III invested the total proceeds from the sale of TruPS and common stock (totaling $15,464) in floating rate Junior Subordinated Debentures (the "Trust III Debentures") issued by the Company. The terms of the Trust III Debentures are such that they qualify as Tier I capital for regulatory purposes. Interest on the Trust III Debentures is payable quarterly on March 15, June 15, September 15 and December 15 of each year, at a rate equal to the three month LIBOR rate plus 1.70% (3.29% at December 31, 2017). Principal is due at maturity on December 15, 2036. The TruPS are guaranteed by the Company and are subject to redemption. The Company may redeem the Trust III Debentures, in whole or in part, on any March 15, June 15, September 15 and December 15 at an amount equal to the principal amount being redeemed plus accrued and unpaid interest to the redemption date. At December 31, 2017 and 2016, the Trust III Debentures were reduced by a purchase accounting fair value discount of $3,537 and $3,723, respectively.

Also upon the acquisition of LegacyTexas Group, Inc., the Company acquired $15,000 of TruPS and $464 of common stock through an unconsolidated subsidiary. The subsidiary invested the total proceeds from the sale of the TruPS and common stock in floating rate Junior Subordinated Debentures issued by LegacyTexas Group, Inc. On April 7, 2015, the Company paid this debt in full.

Other Borrowing Information

At December 31, 2017, borrowed funds, reported gross of purchase accounting fair value discounts, prepayment penalties and debt issuance costs, were structured to contractually pay down as follows:

	FHLB Advances		Repurchase Agreements		Subordinated Debt		Total
2018	$	1,037,754	$	84,676	$	—	$	1,122,430
2019	2,313		—		—		2,313
2020	932		—		—		932
2021	856		—		—		856
2022	695		—		—		695
Thereafter	613		—		140,464		141,077
	$	1,043,163	$	84,676	$	140,464	$	1,268,303

Upon the acquisition of LegacyTexas Group, Inc., the Company assumed long-term notes totaling $8,900. These notes were paid off during the first quarter of 2015.

At December 31, 2017 and 2016, the Company had borrowing availability representing the collateral value assigned to the securities pledged to the discount window through the FRB of $78,616 and $46,725, respectively. Additionally, uncommitted, unsecured Fed Fund lines of credit totaling $250,000 and $255,000 were available at December 31, 2017 and 2016, respectively, from multiple correspondent banks.

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Benefits

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Benefits

Benefits

Employee Stock Ownership (“ESOP”) and 401(k) Plan: The Company offers a KSOP plan composed of an ESOP and 401(k) plan. Employees may participate under the 401(k) portion of the KSOP as of the date they first complete an hour of service with the Bank.  Employees are eligible to receive a matching contribution of 100% of employee contributions up to a maximum of 5% of the employee's qualifying compensation. Matching expense for 2017, 2016 and 2015 was $2,571, $2,479 and $2,130, respectively.

The ESOP portion of the KSOP was established in connection with the Company's 2006 minority stock offering. In 2006 the ESOP purchased shares of common stock financed by a term loan from the Company. This note was fully repaid in September 2016, and all shares have been allocated to participant accounts. In 2010, in connection with our second step conversion to a full stock company, the ESOP purchased 1,588,587 shares of common stock with proceeds from a 30 year note in the amount of $15,886 from the Company. At December 31, 2017, the ESOP held 2,298,076 shares, of which 1,105,983 shares were allocated to participants and 1,192,093 were unallocated. The fair value of unallocated shares at December 31, 2017 was $50,318.

The Company's Board of Directors determines the amount of contribution to the ESOP annually but is required to make contributions sufficient to service the ESOP's debt. Dividends on unallocated shares held by the ESOP are applied to the ESOP note payable. Shares are released for allocation to eligible employees as the ESOP debt is repaid. Eligible employees receive an allocation of released shares at the end of the calendar year on a relative compensation basis. Employees are eligible if they meet the minimum service and eligibility requirements. The dividends paid on allocated shares are paid to employee accounts. Contributions to the ESOP were $842, $1,468, and $2,060 during 2017, 2016 and 2015, and expense was $2,074, $3,174 and $4,914 for December 31, 2017, 2016 and 2015, respectively.

Deferred Compensation Plan: The Company has entered into certain non-qualified deferred compensation agreements with members of the executive management team, directors and certain employees. These agreements, which are subject to the rules of section 409(a) of the Internal Revenue Code, relate to the voluntary deferral of compensation received and do not have an employer contribution. The accrued liability as of December 31, 2017 and 2016 was $3,393 and $3,344, respectively.

Included in other assets is a universal life insurance policy, as well as variable and fixed annuity contracts, totaling $3,588 and $3,534 at December 31, 2017 and 2016, respectively. The Company is the owner and beneficiary of the policy, which pays interest on the funds invested. The life insurance policy is recorded at the net cash surrender value, or the amount that can be realized.

Bank-Owned Life Insurance: The Company is the sole owner of life insurance policies pertaining to certain employees and directors. The selected insured employees and directors agreed to a share of the death benefit while they remain actively employed with the Company or serve on its board. In the event of death while actively employed with the Company, the employee's or director's designated beneficiary will receive an income tax free death benefit paid.

The Company also is the sole owner of other life insurance policies that do not share the death benefit with the employees. The total balance of the bank-owned life insurance policies, reported as an asset, at December 31, 2017 and 2016 totaled $57,684 and $56,477.

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Share-based Compensation

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based Compensation

Share-based Compensation

The 2017 Omnibus Incentive Plan (the "2017 Plan") was approved at the Company's 2017 annual meeting of shareholders, held on May 22, 2017. Prior to approval of the 2017 Plan by shareholders, the Company had in effect the 2012 and 2007 Equity Incentive Plans (the “Prior Plans” and together with the 2017 Plan, the “Plans”). No further awards will be made under the Prior Plans and shares reserved to make new awards under the Prior Plans have been released; however, shares reserved to fund issued and outstanding awards under the Prior Plans continue to be reserved to provide for those awards.  All awards outstanding under the Prior Plans remain outstanding in accordance with their terms.  Each outstanding award under the Prior Plans continue to be governed solely by the terms of the documents evidencing such award, and no provision of the 2017 Plan is deemed to affect or otherwise modify the rights or obligations of the holders of such awards with respect to their acquisition of Company shares. The 2017 Plan permits the granting of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and cash awards to participants. Eligible participants under the 2017 Plan include employees and directors (including advisory and emeritus directors) of the Company and its subsidiaries. There are 3,250,000 total shares authorized under the 2017 Plan, with a fungible share rate of 2.5-for-1 for full-value awards (stock-based awards other than stock options and stock appreciation rights). As of December 31, 2017, 10,500 shares had been issued under the 2017 Plan.

Compensation cost charged to income for share-based compensation, which is reported in non-interest expense as salaries and employee benefits expense, is presented below:

	Years ended December 31,
	2017		2016		2015
Restricted stock	$	3,581	$	3,477	$	3,459
Stock options	3,881		2,537		2,018
Income tax benefit	2,612		2,105		1,917

A summary of activity in the restricted stock portion of the Company's Plans for 2017, 2016 and 2015 is presented below:

	Time-Vested Shares				Performance-Based Shares
	Shares		Weighted- Average Grant Date Fair Value per Share 1		Shares		Weighted- Average Grant Date Fair Value per Share 2
Non-vested at January 1, 2015	297,603		$	20.45	82,400		$	23.89
Granted	80,000		21.23		—		—
Vested	(131,142	)	19.98		(20,600	)	23.89
Non-vested at December 31, 2015	246,461		20.98		61,800		25.02
Granted	55,180		29.29		40,200		29.29
Vested	(101,465	)	20.70		(20,600	)	25.02
Non-vested at December 31, 2016	200,176		23.79		81,400		43.06
Granted	19,208		38.92		12,208		39.90
Vested	(90,796	)	21.67		(20,600	)	41.32
Non-vested at December 31, 2017	128,588		$	27.27	73,008		$	42.21

¹  For restricted stock awards with time-based vesting conditions, the grant date fair value is based upon the closing stock price as quoted on the Nasdaq Stock Market on the grant date.

²  For restricted stock awards with performance-based vesting conditions, the value of the award is based upon the closing stock price as quoted on the Nasdaq Stock Market on the date of vesting. Until the final value is determined on the vesting date, the Company estimates the fair value based upon the closing stock price as quoted on the Nasdaq Stock Market near the last business day of each month.

As of December 31, 2017, there was $2,887 of total unrecognized compensation expense related to non-vested restricted shares awarded under the Company's Plans. That expense is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of shares vested during the years ended December 31, 2017 and 2016, was $2,819 and $2,615, respectively.

Under the terms of the 2017 Plan, stock options may not be granted with an exercise price less than the fair market value of the Company’s common stock on the date the option is granted and may not be exercised later than ten years after the grant date. The fair market value is the closing stock price as quoted on the Nasdaq Stock Market on the date of grant.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the stock option in effect at the time of the grant. The expected term of stock options is based on employees' actual vesting behavior and expected volatilities are based on historical volatilities of the Company’s common stock. Expected dividends are the estimated dividend rate over the expected term of the stock options.

The weighted average fair value of stock options granted during 2017, 2016 and 2015 was $10.76, $7.77 and $6.82, respectively. The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	2017		2016		2015
Risk-free interest rate	2.18	%	1.37	%	1.80	%
Expected term of stock options (years)	6.2		6.3		6.2
Expected stock price volatility	31.85	%	32.07	%	31.14	%
Expected dividends	1.61	%	1.93	%	1.95	%

A summary of activity in the stock option portion of the Company's Plans as of the years ended December 31, 2017, 2016 and 2015 is presented below:

Options	Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2015	1,370,873		$	20.27	8.0	$	5,679
Granted	633,000		25.66
Exercised	(58,855	)	16.12
Forfeited	(79,268	)	20.89
Outstanding at December 31, 2015	1,865,750		22.21		7.9	6,401
Granted	392,838		29.15
Exercised	(175,192	)	19.08
Forfeited	(75,316	)	25.57
Outstanding at December 31, 2016	2,008,080		23.71		9.5	38,850
Granted	513,375		37.15
Exercised	(221,984	)	21.23
Forfeited	(92,228	)	28.80
Outstanding at December 31, 2017	2,207,243		$	26.88	10.1	$	33,848
Fully vested and expected to vest	2,191,740		$	26.82	10.1	$	33,725
Exercisable at December 31, 2017	966,527		$	22.11	7.5	$	19,425

As of December 31, 2017, there was $8,013 of total unrecognized compensation expense related to non-vested stock options. That expense is expected to be recognized over a weighted-average period of 1.9 years. At December 31, 2017, the Company applied an estimated forfeiture rate of 5% based on historical activity. The intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the market price of our common stock as of the reporting date. The total intrinsic value of stock options exercised was $4,084, $2,251 and $644 for years ended December 31, 2017, 2016 and 2015, respectively.

Effective January 1, 2017, the Company changed the accounting for income taxes upon the vesting of stock options and restricted stock to be in accordance with ASC 718, as modified by ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. Prior to the implementation of ASU 2016-09, the tax effects of income tax deductions in excess of compensation cost (windfalls) were recorded in additional paid-in capital, and the tax effects of compensation cost in excess of income tax deductions (shortfalls) were recorded in additional paid-in capital to the extent of previously recognized windfalls, with the remainder recorded in income tax expense. Under ASU 2016-09, all tax effects of windfalls and shortfalls related to share-based payments are recorded through the income statement. Prior period balances were not adjusted.

For the year ended December 31, 2017, we recognized income tax deductions in excess of compensation cost of $4,510 for share-based payment awards, which resulted in a tax benefit of $1,578 recorded as a reduction of income tax expense. The classification of excess tax benefits on the statement of cash flows will be shown as an operating activity.

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Tax Cuts and Jobs Act (the "Act",) which was enacted on December 22, 2017, made key changes to the U.S. tax law, including the reduction of the U.S. federal corporate tax rate from 35% to 21%. As ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21%. The Company is still analyzing certain aspects of the Act, and refining its calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax asset was $13,493. Additionally, related to the deferred tax effects on the unrealized holding gains and losses for available for sale securities, the effect of the Act was recorded as a component of tax expense related to continuing operations during 2017, which is consistent with ASC 740's general prohibition on backward tracing.

The Company's pre-tax income is subject to federal income tax and state margin tax at a combined rate of 36% for 2017, 2016 and 2015. Income tax expense for 2017, 2016 and 2015, was as follows:

	2017			2016			2015
Current expense	$	56,341		$	59,900		$	38,648
Deferred expense	(4,115		)	(6,798		)	(692		)
Impact of Tax Cuts and Jobs Act - net future deductions	12,752			—			—
Impact of Tax Cuts and Jobs Act - unrealized loss on AFS securities	741			—			—
Total income tax expense	$	65,719		$	53,102		$	37,956

At December 31, 2017 and 2016, deferred tax assets and liabilities were due to the following:

	December 31,
	2017			2016
Deferred tax assets:
Allowance for loan losses	$	15,168		$	22,602
Deferred compensation arrangements	762			1,261
Self-funded health insurance	251			241
Non-accrual interest	503			966
Restricted stock and stock options	2,577			3,132
Accrued expenses	623			1,255
Fair value mark on purchased loans	965			2,348
Net unrealized loss on securities available for sale	1,111			1,465
Other	1,909			2,121
	23,869			35,391
Deferred tax liabilities:
Depreciation	(270		)	(336		)
Partnerships — CRA-purposed private equity funds	(941		)	(1,697		)
Fair value mark on subordinated debt	(743		)	(1,303		)
Other	(1,675		)	(2,824		)
	(3,629		)	(6,160		)
Net deferred tax asset	$	20,240		$	29,231

The net deferred tax asset is recorded on the consolidated balance sheets under “other assets.” Management performed an analysis related to the Company's deferred tax asset for each of the years ended December 31, 2017 and 2016 and, based upon these analyses, no valuation allowance was deemed necessary as of December 31, 2017 or 2016.

Effective tax rates differ from the federal statutory rate of 35% in 2017, 2016 and 2015, applied to income before income taxes due to the following:

	At and for the Year Ended December 31,
	2017			2016			2015
Federal statutory rate times financial statement income	$	54,325		$	52,823		$	38,105
Effect of:
State taxes, net of federal benefit	239			267			37
Bank-owned life insurance income	(423		)	(436		)	(419		)
Municipal interest income	(978		)	(1,041		)	(1,025		)
ESOP shares released	541			757			1,207
Restricted stock and stock options	(1,578		)	—			—
Sale of LegacyTexas Insurance Services, Inc.	—			640			—
DTA write-down due to the Tax Cuts and Jobs Act	13,493			—			—
Other	100			92			51
Total income tax expense	$	65,719		$	53,102		$	37,956
Effective Tax Rate before deferred tax write-down	33.65		%	35.18		%	34.86		%
Effective Tax Rate	42.34		%	35.18		%	34.86		%

The Company files income tax returns in the U.S. federal jurisdiction and several U.S. state jurisdictions. The Company is generally no longer subject to U.S. federal income tax examinations for tax years prior to 2014.

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Related Party Transactions

12 Months Ended

Dec. 31, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Loans to executive officers, directors, and their affiliates during 2017 were as follows:

	Balance
Beginning balance	$	15,337
New loans	—
Effect of changes in composition of related parties	—
Repayments	(933		)
Ending balance	$	14,404

None of the above loans were considered non-performing or potential problem loans. These loans are made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than normal risk of collectability. Deposits from executive officers, directors, and their affiliates at December 31, 2017 and 2016 were $39,615 and $48,761, respectively.

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Regulatory Capital Matters

12 Months Ended

Dec. 31, 2017

Regulatory Capital Requirements [Abstract]

Regulatory Capital Matters

Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off‑balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

The Bank and the Company are regulated by the Texas Department of Banking ("TDOB") and the Board of Governors of the Federal Reserve System ("FRB"). The ability of a subsidiary bank to pay dividends depends on its earnings and capital levels and may be limited by their regulator's directives or orders. A bank generally must obtain regulatory approval of a dividend if the total dividends declared during the current year, including the proposed dividend, exceed net income for the current year and retained net income for the prior two years.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is adequately capitalized, regulatory approval is required to accept brokered deposits. If an institution is undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2017 and 2016, the most recent regulatory notification categorized the Bank and the Company as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category. Management believes that, at December 31, 2017, the Bank and the Company met all capital adequacy requirements to which they were subject.

	Actual				Required for Capital Adequacy Purposes				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2017
Total risk-based capital
Company	$	991,713	11.87	%	$	668,142	8.00	%	$	835,178	10.00	%
Bank	939,655		11.25		668,096		8.00		835,120		10.00
Tier 1 risk-based capital
Company	796,887		9.54		501,107		6.00		501,107		6.00
Bank	867,424		10.39		501,072		6.00		668,096		8.00
Common equity tier 1 risk-based capital
Company	784,960		9.40		375,830		4.50		n/a1		n/a1
Bank	867,424		10.39		375,804		4.50		542,828		6.50
Tier 1 leverage
Company	796,887		9.17		347,731		4.00		n/a1		n/a1
the Bank	867,424		9.98		347,808		4.00		434,759		5.00
As of December 31, 2016
Total risk-based capital
Company	$	910,040	11.71	%	$	621,870	8.00	%	$	777,338	10.00	%
Bank	869,523		11.19		621,840		8.00		777,300		10.00
Tier 1 risk-based capital
Company	721,600		9.28		466,403		6.00		466,403		6.00
Bank	803,374		10.34		466,380		6.00		621,840		8.00
Common equity tier 1 risk-based capital
Company	709,858		9.13		349,802		4.50		n/a1		n/a1
Bank	803,374		10.34		349,785		4.50		505,245		6.50
Tier 1 leverage
Company	721,600		8.73		330,782		4.00		n/a1		n/a1
Bank	803,374		9.71		330,873		4.00		413,591		5.00

¹  Not applicable

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Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

In the normal course of business, the Company enters into various transactions which, in accordance with US GAAP, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit which involve, to varying degrees, elements of credit and interest rate risk. Credit losses up to the face amount of these instruments could occur, although material losses are not anticipated. The Company's credit policies applied to loan originations are also applied to these commitment requests, including obtaining collateral at the exercise of the commitment.

The contractual amounts of financial instruments with off‑balance sheet risk at December 31, 2017 and 2016, are summarized below. Please see Part II-Item 7- "Off-Balance Sheet Arrangements, Contractual Obligation and Commitments" of this Form 10-K for information related to commitment maturities.

	December 31,
	2017		2016
Unused commitments to extend credit	$	1,600,794	$	1,642,528
Unused capacity on Warehouse Purchase Program loans	738,412		892,659
Standby letters of credit	34,091		29,198
Total unused commitments/capacity	$	2,373,297	$	2,564,385

Unused commitments to extend credit - The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Since many commitments expire without being drawn upon, the total contractual amount of commitments does not necessarily represent future cash requirements of the Company. Substantially all of the Company's commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of future loan funding.

Unused capacity on Warehouse Purchase Program loans - In regard to unused capacity on Warehouse Purchase Program loans, the Company has established maximum purchase facility amounts, but reserves the right, at any time, to refuse to buy any mortgage loans offered for sale by each customer, for any reason in the Company's sole and absolute discretion.

Standby letters of credit - Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

In addition to the commitments above, the Company guarantees the credit card debt of certain customers to the merchant bank that issues the credit cards. These guarantees are in place for as long as the guaranteed credit card is open. At December 31, 2017 and 2016, these credit card guarantees totaled $5,257 and $3,335, respectively. This amount represents the maximum potential amount of future payments under the guarantee, which the Company is responsible for in the event of customer non-payment.

The Company funds an allowance for credit losses on off-balance sheet lending-related commitments and guarantees on credit card debt through a charge to provision for credit losses on the Company's consolidated statement of income. At December 31, 2017 and 2016, this allowance for credit losses on off-balance sheet lending-related commitments and guarantees on credit card debt, included in "other liabilities" on the Company's consolidated balance sheets, totaled $929 and $1,573 respectively.

In addition to the commitments above, the Company had overdraft protection available in the amounts of $84,727 and $85,709 at December 31, 2017 and 2016, respectively.

The Company, at December 31, 2017, had FHLB letters of credit of $944,370 pledged to secure public deposits, repurchase agreements, and for other purposes required or permitted by law.

At December 31, 2017, the Company had $1,680 of unfunded commitments recorded in other liabilities in its consolidated balance sheet related to investments in community development-oriented private equity funds used for Community Reinvestment Act purposes. The total investment in these equity funds was $11,223, with an average ownership of 6.2%.

Liability for Mortgage Loan Repurchase Losses

Residential mortgage loans are sold in the secondary market with standard representations and warranties regarding certain characteristics such as the quality of the loan, the absence of fraud, the eligibility of the loan for sale and the future servicing associated with the loan. The Company may be required to repurchase these loans at par, or make-whole or indemnify the purchasers for losses incurred when representations and warranties are breached.

The Company maintains a repurchase liability related to residential mortgage loans sold with representations and warranty provisions. This repurchase liability, reported in other liabilities on the consolidated balance sheets, reflects management’s estimate of losses based on historical repurchase and loss trends, as well as other factors that may result in anticipated losses different from historical loss trends. Adjustments to this reserve are recorded in other non-interest expense on the consolidated statements of income. The liability was $131 and $143 at December 31, 2017 and 2016, respectively.

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Parent Company Only Condensed Financial Information

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Parent Company Only Condensed Financial Information

Parent Company Only Condensed Financial Information

Condensed financial information of the Company is as follows:

CONDENSED BALANCE SHEETS

December 31,

	2017		2016
ASSETS
Cash on deposit at subsidiary	$	26,692	$	16,962
Investment in banking subsidiary	1,042,338		978,880
Receivable from banking subsidiary	12,278		10,317
ESOP note receivable and other assets	13,814		13,999
Total assets	$	1,095,122	$	1,020,158
LIABILITIES AND SHAREHOLDERS’ EQUITY
Borrowings	$	134,522	$	134,032
Other liabilities	726		761
Shareholders’ equity	959,874		885,365
Total liabilities and shareholders’ equity	$	1,095,122	$	1,020,158

CONDENSED STATEMENTS OF INCOME

December 31,

	2017		2016		2015
Cash dividends from subsidiary	$	35,000	$	—	$	24,500
Excess of earnings over dividend from subsidiary	61,341		103,572		48,677
Interest income on ESOP loan	449		487		565
Interest income on subordinated debt	13		11		17
Other income	—		—		5
	96,803		104,070		73,764
Interest expense	7,819		6,040		1,046
Operating expenses	3,754		3,236		3,009
Earnings before income tax benefit	85,230		94,794		69,709
Income tax benefit	4,264		3,027		1,207
Net income	$	89,494	$	97,821	$	70,916

CONDENSED STATEMENTS OF CASH FLOWS

December 31,

	2017			2016			2015
Cash flows from operating activities
Net income	$	89,494		$	97,821		$	70,916
Adjustments to reconcile net income to net cash from operating activities:
Excess of earnings over dividend from subsidiary	(61,341		)	(103,572		)	(48,677		)
Amortization	490			530			171
Activity in share-based compensation plans	5,501			3,152			3,068
Net change in other assets	(207		)	(481		)	6,931
Net change in other liabilities	(35		)	(38		)	(14,544		)
Net cash provided by (used in) operating activities	33,902			(2,588		)	17,865
Cash flows from investing activities
Capital contribution (to) from subsidiary	—			(49,000		)	(40,000		)
Cash and cash equivalents acquired from LegacyTexas Group, Inc.	—			—			201
Payments received on ESOP notes receivable	393			981			1,495
Net cash provided by (used in) investing activities	393			(48,019		)	(38,304		)
Cash flows from financing activities
Proceeds from borrowings	—			73,439			73,407
Repayments of borrowings	—			(24,929		)	(24,364		)
Share repurchase	—			—			(7,989		)
Net issuance of common stock under employee stock plans	4,712			3,755			1,284
Payment of dividends	(29,277		)	(27,676		)	(25,747		)
Net cash provided by (used in) financing activities	(24,565		)	24,589			16,591
Net change in cash and cash equivalents	9,730			(26,018		)	(3,848		)
Beginning cash and cash equivalents	16,962			42,980			46,828
Ending cash and cash equivalents	$	26,692		$	16,962		$	42,980

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

Quarterly Financial Data (Unaudited)

	Interest Income		Interest Expense		Net Interest Income		Provision for Credit Losses			Securities Gains and (Losses)			Net Income			Earnings per Share
																Basic	Diluted
2017
First quarter	$	87,536	$	10,988	$	76,548	$	22,301	1	$	(19	)	$	18,190		0.39	0.38
Second quarter	88,747		13,027		75,720		6,255			—			27,935			0.60	0.59
Third quarter	94,463		15,499		78,964		7,157			(20		)	28,709			0.61	0.61
Fourth quarter	96,111		15,912		80,199		3,743			—			14,660		2	0.31	0.31
2016
First quarter	$	72,608	$	7,257	$	65,351	$	8,800		$	—		$	22,082		0.48	0.48
Second quarter	77,336		7,982		69,354		6,800			65			23,217			0.50	0.50
Third quarter	82,911		9,431		73,480		3,467			(3		)	27,217			0.59	0.58
Fourth quarter	84,497		10,413		74,084		7,833			(6		)	25,305			0.54	0.54

¹  Includes the impact of a charge-off totaling $16,360 on a corporate healthcare finance relationship, which was reported in the Company's commercial and industrial loan portfolio.

²  Includes the impact of a $13,493 income tax adjustment to the Company's deferred tax asset related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

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Subsequent Events

12 Months Ended

Dec. 31, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company evaluated events from the date of the consolidated financial statements on December 31, 2017 through the issuance of those consolidated financial statements included in this Annual Report on Form 10-K dated February 8, 2018.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation: The consolidated financial statements include LegacyTexas Financial Group, Inc. (the "Company"), whose business at December 31, 2017 primarily consisted of the operations of its wholly-owned subsidiary, LegacyTexas Bank (the "Bank"). In addition, the Company also offers title services through LegacyTexas Title Co., which is a wholly-owned subsidiary of the Bank. Intercompany transactions and balances are eliminated in consolidation.

Use of Estimates

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles ("US GAAP"), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, valuation of other real estate owned, other-than-temporary impairment of securities, realization of deferred tax assets, and fair values of financial instruments are subject to change.

Cash Flows

Cash Flows: Cash and cash equivalents include cash, deposits with other financial institutions with maturities less than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions, federal funds purchased, Federal Home Loan Bank advances and repurchase agreements.

Restrictions on Cash

Restrictions on Cash: The Company maintains deposits with other financial institutions in amounts that exceed federal deposit insurance coverage. Management regularly evaluates the credit risk associated with the counterparties to these transactions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents. Cash balances equaling or exceeding escrow amounts are maintained at correspondent banks.

Securities

Securities: Securities that the Company has both the positive intent and ability to hold to maturity are classified as held to maturity and are carried at amortized cost. Securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, are classified as available for sale and are carried at fair value. Unrealized gains and losses on securities classified as available for sale have been accounted for as accumulated other comprehensive income (loss), net of taxes.

Gains and losses on the sale of securities classified as available for sale are recorded on the trade date using the specific-identification method. Amortization of premiums and discounts are recognized in interest income over the period to maturity. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayment, except for mortgage-backed securities where prepayments are anticipated.

Other-than-Temporary Impairment

The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis and more frequently when economic, market, or security specific concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than amortized cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Company has the intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition. The Company conducts regular reviews of the bond agency ratings of securities and considers whether the securities were issued by or have principal and interest payments guaranteed by the federal government or its agencies. These reviews focus on the underlying rating of the issuer and also include the insurance rating of securities that have an insurance component or guarantee. The ratings and financial condition of the issuers are monitored, as well as the financial condition and ratings of the insurers and guarantors.

For periods in which other-than-temporary impairment of a debt security is recognized, the credit portion of the amount is determined by subtracting the present value of the stream of estimated cash flows as calculated in a discounted cash flow model and discounted at book yield from the prior period’s ending carrying value. The non-credit portion of the amount is determined by subtracting the credit portion of the impairment from the difference between the book value and fair value of the security. The credit related portion of the impairment is charged against income and the non-credit related portion is charged to equity as a component of accumulated other comprehensive income.

Mortgage Loans Held for Sale

Mortgage Loans Held for Sale: The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with Accounting Standards Codification ("ASC") 825, "Financial Instruments." This election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC 815, “Derivatives and Hedging.”

Warehouse Purchase Program Loans and Loans

Warehouse Purchase Program Loans: The Warehouse Purchase Program allows unaffiliated mortgage originators to close one- to four-family real estate loans in their own name and manage their cash flow needs until the loans are sold to investors. The mortgage banking company customer closes mortgage loans consistent with underwriting standards established by the Bank and approved investors and, once all pertinent documents are received, the participation interest is delivered by the Bank to the investor selected by the originator and approved by us. Although not bound by any legally binding commitment, when a purchase decision is made, we purchase a 100% participation interest in the mortgage loans originated by our mortgage banking company customers. All Warehouse Purchase Program loans are collectively evaluated for impairment and are purchased under several contractual requirements, providing safeguards to the Company. These safeguards include the requirement that our mortgage company customers have a takeout commitment or similar arrangement for each loan. To date, the Company has not experienced a loss on these loans and no allowance for loan losses has been allocated to them.

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, purchase premiums and discounts, deferred loan fees and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Past due status is based on the contractual terms of the loan. Loans that are past due 30 days are considered delinquent. Interest income on loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Non-mortgage consumer loans are typically charged off no later than 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and larger individually classified impaired loans.

All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

For loans collateralized by real property and commercial and industrial loans, credit exposure is monitored by internally assigned grades used for classification of loans. A loan is considered “special mention” when management has determined that there is a potential weakness that deserves management's close attention. Loans rated as "special mention" are not adversely classified according to regulatory classifications and do not expose the Company to sufficient risk to warrant adverse classification. A loan is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. “Substandard” loans include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected, and the loan may or may not meet the criteria for impairment. Loans classified as “doubtful” have all of the weaknesses of those classified as “substandard” with the added characteristic that the weaknesses present makes “collection or liquidation in full,” on the basis of currently existing facts, conditions and values, “highly questionable and improbable.” All other loans that do not fall into the above mentioned categories are considered “pass” loans. Updates to internally assigned grades are made monthly and/or upon significant developments.

For other consumer loans (non-real estate), credit exposure is monitored by payment history of the loans. Non-performing other consumer loans are on nonaccrual status and are generally greater than 90 days past due.

Acquired Loans

Acquired Loans: Loans acquired through the completion of a transfer, including loans acquired in a business combination, that have evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable are initially recorded at fair value (as determined by the present value of expected future cash flows) with no valuation allowance. The difference between the undiscounted cash flows expected at acquisition and the investment in the loan, or the “accretable yield,” is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “nonaccretable difference,” are not recognized on the balance sheet and do not result in any yield adjustments, loss accruals or valuation allowances. Increases in expected cash flows, including prepayments, subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment. Valuation allowances on these impaired loans reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). Revolving loans, including lines of credit, are excluded from acquired credit impaired loan accounting.

For acquired loans not deemed credit-impaired at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. Subsequent to the acquisition date, methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans; however, a provision for credit losses will be recorded only to the extent the required allowance exceeds any remaining credit discounts.

Concentration of Credit Risk

Concentration of Credit Risk: Most of the Company’s business activity is with customers located within the North Texas region and a large portion of loans are secured by real estate in this area. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy of the North Texas area.

Allowance for Loan Losses

Allowance for Loan Losses: The allowance for loan losses and related provision expense are susceptible to change if the credit quality of our loan portfolio changes, which is evidenced by many factors, including but not limited to charge-offs and non-performing loan trends. Generally, consumer real estate lending has a lower credit risk profile compared to other consumer lending (such as automobile loans). Commercial real estate and commercial and industrial lending, however, can have higher risk profiles than consumer loans due to these loans being larger in amount and non-homogeneous in structure and term. Changes in economic conditions, the mix and size of the loan portfolio, and individual borrower conditions can dramatically impact our level of allowance for loan losses in relatively short periods of time.

The allowance for loan losses is maintained to cover incurred losses that are estimated in accordance with US GAAP. It is our estimate of credit losses inherent in our loan portfolio at each balance sheet date. Our methodology for analyzing the allowance for loan losses consists of general and specific components. For the general component, we stratify the loan portfolio into homogeneous groups of loans that possess similar loss potential characteristics and apply a loss ratio to these groups of loans to estimate the credit losses in the loan portfolio. We use both historical loss ratios and qualitative loss factors assigned to major loan collateral types to establish general component loss allocations, inclusive of estimated loss emergence periods. Qualitative loss factors are based on management's judgment of company, market, industry or business specific data and external economic indicators, which are not yet reflected in the historical loss ratios, and that could impact the Company's specific loan portfolios. The Allowance for Loan Loss Committee sets and adjusts qualitative loss factors by regularly reviewing changes in underlying loan composition and the seasonality of specific portfolios. The Allowance for Loan Loss Committee also considers credit quality and trends relating to delinquency, non-performing and adversely rated loans within the Company's loan portfolio when evaluating qualitative loss factors. Additionally, the Allowance for Loan Loss Committee adjusts qualitative factors to account for the potential impact of external economic factors, including the unemployment rate, vacancy and capitalization rates and other pertinent economic data specific to our primary market area and lending portfolios.

For the specific component, the allowance for loan losses includes loans where management has concerns about the borrower's ability to repay and on individually analyzed loans found to be impaired. Management evaluates current information and events regarding a borrower's ability to repay its obligations and considers a loan to be impaired when the ultimate collectability of amounts due, according to the contractual terms of the loan agreement, is in doubt. If an impaired loan is collateral-dependent, the fair value of the collateral, less the estimated cost to sell, is used to determine the amount of impairment. If an impaired loan is not collateral-dependent, estimated discounted cash flows are used to determine the amount of impairment, if any. For impaired loans, the amount of the impairment can be adjusted, based on current data, until such time as the actual basis is established by acquisition of the collateral or until the basis is collected. Impairment losses are reflected in the allowance for loan losses through a charge to the provision for credit losses. Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal.

Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. As a result, the Company does not separately identify consumer real estate loans less than $417 or individual consumer non-real estate secured loans for impairment disclosures. The Company considers these loans to be homogeneous in nature due to the smaller dollar amount and the similar underwriting criteria.

A loan that has been modified is considered a troubled debt restructuring (“TDR”) when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics. Modifications to loan terms may include a modification of the contractual interest rate to a below-market rate (even if the modified rate is higher than the original rate), forgiveness of accrued interest, forgiveness of a portion of principal, an extended repayment period or a deed in lieu of foreclosure or other transfer of assets other than cash to fully or partially satisfy a debt. The Company's policy is to place all TDRs on nonaccrual for a minimum period of six months. Loans qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months and the collection of principal and interest under the revised terms is deemed probable. All TDRs are considered to be impaired loans.

FHLB stock and other restricted securities

FHLB stock and other restricted securities: FHLB, FRB and other restricted stock is carried at cost, classified as restricted securities and periodically evaluated for impairment based on the ultimate recoverability of the par value. Both cash and stock dividends are reported as interest income.

Bank-Owned Life Insurance

Bank-Owned Life Insurance: The Company has purchased life insurance policies on certain key employees. The purchase of these life insurance policies allows the Company to use tax-advantaged rates of return. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Premises and Equipment

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are generally depreciated using the straight-line method with useful lives ranging from 10 to 30 years. Furniture, fixtures and equipment are generally depreciated using the straight-line method with useful lives ranging from 3 to 7 years. The cost of leasehold improvements is amortized over the shorter of the lease term or useful life using the straight-line method.

Goodwill

Goodwill: Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. According to ASC 350-20, "Intangibles- Goodwill and Other," goodwill shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Deterioration in economic market conditions, changes in key personnel, increased estimates of the effects of recent regulatory or legislative changes, or additional regulatory or legislative changes may result in declines in projected business performance beyond management's current expectations. Such declines in business performance could cause the estimated fair value of goodwill to decline, which could result in an impairment charge to earnings in a future period related to goodwill.

The Company evaluates goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount, in accordance with ASC 350-20. During 2016, the Company changed its annual goodwill impairment testing date from December 31 to October 1. The Company believes that this new date is preferable as it provides additional time prior to the Company’s year-end to complete the annual goodwill impairment test, especially in the event of future acquisitions and growth. This change does not accelerate, delay, avoid or cause an impairment charge, nor does this change result in adjustments to previously issued financial statements.

The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining the need to perform the two-step test for goodwill impairment (the qualitative method). If the qualitative method cannot be used or if it determines, based on the qualified method, that the fair value is more likely than not less than the carrying amount, the Company uses the two-step test. Under the two-step test, the Company compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Step two of the goodwill impairment test compares the implied estimated fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill for that reporting unit exceeds the implied fair value of that unit's goodwill, an impairment loss is recognized in an amount equal to that excess.

Identifiable Intangibles

Identifiable Intangibles: Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. The Company's intangible assets relate to core deposits and customer relationships. Intangible assets with definite useful lives are amortized on an accelerated basis over their estimated life. Intangible assets, premises and equipment and other long-lived assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Foreclosed Assets

Foreclosed Assets: Assets acquired through loan foreclosure are initially recorded at the lower of the recorded investment in the loan at the time of foreclosure or the fair value less costs to sell, establishing a new cost basis. Any write-down in the carrying value of a property at the time of acquisition is charged-off to the allowance for loan losses. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Derivative Financial Instruments

Derivative Financial Instruments: The Company enters into the following derivative financial instruments: interest rate lock commitments, forward mortgage-backed securities trades and interest rate swaps and caps. These financial instruments are not designated as hedging instruments and are used for asset and liability management and commercial customers' financing needs. All derivatives are carried at fair value in either other assets or other liabilities.

Fair Value of Financial Instruments

Fair Value of Financial Instruments: In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Fair value measurements and disclosures guidance establishes a three-level fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Repurchase/Resell Agreements

Repurchase/Resell Agreements: The Company sells certain securities under agreements to repurchase. The securities sold under these agreements are treated as collateralized borrowings and are recorded at amounts equal to the cash received. The contractual terms of the agreements to repurchase may require the Company to provide additional collateral if the fair value of the securities underlying the borrowings declines during the term of the agreement.

Advertising Expense

Advertising Expense: The Company expenses all advertising costs as they are incurred.

Share-Based Compensation

Share-Based Compensation: The Company has shareholder approved share-based compensation plans that are accounted for under ASC 718, Compensation - Stock Compensation, which requires companies to record compensation cost for share-based payment transactions with employees in return for employment service. Compensation cost is recognized for stock options and restricted stock awards based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with time-based vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. For awards with performance-based vesting conditions, compensation cost is recognized when the achievement of the performance condition is considered probable of achievement. If a performance condition is subsequently determined to be improbable of achievement, compensation cost is reversed.

Retirement Plans

Retirement Plans: Employee 401(k) and profit sharing plan expense is the amount of matching contributions as determined by formula. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Income Taxes

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company did not have any material uncertain tax positions which would require accrual at December 31, 2017 or 2016.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense and did not have any amounts accrued for interest and penalties for the years ended December 31, 2017 or 2016. The Company files a consolidated income tax return with its subsidiaries. Federal income tax expense or benefit has been allocated to subsidiaries on a separate return basis.

Earnings per common share

Earnings per common share: The Company calculated earnings per common share in accordance with ASC 260, “Earnings Per Share,” which provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company has determined that its outstanding non-vested stock awards are participating securities. Accordingly, earnings per common share is computed using the two-class method prescribed under ASC 260.

Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per common share for the reported periods is provided in Note 3 — Earnings Per Common Share.

Comprehensive Income (Loss)

Comprehensive Income (Loss): Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, net of taxes, which are also recognized as a separate component of equity.

Employee stock ownership plan (ESOP)

Employee stock ownership plan (ESOP): The Company accounts for its ESOP in accordance with ASC 718-40, "Employee Stock Ownership Plans." Accordingly, since the Company sponsors the ESOP with an employer loan, neither the ESOP’s loan payable nor the Company’s loan receivable are reported in the Company’s consolidated balance sheet. Likewise, the Company does not recognize interest income or interest cost on the loan.

Unallocated shares held by the ESOP are recorded as unearned ESOP shares in the consolidated statement of changes in shareholders’ equity. As shares are committed to be released for allocation, the Company recognizes compensation expense equal to the average market price of the shares for the period. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce principal and accrued interest payable on the ESOP loan.

Dividend Restriction

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Company or by the Company to shareholders.

Loss Contingencies

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Transfers of Financial Assets

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over the transferred assets through either (a) an agreement that entitles and obligates the Company to repurchase or redeem them before their maturity or (b) the ability to unilaterally cause the holder to return specific assets.

Operating Segments

Operating Segments: The Company has determined that all of its banking operations comprise one segment under ASC 280, Segment Reporting, since all offer similar products and services, operate with similar processes, and have similar customers. Additionally, the Company has determined that the Bank's title subsidiary does not meet the materiality threshold to require segment disclosure under ASC 280.

Loan Commitments And Related Financial Instruments

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Reclassifications

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation.

Adoption of New Accounting Standards

Adoption of New Accounting Standards:

In March 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2016-06, Contingent Put and Call Options in Debt Instruments. This ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this ASU is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. For public business entities, this ASU was effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The adoption of this ASU did not have an impact on the Company's financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting. This ASU eliminates the requirement for an investor to retrospectively apply the equity method when an investment that it had accounted for by another method qualifies for use of the equity method. This ASU was effective for fiscal years beginning after December 15, 2016, and interim periods therein. The adoption of this ASU did not impact the Company's financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, this ASU was effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. See Note 13 - Share-based Compensationfor information regarding the impact of this ASU on the Company's financial statements.

Effect of Newly Issued But Not Yet Effective Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASU states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU affects entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which deferred the effective date of ASU 2014-09 for public entities to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. We have completed our evaluation of the impact of ASU 2014-09 on components of our non-interest income and have not found any significant changes to our methodology of recognizing revenue. As required by ASU 2014-09, we will adopt the standard in the first quarter of 2018 and, at the time of this filing, we do not anticipate recording a cumulative effect adjustment to opening retained earnings because the adjustment was determined to be insignificant. We will include newly applicable revenue disclosures in our Form 10-Q for the quarter ended March 31, 2018.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurements of Financial Assets and Financial Liabilities. This ASU requires that all equity investments be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). This ASU also requires that an entity present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, this ASU requires that public business entities base their fair value disclosures for financial instruments that are not measured at fair value in the financial statements on the exit price notion. Currently, the Company values these financial instruments using an entry price notion consistent with the current guidance, and will be changing to the exit price notion in the first quarter of 2018 in compliance with this ASU. For public business entities, this ASU is effective for annual periods beginning after December 15, 2017, and interim periods therein. The adoption of this ASU will not have a significant impact on the Company's financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held to maturity debt securities. Under current US GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. This revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for lifetime expected credit losses. Credit losses will be immediately recognized through net income; the amount recognized will be based on the current estimate of contractual cash flows not expected to be collected over the financial asset’s contractual term. ASU 2016-13 also amends the credit loss measurement guidance for available for sale debt securities. For public business entities, this ASU is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investments. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The adoption of this ASU will not have a significant impact on the Company's financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets other than Inventory. This ASU eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today's two-step impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates today’s requirement to calculate a goodwill impairment charge using Step 2, which requires an entity to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount. For public business entities, this ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be impacted. Under current GAAP, premiums on callable debt securities are generally amortized over the contractual life of the security. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein. The adoption of this ASU is not expected to have a significant impact on the Company's financial statements and disclosures.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting model to enable entities to better portray their risk management activities in their financial statements, by expanding an entity's ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This ASU eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, this ASU also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. For public business entities, this ASU is effective for financial statements issued for fiscal years and for interim periods within those fiscal years beginning after December 15, 2018. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

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Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Reconciliation of Numerator and Denominator of Basic and Diluted Earnings per Common Share

A reconciliation of the numerator and denominator of the basic and diluted earnings per common share computation for the years ended December 31, 2017, 2016 and 2015 is as follows:

	Years Ended December 31,
	2017			2016			2015
Basic earnings per share:
Numerator:
Net income	$	89,494		$	97,821		$	70,916
Distributed and undistributed earnings to participating securities	(318		)	(497		)	(534		)
Income available to common shareholders	$	89,176		$	97,324		$	70,382
Denominator:
Weighted average common shares outstanding	47,998,439			47,721,179			47,659,389
Less: Average unallocated ESOP shares	(1,220,516		)	(1,301,356		)	(1,464,324		)
Average unvested restricted stock awards	(166,143		)	(235,749		)	(347,781		)
Average shares for basic earnings per share	46,611,780			46,184,074			45,847,284
Basic earnings per common share	$	1.91		$	2.11		$	1.54
Diluted earnings per share:
Numerator:
Income available to common shareholders	$	89,176		$	97,324		$	70,382
Denominator:
Average shares for basic earnings per share	46,611,780			46,184,074			45,847,284
Dilutive effect of share-based compensation plan	526,738			300,893			278,163
Average shares for diluted earnings per share	47,138,518			46,484,967			46,125,447
Diluted earnings per common share	$	1.89		$	2.09		$	1.53
Share awards excluded in the computation of diluted earnings per share because the exercise price was greater than the common stock average market price and were therefore anti-dilutive	623,666			1,384,784			1,012,771

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Securities (Tables)

12 Months Ended

Dec. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Fair Value of Available-for-Sale Securities and Related Gross Unrealized Gains and Losses

The amortized cost, related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss), and the fair value of securities available for sale ("AFS") were as follows:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency residential mortgage-backed securities 1	$	191,216	$	419	$	2,169	$	189,466
Agency commercial mortgage-backed securities 1	9,360		—		125		9,235
Agency residential collateralized mortgage obligations 1	187,637		4		3,425		184,216
US government and agency securities	1,590		81		—		1,671
Municipal bonds	35,196		241		308		35,129
Total securities	$	424,999	$	745	$	6,027	$	419,717
December 31, 2016
Agency residential mortgage-backed securities 1	$	220,744	$	635	$	2,828	$	218,551
Agency commercial mortgage-backed securities 1	9,422		—		75		9,347
Agency residential collateralized mortgage obligations 1	87,959		22		1,452		86,529
US government and agency securities	2,150		101		—		2,251
Municipal bonds	38,417		47		627		37,837
Total securities	$	358,692	$	805	$	4,982	$	354,515

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

Carrying Amount, Unrecognized Gains and Losses, and Fair Value of Securities Held to Maturity

The amortized cost (carrying amount), unrealized gains and losses, and fair value of securities held to maturity ("HTM") were as follows:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency residential mortgage-backed securities 1	$	57,334	$	616	$	646	$	57,304
Agency commercial mortgage-backed securities 1	27,435		589		98		27,926
Agency residential collateralized mortgage obligations 1	27,112		265		99		27,278
Municipal bonds	61,628		1,079		289		62,418
Total securities	$	173,509	$	2,549	$	1,132	$	174,926
December 31, 2016
Agency residential mortgage-backed securities 1	$	74,881	$	1,147	$	817	$	75,211
Agency commercial mortgage-backed securities 1	28,023		836		166		28,693
Agency residential collateralized mortgage obligations 1	40,707		697		33		41,371
Municipal bonds	66,776		1,635		705		67,706
Total securities	$	210,387	$	4,315	$	1,721	$	212,981

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

Carrying Amount and Fair Value of Held to Maturity Debt Securities and Fair Value of Available-for-Sale Debt Securities

The amortized cost (carrying amount) and fair value of held to maturity debt securities and the fair value of available for sale debt securities at December 31, 2017 by contractual maturity are set forth below in the table below. Securities with contractual payments not due at a single maturity date, including mortgage backed securities and collateralized mortgage obligations, are shown separately.

	HTM				AFS
	Amortized Cost		Fair Value		Fair Value
Due in one year or less	$	1,365	$	1,373	$	1,526
Due after one to five years	10,699		10,959		12,726
Due after five to ten years	44,059		44,628		16,731
Due after ten years	5,505		5,458		5,817
Agency residential mortgage-backed securities	57,334		57,304		189,466
Agency commercial mortgage-backed securities	27,435		27,926		9,235
Agency residential collateralized mortgage obligations	27,112		27,278		184,216
Total	$	173,509	$	174,926	$	419,717

Summarized Sales Activity

Sales activity of securities for the years ended December 31, 2017, 2016 and 2015 was as follows. All securities sold were classified as available for sale.

	December 31,
	2017		2016		2015
Proceeds	$	—	$	7,700	$	36,984
Gross gains	—		72		278
Gross losses	—		7		50
Tax expense of securities gains/losses reclassified from accumulated other comprehensive income	—		23		80

Securities with Unrealized Losses Aggregated by Investment and Length of Time that Individual Securities have been in Continuous Unrealized Loss Position Category

Securities with unrealized losses at December 31, 2017 and 2016, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

AFS	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency residential mortgage-backed securities 1	$	59,545	$	412	$	100,214	$	1,757	$	159,759	$	2,169
Agency commercial mortgage-backed securities 1	9,235		125		—		—		9,235		125
Agency residential collateralized mortgage obligations 1	128,869		1,860		49,171		1,565		178,040		3,425
Municipal bonds	10,114		72		6,583		236		16,697		308
Total temporarily impaired	$	207,763	$	2,469	$	155,968	$	3,558	$	363,731	$	6,027
December 31, 2016
Agency residential mortgage-backed securities 1	$	167,503	$	2,770	$	7,516	$	58	$	175,019	$	2,828
Agency commercial mortgage-backed securities 1	9,347		75		—		—		9,347		75
Agency residential collateralized mortgage obligations 1	72,822		1,420		2,649		32		75,471		1,452
Municipal bonds	26,911		512		3,412		115		30,323		627
Total temporarily impaired	$	276,583	$	4,777	$	13,577	$	205	$	290,160	$	4,982

HTM	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency residential mortgage-backed securities 1	$	20,397	$	206	$	16,909	$	440	$	37,306	$	646
Agency commercial mortgage-backed securities 1	3,685		26		3,484		72		7,169		98
Agency residential collateralized mortgage obligations 1	8,008		64		2,267		35		10,275		99
Municipal bonds	9,313		80		10,486		209		19,799		289
Total temporarily impaired	$	41,403	$	376	$	33,146	$	756	$	74,549	$	1,132
December 31, 2016
Agency residential mortgage-backed securities 1	$	41,375	$	817	$	—	$	—	$	41,375	$	817
Agency commercial mortgage-backed securities 1	7,273		166		—		—		7,273		166
Agency residential collateralized mortgage obligations 1	6,322		11		1,451		22		7,773		33
Municipal bonds	19,362		658		1,045		47		20,407		705
Total temporarily impaired	$	74,332	$	1,652	$	2,496	$	69	$	76,828	$	1,721

¹  Mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

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Loans (Tables)

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

Loans

Loans consist of the following:

	December 31, 2017			December 31, 2016
Loans held for sale, at fair value	$	16,707		$	21,279
Loans held for investment:
Commercial real estate	$	3,019,339		$	2,670,455
Commercial and industrial	2,093,307			1,971,160
Construction and land	277,864			294,894
Consumer real estate	1,213,434			1,074,923
Other consumer	45,506			53,991
Gross loans held for investment, excluding Warehouse Purchase Program	6,649,450			6,065,423
Net of:
Deferred costs (fees) and discounts, net	6,380			(2,251		)
Allowance for loan losses	(71,301		)	(64,576		)
Net loans held for investment, excluding Warehouse Purchase Program	6,584,529			5,998,596
Warehouse Purchase Program	1,154,588			1,055,341
Total loans held for investment	$	7,739,117		$	7,053,937

Allowances for Loan Losses and Off-Balance Sheet Credit Losses

Activity in the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015, segregated by portfolio segment and evaluation for impairment, is set forth below. The below activity does not include Warehouse Purchase Program loans, which are collectively evaluated for impairment and are purchased under several contractual requirements, providing safeguards to the Company. To date, the Company has not experienced a loss on its Warehouse Purchase Program loans and no allowance for loan losses has been allocated to them. At December 31, 2017, 2016 and 2015, the allowance for loan impairment related to purchased credit impaired ("PCI") loans totaled $269, $180, and $150, respectively.

For the year ended December 31, 2017	Commercial Real Estate			Commercial and Industrial			Construction and Land			Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	18,303		$	35,464		$	5,075		$	4,484		$	1,250		$	64,576
Charge-offs	(16		)	(32,846		)	(418		)	(96		)	(1,366		)	(34,742		)
Recoveries	205			405			75			42			640			1,367
Provision expense (benefit)	3,095			35,982			(88		)	408			703			40,100
Ending balance	$	21,587		$	39,005		$	4,644		$	4,838		$	1,227		$	71,301
Allowance ending balance:
Individually evaluated for impairment	$	—		$	10,527		$	—		$	230		$	34		$	10,791
Collectively evaluated for impairment	21,587			28,478			4,644			4,608			1,193			60,510
Loans:
Individually evaluated for impairment	4,134			84,005			—			2,992			35			91,166
Collectively evaluated for impairment	3,012,892			2,009,126			277,864			1,209,550			45,288			6,554,720
PCI loans	2,313			176			—			892			183			3,564
Ending balance	$	3,019,339		$	2,093,307		$	277,864		$	1,213,434		$	45,506		$	6,649,450

For the year ended December 31, 2016	Commercial Real Estate			Commercial and Industrial			Construction and Land		Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	14,123		$	24,975		$	3,013	$	3,992		$	990		$	47,093
Charge-offs	(79		)	(7,746		)	—		(107		)	(927		)	(8,859		)
Recoveries	21			472			—		109			340			942
Provision expense	4,238			17,763			2,062		490			847			25,400
Ending balance	$	18,303		$	35,464		$	5,075	$	4,484		$	1,250		$	64,576
Allowance ending balance:
Individually evaluated for impairment	$	300		$	4,521		$	—	$	138		$	52		$	5,011
Collectively evaluated for impairment	18,003			30,943			5,075		4,346			1,198			59,565
Loans:
Individually evaluated for impairment	5,195			86,664			11,385		3,300			75			106,619
Collectively evaluated for impairment	2,659,644			1,884,263			283,509		1,070,732			53,683			5,951,831
PCI loans	5,616			233			—		891			233			6,973
Ending balance	$	2,670,455		$	1,971,160		$	294,894	$	1,074,923		$	53,991		$	6,065,423

For the year ended December 31, 2015	Commercial Real Estate			Commercial and Industrial			Construction and Land		Consumer Real Estate			Other Consumer			Total
Allowance for loan losses:
Beginning balance	$	11,830		$	9,068		$	174	$	4,069		$	408		$	25,549
Charge-offs	(167		)	(3,129		)	—		(321		)	(1,090		)	(4,707		)
Recoveries	29			246			—		85			426			786
Provision expense	2,431			18,790			2,839		159			1,246			25,465
Ending balance	$	14,123		$	24,975		$	3,013	$	3,992		$	990		$	47,093
Allowance ending balance:
Individually evaluated for impairment	$	366		$	1,470		$	—	$	81		$	61		$	1,978
Collectively evaluated for impairment	13,757			23,505			3,013		3,911			929			45,115
Loans:
Individually evaluated for impairment	11,580			16,906			33		4,767			120			33,406
Collectively evaluated for impairment	2,155,351			1,595,548			269,675		931,140			69,433			5,021,147
PCI loans	10,612			215			—		850			277			11,954
Ending balance	$	2,177,543		$	1,612,669		$	269,708	$	936,757		$	69,830		$	5,066,507

Changes in the allowance for off-balance sheet credit losses on lending-related commitments and guarantees on credit card debt, included in "accrued expenses and other liabilities" on the consolidated balance sheets, are summarized in the following table. Please see Note 17 - Commitments and Contingent Liabilities for more information.

	Years Ended December 31,
	2017			2016
Balance at beginning of period	$	1,573		$	73
Charge-offs on lending-related commitments	—			—
Provision (recovery) for credit losses on lending-related commitments	(644		)	1,500
Balance at end of period	$	929		$	1,573

Impaired Loans

Impaired loans at December 31, 2017 and 2016, were as follows ¹:

December 31, 2017	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial real estate	$	4,411	$	4,134	$	—	$	4,134	$	—
Commercial and industrial	89,713		48,463		35,542		84,005		10,502
Consumer real estate	3,545		2,985		7		2,992		7
Other consumer	71		16		19		35		13
Total	$	97,740	$	55,598	$	35,568	$	91,166	$	10,522
December 31, 2016
Commercial real estate	$	5,388	$	4,429	$	766	$	5,195	$	272
Commercial and industrial	87,756		73,377		13,287		86,664		4,519
Construction and land	11,384		11,385		—		11,385		—
Consumer real estate	3,766		3,290		10		3,300		10
Other consumer	107		33		42		75		30
Total	$	108,401	$	92,514	$	14,105	$	106,619	$	4,831

¹  No Warehouse Purchase Program loans were impaired at December 31, 2017 or 2016. Loans reported do not include PCI loans.

Income on impaired loans at December 31, 2017, 2016 and 2015, was as follows¹ 

	December 31, 2017				December 31, 2016				December 31, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial real estate	$	4,421	$	8	$	5,240	$	9	$	8,178	$	24
Commercial and industrial	83,508		—		28,634		1		19,595		8
Construction and land	2,273		—		901		—		84		—
Consumer real estate	2,786		14		4,831		14		5,269		7
Other consumer	264		4		95		4		202		2
Total	$	93,252	$	26	$	39,701	$	28	$	33,328	$	41

¹  Loans reported do not include PCI loans

The carrying amount of PCI loans included in the consolidated balance sheets and the related outstanding balances at December 31, 2017 and 2016 are set forth in the table below. The outstanding balance represents the total amount owed, including accrued but unpaid interest, and any amounts previously charged off.

	December 31,
	2017		2016
Carrying amount 1	$	3,295	$	6,793
Outstanding balance	3,992		7,597

¹ The carrying amounts are reported net of allowance for loan losses of $269 and $180 as of December 31, 2017 and 2016.

Changes in the accretable yield for PCI loans for the years ended December 31, 2017 and 2016, are as follows:

	December 31,
	2017			2016
Balance at beginning of period	$	2,515		$	3,356
Reclassifications from nonaccretable	602			429
Disposals	(187		)	(359		)
Accretion	(651		)	(911		)
Balance at end of period	$	2,279		$	2,515

Non-Performing (Nonaccrual) Loans

Non-performing loans were as follows:

	December 31,
	2017		2016
Commercial real estate	$	4,134	$	5,195
Commercial and industrial	84,003		86,664
Construction and land	—		11,385
Consumer real estate	6,190		7,987
Other consumer	76		158
Total	$	94,403	$	111,389

Outstanding and Recorded Balances of Loans Modified as TDRs

The outstanding balances of TDRs are shown below:

	December 31,
	2017		2016
Nonaccrual TDRs (1)	$	17,294	$	11,701
Performing TDRs (2)	768		454
Total	$	18,062	$	12,155
Outstanding commitments to lend additional funds to borrowers with TDR loans	—		—

¹  Nonaccrual TDR loans are included in the nonaccrual loan totals.

²  Performing TDR loans are loans that have been performing under the restructured terms for at least six months and the Company is accruing interest on these loans.

The following table provides the recorded balances of loans modified as a TDR during the years ended December 31, 2017, 2016 and 2015.

December 31, 2017	Principal Deferrals			Combination of Rate Reduction & Principal Deferral		Other			Total
Commercial and industrial	$	38		$	131	$	14,063	(1)	$	14,232
Total	$	38		$	131	$	14,063		$	14,232
December 31, 2016
Commercial and industrial	$	685		$	—	$	7,090	(1)	$	7,775
Consumer real estate	—			79		—			79
Other consumer	1			—		—			1
Total	$	686		$	79	$	7,090		$	7,855
December 31, 2015
Commercial real estate	$	100		$	—	$	—		$	100
Commercial and industrial	—			—		191			191
Consumer real estate	209		(2)	60		36			305
Other consumer	1			—		3			4
Total	$	310		$	60	$	230		$	600

¹  Reserve-based energy relationships where the primary modification consisted of suspension of required borrowing base payments.

²  Principal deferrals include Chapter 7 bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt. Such loans are placed on non-accrual status.

Loans modified as a TDR during the years ended December 31, 2017, 2016 and 2015, which experienced a subsequent payment default during the periods, are shown below. A payment default is defined as a loan that was 90 days or more past due.

	Years Ended December 31,
	2017		2016		2015
Consumer real estate	$	—	$	31	$	178

Analysis of Age of Recorded Investment in Loans

Below is an analysis of the age of recorded investment in loans that were past due at December 31, 2017 and 2016. No Warehouse Purchase Program loans were delinquent at December 31, 2017 or 2016 and therefore are not included in the following table.

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Loans Past Due		Current Loans 1		Total Loans
Commercial real estate	$	9,414	$	—	$	250	$	9,664	$	3,009,675	$	3,019,339
Commercial and industrial	918		284		7,350		8,552		2,084,755		2,093,307
Construction and land	9,354		—		—		9,354		268,510		277,864
Consumer real estate	16,436		2,928		1,367		20,731		1,192,703		1,213,434
Other consumer	891		34		2		927		44,579		45,506
Total	$	37,013	$	3,246	$	8,969	$	49,228	$	6,600,222	$	6,649,450
December 31, 2016
Commercial real estate	$	1,829	$	72	$	766	$	2,667	$	2,667,788	$	2,670,455
Commercial and industrial	20,910		495		46		21,451		1,949,709		1,971,160
Construction and land	19,517		283		—		19,800		275,094		294,894
Consumer real estate	10,487		1,916		1,199		13,602		1,061,321		1,074,923
Other consumer	1,523		31		6		1,560		52,431		53,991
Total	$	54,266	$	2,797	$	2,017	$	59,080	$	6,006,343	$	6,065,423

¹  Includes acquired PCI loans with a total carrying value of $3,338 and $6,729 at December 31, 2017 and 2016, respectively.

Real Estate and Commercial and Industrial Credit Risk Profile by Internally Assigned Grade

The recorded investment in loans by credit quality indicators at December 31, 2017 and 2016, was as follows.

Real Estate and Commercial and Industrial Credit Exposure

Credit Risk Profile by Internally Assigned Grade

December 31, 2017	Commercial Real Estate		Commercial and Industrial		Construction and Land		Consumer Real Estate
Grade:1
Pass	$	2,980,656	$	1,953,496	$	277,864	$	1,203,236
Special Mention	30,656		43,161		—		1,408
Substandard	8,027		96,546		—		7,762
Doubtful	—		104		—		1,028
Total	$	3,019,339	$	2,093,307	$	277,864	$	1,213,434
December 31, 2016
Grade:1
Pass	$	2,648,842	$	1,712,171	$	283,423	$	1,062,549
Special Mention	7,972		155,110		—		2,083
Substandard	12,875		103,815		11,471		8,252
Doubtful	766		64		—		2,039
Total	$	2,670,455	$	1,971,160	$	294,894	$	1,074,923

¹  PCI loans are included in the substandard or doubtful categories for December 31, 2017 and 2016, respectively. These categories are generally consistent with the "substandard" and "doubtful" categories as defined by regulatory authorities.

Consumer Credit Exposure Credit Risk Profile Based on Payment Activity

Credit Risk Profile Based on Payment Activity

	December 31, 2017		December 31, 2016
Performing	$	45,430	$	53,833
Non-performing	76		158
Total	$	45,506	$	53,991

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below.

	Fair Value Measurements Using Level 2
	December 31, 2017		December 31, 2016
Assets:
Agency residential mortgage-backed securities	$	189,466	$	218,551
Agency commercial mortgage-backed securities	9,235		9,347
Agency residential collateralized mortgage obligations	184,216		86,529
US government and agency securities	1,671		2,251
Municipal bonds	35,129		37,837
Total securities available for sale	$	419,717	$	354,515
Loans held for sale1	$	16,707	$	21,279
Derivative financial instruments:
Interest rate lock commitments	358		379
Forward mortgage-backed securities trades	7		36
Loan customer counterparty	—		—
Financial institution counterparty	1,735		1,369
Liabilities:
Derivative financial instruments:
Interest rate lock commitments	—		—
Forward mortgage-backed securities trades	18		80
Loan customer counterparty	1,735		1,369
Financial institution counterparty	—		—

¹  At December 31, 2017, loans held for sale had an aggregate outstanding principal balance of $16,242. There were no mortgage loans held for sale that were 90 days or greater past due or on non-accrual at December 31, 2017.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below. There were no liabilities measured at fair value on a non-recurring basis as of December 31, 2017 or 2016.

	Fair Value Measurements Using Level 3
	December 31, 2017		December 31, 2016
Assets:
Impaired loans	$	25,046	$	9,274
Foreclosed assets:
Commercial real estate	6,694		10,638
Construction and land	859		194
Consumer real estate	192		—
Other	687		6

Fair Value of Financial Instruments Not Recorded at Fair Value

The carrying amount and fair value information of financial instruments not recorded at fair value in their entirety on a recurring basis on the Company's consolidated balance sheets at December 31, 2017 and 2016, were as follows:

			Fair Value
December 31, 2017	Carrying Amount		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	293,456	$	293,456	$	—	$	—
Securities held to maturity	173,509		—		174,926		—
Loans held for investment, net	6,584,529		—		—		6,651,207
Loans held for investment - Warehouse Purchase Program	1,154,588		—		—		1,171,354
FHLB and other restricted securities, at cost	64,790		—		64,790		—
Accrued interest receivable	24,596		24,596		—		—
Financial liabilities
Deposits	$	6,767,683	$	—	$	—	$	6,326,572
FHLB advances	1,043,163		—		—		1,043,416
Repurchase agreements	84,676		—		—		81,041
Subordinated debt	134,522		—		—		141,972
Accrued interest payable	2,729		2,729		—		—
December 31, 2016
Financial assets
Cash and cash equivalents	$	289,212	$	289,212	$	—	$	—
Securities held to maturity	210,387		—		212,981		—
Loans held for investment, net	5,998,596		—		—		6,080,165
Loans held for investment - Warehouse Purchase Program	1,055,341		—		—		1,055,219
FHLB and other restricted securities, at cost	43,266		—		43,266		—
Accrued interest receivable	20,347		20,347		—		—
Financial liabilities
Deposits	$	6,365,476	$	—	$	—	$	5,989,933
FHLB advances	833,682		—		—		830,930
Repurchase agreement	86,691		—		—		84,265
Subordinated debt	134,032		—		—		121,743
Accrued interest payable	2,111		2,111		—		—

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Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

The commercial loan customer counterparty weighted average received and paid interest rates for interest rate swaps outstanding at December 31, 2017 and 2016 are presented in the following table.

	Weighted-Average Interest Rate
	December 31, 2017				December 31, 2016
	Received		Paid		Received		Paid
Loan customer counterparty	2.52	%	2.54	%	3.12	%	2.36	%

Income (loss) for the years ended December 31, 2017, 2016 and 2015 was as follows:

Derivatives not designated as hedging instruments	Years Ended December 31,
	2017			2016			2015
IRLC's	$	(21	)	$	(43	)	$	8
Forward mortgage-backed securities trades	(479		)	13			(195		)

The following table provides the outstanding notional balances and fair values of outstanding derivative positions at December 31, 2017 and 2016.

	December 31, 2017						December 31, 2016
	Outstanding Notional Balance		Asset Derivative Fair Value		Liability Derivative Fair Value		Outstanding Notional Balance		Asset Derivative Fair Value		Liability Derivative Fair Value
IRLCs	$	10,337	$	358	$	—	$	10,952	$	379	$	—
Forward mortgage-backed securities trades	19,788		7		18		18,613		36		80
Commercial loan interest rate swaps and caps:
Loan customer counterparty	114,594		—		1,735		112,294		—		1,369
Financial institution counterparty	114,594		1,735		—		112,294		1,369		—

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Premises and Equipment

Premises and equipment were as follows:

	December 31,
	2017			2016
Land	$	22,140		$	23,636
Buildings	57,079			59,298
Furniture, fixtures and equipment	20,218			19,561
Leasehold improvements	10,055			7,674
	109,492			110,169
Less: accumulated depreciation	(39,799		)	(35,943		)
Total	$	69,693		$	74,226

Rent Commitments

Rent commitments, before considering applicable renewal options, as of December 31, 2017, were as follows:

	Balance
2018	$	5,725
2019	5,069
2020	4,696
2021	4,443
2022	3,735
Thereafter	16,303
Total	$	39,971

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Goodwill and Core Deposit Intangibles (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Changes In Carrying Amount of Company's Goodwill and Core Deposit Intangibles (Cdi)

Changes in the carrying amount of the Company's goodwill and core deposit intangibles (“CDI”) for years ended December 31, 2017 and 2016, were as follows:

	Goodwill			Core Deposit Intangibles
Balance as of December 31, 2015	$	180,776		$	1,030
Disposition of insurance subsidiary goodwill upon the sale of subsidiary operations	(2,217		)	—
Amortization of core deposit intangible	—			(365		)
Balance as of December 31, 2016	178,559			665
Amortization of core deposit intangible	—			(263		)
Balance as of December 31, 2017	$	178,559		$	402

Estimated Aggregate Future Amortization Expense for Intangible Assets Remaining

The estimated aggregate future amortization expense for CDI remaining as of December 31, 2017 is as follows:

	Balance
2018	$	156
2019	101
2020	73
2021	48
2022	24
Thereafter	—

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Deposits (Tables)

12 Months Ended

Dec. 31, 2017

Banking and Thrift [Abstract]

Scheduled Maturity of Time Deposits

At December 31, 2017, scheduled maturities of time deposits for the next five years with the weighted average rate at the end of the period were as follows:

	Balance		Weighted Average Rate
2018	$	860,102	1.16	%
2019	383,687		1.57
2020	41,093		1.47
2021	59,074		1.59
2022 and thereafter	23,434		1.57
Total	$	1,367,390	1.31	%

Interest Expense on Deposits

Interest expense on deposits is summarized as follows:

	Years Ended December 31,
	2017		2016		2015
Interest-bearing demand	$	5,475	$	3,974	$	3,297
Savings and money market	16,845		7,288		3,644
Time	14,374		9,772		6,186
Total	$	36,694	$	21,034	$	13,127

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Borrowed Funds (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Summary of Borrowed Funds

Borrowed funds are summarized as follows:

	December 31,
	2017				2016
	Amount		Rate1		Amount		Rate1
Federal Home Loan Bank advances	$	1,043,163	1.51	%	$	833,682	0.71	%
Repurchase Agreements
Credit Suisse structured repurchase agreement	25,000		3.02		25,000		3.02
Overnight repurchase agreements with depositors	59,676		1.18		61,691		0.15
Subordinated Debt
Fixed to floating rate note maturing on December 1, 2025	125,000		5.50		125,000		5.58
Junior subordinated debentures	15,464		3.29		15,464		2.66

¹  Rate at period-end, with the exception of the fixed to floating rate subordinated debt note, which is a weighted average rate calculated using period-end rates.

Debt Pay Down Schedule

At December 31, 2017, borrowed funds, reported gross of purchase accounting fair value discounts, prepayment penalties and debt issuance costs, were structured to contractually pay down as follows:

	FHLB Advances		Repurchase Agreements		Subordinated Debt		Total
2018	$	1,037,754	$	84,676	$	—	$	1,122,430
2019	2,313		—		—		2,313
2020	932		—		—		932
2021	856		—		—		856
2022	695		—		—		695
Thereafter	613		—		140,464		141,077
	$	1,043,163	$	84,676	$	140,464	$	1,268,303

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Share-based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

Compensation cost charged to income for share-based compensation, which is reported in non-interest expense as salaries and employee benefits expense, is presented below:

	Years ended December 31,
	2017		2016		2015
Restricted stock	$	3,581	$	3,477	$	3,459
Stock options	3,881		2,537		2,018
Income tax benefit	2,612		2,105		1,917

Nonvested Shares for the Company's Stock Plans

A summary of activity in the restricted stock portion of the Company's Plans for 2017, 2016 and 2015 is presented below:

	Time-Vested Shares				Performance-Based Shares
	Shares		Weighted- Average Grant Date Fair Value per Share 1		Shares		Weighted- Average Grant Date Fair Value per Share 2
Non-vested at January 1, 2015	297,603		$	20.45	82,400		$	23.89
Granted	80,000		21.23		—		—
Vested	(131,142	)	19.98		(20,600	)	23.89
Non-vested at December 31, 2015	246,461		20.98		61,800		25.02
Granted	55,180		29.29		40,200		29.29
Vested	(101,465	)	20.70		(20,600	)	25.02
Non-vested at December 31, 2016	200,176		23.79		81,400		43.06
Granted	19,208		38.92		12,208		39.90
Vested	(90,796	)	21.67		(20,600	)	41.32
Non-vested at December 31, 2017	128,588		$	27.27	73,008		$	42.21

¹  For restricted stock awards with time-based vesting conditions, the grant date fair value is based upon the closing stock price as quoted on the Nasdaq Stock Market on the grant date.

²  For restricted stock awards with performance-based vesting conditions, the value of the award is based upon the closing stock price as quoted on the Nasdaq Stock Market on the date of vesting. Until the final value is determined on the vesting date, the Company estimates the fair value based upon the closing stock price as quoted on the Nasdaq Stock Market near the last business day of each month.

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	2017		2016		2015
Risk-free interest rate	2.18	%	1.37	%	1.80	%
Expected term of stock options (years)	6.2		6.3		6.2
Expected stock price volatility	31.85	%	32.07	%	31.14	%
Expected dividends	1.61	%	1.93	%	1.95	%

Summary of Activity under Stock Option Portion of Equity Incentive Plan

A summary of activity in the stock option portion of the Company's Plans as of the years ended December 31, 2017, 2016 and 2015 is presented below:

Options	Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2015	1,370,873		$	20.27	8.0	$	5,679
Granted	633,000		25.66
Exercised	(58,855	)	16.12
Forfeited	(79,268	)	20.89
Outstanding at December 31, 2015	1,865,750		22.21		7.9	6,401
Granted	392,838		29.15
Exercised	(175,192	)	19.08
Forfeited	(75,316	)	25.57
Outstanding at December 31, 2016	2,008,080		23.71		9.5	38,850
Granted	513,375		37.15
Exercised	(221,984	)	21.23
Forfeited	(92,228	)	28.80
Outstanding at December 31, 2017	2,207,243		$	26.88	10.1	$	33,848
Fully vested and expected to vest	2,191,740		$	26.82	10.1	$	33,725
Exercisable at December 31, 2017	966,527		$	22.11	7.5	$	19,425

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Tax Expense

Income tax expense for 2017, 2016 and 2015, was as follows:

	2017			2016			2015
Current expense	$	56,341		$	59,900		$	38,648
Deferred expense	(4,115		)	(6,798		)	(692		)
Impact of Tax Cuts and Jobs Act - net future deductions	12,752			—			—
Impact of Tax Cuts and Jobs Act - unrealized loss on AFS securities	741			—			—
Total income tax expense	$	65,719		$	53,102		$	37,956

Deferred Tax Assets and Liabilities

At December 31, 2017 and 2016, deferred tax assets and liabilities were due to the following:

	December 31,
	2017			2016
Deferred tax assets:
Allowance for loan losses	$	15,168		$	22,602
Deferred compensation arrangements	762			1,261
Self-funded health insurance	251			241
Non-accrual interest	503			966
Restricted stock and stock options	2,577			3,132
Accrued expenses	623			1,255
Fair value mark on purchased loans	965			2,348
Net unrealized loss on securities available for sale	1,111			1,465
Other	1,909			2,121
	23,869			35,391
Deferred tax liabilities:
Depreciation	(270		)	(336		)
Partnerships — CRA-purposed private equity funds	(941		)	(1,697		)
Fair value mark on subordinated debt	(743		)	(1,303		)
Other	(1,675		)	(2,824		)
	(3,629		)	(6,160		)
Net deferred tax asset	$	20,240		$	29,231

Reconciliation of Effective Income Tax Rate

Effective tax rates differ from the federal statutory rate of 35% in 2017, 2016 and 2015, applied to income before income taxes due to the following:

	At and for the Year Ended December 31,
	2017			2016			2015
Federal statutory rate times financial statement income	$	54,325		$	52,823		$	38,105
Effect of:
State taxes, net of federal benefit	239			267			37
Bank-owned life insurance income	(423		)	(436		)	(419		)
Municipal interest income	(978		)	(1,041		)	(1,025		)
ESOP shares released	541			757			1,207
Restricted stock and stock options	(1,578		)	—			—
Sale of LegacyTexas Insurance Services, Inc.	—			640			—
DTA write-down due to the Tax Cuts and Jobs Act	13,493			—			—
Other	100			92			51
Total income tax expense	$	65,719		$	53,102		$	37,956
Effective Tax Rate before deferred tax write-down	33.65		%	35.18		%	34.86		%
Effective Tax Rate	42.34		%	35.18		%	34.86		%

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2017

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

Loans to executive officers, directors, and their affiliates during 2017 were as follows:

	Balance
Beginning balance	$	15,337
New loans	—
Effect of changes in composition of related parties	—
Repayments	(933		)
Ending balance	$	14,404

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Regulatory Capital Matters (Tables)

12 Months Ended

Dec. 31, 2017

Regulatory Capital Requirements [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

	Actual				Required for Capital Adequacy Purposes				To Be Well-Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2017
Total risk-based capital
Company	$	991,713	11.87	%	$	668,142	8.00	%	$	835,178	10.00	%
Bank	939,655		11.25		668,096		8.00		835,120		10.00
Tier 1 risk-based capital
Company	796,887		9.54		501,107		6.00		501,107		6.00
Bank	867,424		10.39		501,072		6.00		668,096		8.00
Common equity tier 1 risk-based capital
Company	784,960		9.40		375,830		4.50		n/a1		n/a1
Bank	867,424		10.39		375,804		4.50		542,828		6.50
Tier 1 leverage
Company	796,887		9.17		347,731		4.00		n/a1		n/a1
the Bank	867,424		9.98		347,808		4.00		434,759		5.00
As of December 31, 2016
Total risk-based capital
Company	$	910,040	11.71	%	$	621,870	8.00	%	$	777,338	10.00	%
Bank	869,523		11.19		621,840		8.00		777,300		10.00
Tier 1 risk-based capital
Company	721,600		9.28		466,403		6.00		466,403		6.00
Bank	803,374		10.34		466,380		6.00		621,840		8.00
Common equity tier 1 risk-based capital
Company	709,858		9.13		349,802		4.50		n/a1		n/a1
Bank	803,374		10.34		349,785		4.50		505,245		6.50
Tier 1 leverage
Company	721,600		8.73		330,782		4.00		n/a1		n/a1
Bank	803,374		9.71		330,873		4.00		413,591		5.00

¹  Not applicable

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Commitments and Contingent Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Fair Value, Off-balance Sheet Risks

The contractual amounts of financial instruments with off‑balance sheet risk at December 31, 2017 and 2016, are summarized below. Please see Part II-Item 7- "Off-Balance Sheet Arrangements, Contractual Obligation and Commitments" of this Form 10-K for information related to commitment maturities.

	December 31,
	2017		2016
Unused commitments to extend credit	$	1,600,794	$	1,642,528
Unused capacity on Warehouse Purchase Program loans	738,412		892,659
Standby letters of credit	34,091		29,198
Total unused commitments/capacity	$	2,373,297	$	2,564,385

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Parent Company Only Condensed Financial Information (Tables)

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of Condensed Balance Sheet

CONDENSED BALANCE SHEETS

December 31,

	2017		2016
ASSETS
Cash on deposit at subsidiary	$	26,692	$	16,962
Investment in banking subsidiary	1,042,338		978,880
Receivable from banking subsidiary	12,278		10,317
ESOP note receivable and other assets	13,814		13,999
Total assets	$	1,095,122	$	1,020,158
LIABILITIES AND SHAREHOLDERS’ EQUITY
Borrowings	$	134,522	$	134,032
Other liabilities	726		761
Shareholders’ equity	959,874		885,365
Total liabilities and shareholders’ equity	$	1,095,122	$	1,020,158

Schedule of Condensed Income Statement

CONDENSED STATEMENTS OF INCOME

December 31,

	2017		2016		2015
Cash dividends from subsidiary	$	35,000	$	—	$	24,500
Excess of earnings over dividend from subsidiary	61,341		103,572		48,677
Interest income on ESOP loan	449		487		565
Interest income on subordinated debt	13		11		17
Other income	—		—		5
	96,803		104,070		73,764
Interest expense	7,819		6,040		1,046
Operating expenses	3,754		3,236		3,009
Earnings before income tax benefit	85,230		94,794		69,709
Income tax benefit	4,264		3,027		1,207
Net income	$	89,494	$	97,821	$	70,916

Schedule of Condensed Cash Flow Statement

CONDENSED STATEMENTS OF CASH FLOWS

December 31,

	2017			2016			2015
Cash flows from operating activities
Net income	$	89,494		$	97,821		$	70,916
Adjustments to reconcile net income to net cash from operating activities:
Excess of earnings over dividend from subsidiary	(61,341		)	(103,572		)	(48,677		)
Amortization	490			530			171
Activity in share-based compensation plans	5,501			3,152			3,068
Net change in other assets	(207		)	(481		)	6,931
Net change in other liabilities	(35		)	(38		)	(14,544		)
Net cash provided by (used in) operating activities	33,902			(2,588		)	17,865
Cash flows from investing activities
Capital contribution (to) from subsidiary	—			(49,000		)	(40,000		)
Cash and cash equivalents acquired from LegacyTexas Group, Inc.	—			—			201
Payments received on ESOP notes receivable	393			981			1,495
Net cash provided by (used in) investing activities	393			(48,019		)	(38,304		)
Cash flows from financing activities
Proceeds from borrowings	—			73,439			73,407
Repayments of borrowings	—			(24,929		)	(24,364		)
Share repurchase	—			—			(7,989		)
Net issuance of common stock under employee stock plans	4,712			3,755			1,284
Payment of dividends	(29,277		)	(27,676		)	(25,747		)
Net cash provided by (used in) financing activities	(24,565		)	24,589			16,591
Net change in cash and cash equivalents	9,730			(26,018		)	(3,848		)
Beginning cash and cash equivalents	16,962			42,980			46,828
Ending cash and cash equivalents	$	26,692		$	16,962		$	42,980

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

	Interest Income		Interest Expense		Net Interest Income		Provision for Credit Losses			Securities Gains and (Losses)			Net Income			Earnings per Share
																Basic	Diluted
2017
First quarter	$	87,536	$	10,988	$	76,548	$	22,301	1	$	(19	)	$	18,190		0.39	0.38
Second quarter	88,747		13,027		75,720		6,255			—			27,935			0.60	0.59
Third quarter	94,463		15,499		78,964		7,157			(20		)	28,709			0.61	0.61
Fourth quarter	96,111		15,912		80,199		3,743			—			14,660		2	0.31	0.31
2016
First quarter	$	72,608	$	7,257	$	65,351	$	8,800		$	—		$	22,082		0.48	0.48
Second quarter	77,336		7,982		69,354		6,800			65			23,217			0.50	0.50
Third quarter	82,911		9,431		73,480		3,467			(3		)	27,217			0.59	0.58
Fourth quarter	84,497		10,413		74,084		7,833			(6		)	25,305			0.54	0.54

¹  Includes the impact of a charge-off totaling $16,360 on a corporate healthcare finance relationship, which was reported in the Company's commercial and industrial loan portfolio.

²  Includes the impact of a $13,493 income tax adjustment to the Company's deferred tax asset related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

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Summary of Significant Accounting Policies (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) segment loan_production_office	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Property, Plant and Equipment [Line Items]
Number of full-service branches | loan_production_office	44
Days past due to be considered delinquent	30 days
Days delinquent for interest on loan to be discontinued	90 days
Days delinquent for a consumer loan to be typically charged off	120 days
Consumer loans, nonperforming, period Before placed into nonaccrual status	90 days
Threshold for not being measured on an individual basis, unpaid principal for impaired financing receivable	$ 417
Troubled debt restructuring non accrual period	6 months
Performance period for troubled debt restructuring loans to return to accrual status	6 months
Advertising expense	$ 4,378	$ 3,861	$ 3,773
Number of segments | segment	1
Buildings | Minimum
Property, Plant and Equipment [Line Items]
Useful lives	10 years
Buildings | Maximum
Property, Plant and Equipment [Line Items]
Useful lives	30 years
Furniture, fixtures and equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful lives	3 years
Furniture, fixtures and equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful lives	7 years

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Share Transactions (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Aug. 31, 2012
Stockholders' Equity Note [Abstract]
Percentage of shares authorized to be repurchased				5.00%
Repurchase authorized (in shares)				1,978,871
Stock repurchased and retired during period (in shares)	0	0	357,950
Average price of stock retired (in dollars per share)			$ 22.32
Remaining available for purchase (in shares)	1,537,121

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Numerator:
Net income									$ 89,494	$ 97,821	$ 70,916
Distributed and undistributed earnings to participating securities									(318)	(497)	(534)
Income available to common shareholders									$ 89,176	$ 97,324	$ 70,382
Denominator:
Weighted average common shares outstanding (in shares)									47,998,439	47,721,179	47,659,389
Less: Average unallocated ESOP shares (in shares)									(1,220,516)	(1,301,356)	(1,464,324)
Average unvested restricted stock awards (in shares)									(166,143)	(235,749)	(347,781)
Average shares for basic earnings per share (in shares)									46,611,780	46,184,074	45,847,284
Basic earnings per common share (in dollars per share)	$ 0.31	$ 0.61	$ 0.60	$ 0.39	$ 0.54	$ 0.59	$ 0.50	$ 0.48	$ 1.91	$ 2.11	$ 1.54
Numerator:
Income available to common shareholders									$ 89,176	$ 97,324	$ 70,382
Denominator:
Average shares for basic earnings per share (in shares)									46,611,780	46,184,074	45,847,284
Dilutive effect of share-based compensation plan (in shares)									526,738	300,893	278,163
Average shares for diluted earnings per share (in shares)									47,138,518	46,484,967	46,125,447
Diluted earnings per common share (in dollars per share)	$ 0.31	$ 0.61	$ 0.59	$ 0.38	$ 0.54	$ 0.58	$ 0.50	$ 0.48	$ 1.89	$ 2.09	$ 1.53
Share awards excluded in the computation of diluted earnings per share because the exercise price was greater than the common stock average market price and were therefore anti-dilutive (in shares)									623,666	1,384,784	1,012,771

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Securities - Fair Value of Available-for-Sale Securities and Related Gross Unrealized Gains and Losses (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 424,999	$ 358,692
Gross Unrealized Gains	745	805
Gross Unrealized Losses	6,027	4,982
Fair Value	419,717	354,515
Agency residential mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	191,216	220,744
Gross Unrealized Gains	419	635
Gross Unrealized Losses	2,169	2,828
Fair Value	189,466	218,551
Agency commercial mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	9,360	9,422
Gross Unrealized Gains	0	0
Gross Unrealized Losses	125	75
Fair Value	9,235	9,347
Agency residential collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	187,637	87,959
Gross Unrealized Gains	4	22
Gross Unrealized Losses	3,425	1,452
Fair Value	184,216	86,529
US government and agency securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,590	2,150
Gross Unrealized Gains	81	101
Gross Unrealized Losses	0	0
Fair Value	1,671	2,251
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	35,196	38,417
Gross Unrealized Gains	241	47
Gross Unrealized Losses	308	627
Fair Value	$ 35,129	$ 37,837

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Securities - Carrying Amount, Unrecognized Gains and Losses, and Fair Value of Securities Held to Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 173,509	$ 210,387
Gross Unrealized Gains	2,549	4,315
Gross Unrealized Losses	1,132	1,721
Fair Value	174,926	212,981
Agency residential mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	57,334	74,881
Gross Unrealized Gains	616	1,147
Gross Unrealized Losses	646	817
Fair Value	57,304	75,211
Agency commercial mortgage-backed securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	27,435	28,023
Gross Unrealized Gains	589	836
Gross Unrealized Losses	98	166
Fair Value	27,926	28,693
Agency residential collateralized mortgage obligations
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	27,112	40,707
Gross Unrealized Gains	265	697
Gross Unrealized Losses	99	33
Fair Value	27,278	41,371
Municipal bonds
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	61,628	66,776
Gross Unrealized Gains	1,079	1,635
Gross Unrealized Losses	289	705
Fair Value	$ 62,418	$ 67,706

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Securities - Carrying Amount and Fair Value of Held to Maturity Debt Securities and Fair Value of Available-for-Sale Debt Securities (Details) $ in Thousands	Dec. 31, 2017 USD ($)
HTM - Amortized Cost
Due in one year or less	$ 1,365
Due after one to five years	10,699
Due after five to ten years	44,059
Due after ten years	5,505
Held to maturity, Amortized Cost	173,509
HTM - Fair Value
Due in one year or less	1,373
Due after one to five years	10,959
Due after five to ten years	44,628
Due after ten years	5,458
Fair value of securities held to maturity	174,926
AFS - Fair Value
Due in one year or less	1,526
Due after one to five years	12,726
Due after five to ten years	16,731
Due after ten years	5,817
Securities available for sale, at fair value	419,717
Agency residential mortgage-backed securities
AFS - Fair Value
Securities available for sale, at fair value	189,466
Agency commercial mortgage-backed securities
AFS - Fair Value
Securities available for sale, at fair value	9,235
Agency residential collateralized mortgage obligations
AFS - Fair Value
Securities available for sale, at fair value	184,216
Agency residential mortgage-backed securities
HTM - Amortized Cost
Held to maturity, Amortized Cost	57,334
HTM - Fair Value
Fair value of securities held to maturity	57,304
Agency commercial mortgage-backed securities
HTM - Amortized Cost
Held to maturity, Amortized Cost	27,435
HTM - Fair Value
Fair value of securities held to maturity	27,926
Agency residential collateralized mortgage obligations
HTM - Amortized Cost
Held to maturity, Amortized Cost	27,112
HTM - Fair Value
Fair value of securities held to maturity	$ 27,278

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Securities - Summarized Sales Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Proceeds	$ 0	$ 7,700	$ 36,984
Gross gains	0	72	278
Gross losses	0	7	50
Tax expense of securities gains/losses reclassified from accumulated other comprehensive income	$ 0	$ 23	$ 80

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Securities - Securities with Unrealized Losses Aggregated by Investment and Length of Time that Individual Securities Have Been in Continuous Unrealized Loss Position Category (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
AFS - Fair Value
Less than 12 Months	$ 207,763	$ 276,583
12 Months or More	155,968	13,577
Fair Value, Total	363,731	290,160
AFS - Unrealized Loss
Less than 12 Months	2,469	4,777
12 Months or More	3,558	205
Total	6,027	4,982
HTM - Fair Value
Less than 12 Months	41,403	74,332
12 Months or More	33,146	2,496
Fair Value, Total	74,549	76,828
HTM - Unrealized Loss
Less than 12 Months	376	1,652
12 Months or More	756	69
Total	1,132	1,721
Agency residential mortgage-backed securities
HTM - Fair Value
Less than 12 Months	20,397	41,375
12 Months or More	16,909	0
Fair Value, Total	37,306	41,375
HTM - Unrealized Loss
Less than 12 Months	206	817
12 Months or More	440	0
Total	646	817
Agency commercial mortgage-backed securities
HTM - Fair Value
Less than 12 Months	3,685	7,273
12 Months or More	3,484	0
Fair Value, Total	7,169	7,273
HTM - Unrealized Loss
Less than 12 Months	26	166
12 Months or More	72	0
Total	98	166
Agency residential collateralized mortgage obligations
HTM - Fair Value
Less than 12 Months	8,008	6,322
12 Months or More	2,267	1,451
Fair Value, Total	10,275	7,773
HTM - Unrealized Loss
Less than 12 Months	64	11
12 Months or More	35	22
Total	99	33
Municipal Bonds
HTM - Fair Value
Less than 12 Months	9,313	19,362
12 Months or More	10,486	1,045
Fair Value, Total	19,799	20,407
HTM - Unrealized Loss
Less than 12 Months	80	658
12 Months or More	209	47
Total	289	705
Agency residential mortgage-backed securities
AFS - Fair Value
Less than 12 Months	59,545	167,503
12 Months or More	100,214	7,516
Fair Value, Total	159,759	175,019
AFS - Unrealized Loss
Less than 12 Months	412	2,770
12 Months or More	1,757	58
Total	2,169	2,828
Agency commercial mortgage-backed securities
AFS - Fair Value
Less than 12 Months	9,235	9,347
12 Months or More	0	0
Fair Value, Total	9,235	9,347
AFS - Unrealized Loss
Less than 12 Months	125	75
12 Months or More	0	0
Total	125	75
Agency residential collateralized mortgage obligations
AFS - Fair Value
Less than 12 Months	128,869	72,822
12 Months or More	49,171	2,649
Fair Value, Total	178,040	75,471
AFS - Unrealized Loss
Less than 12 Months	1,860	1,420
12 Months or More	1,565	32
Total	3,425	1,452
Municipal Bonds
AFS - Fair Value
Less than 12 Months	10,114	26,911
12 Months or More	6,583	3,412
Fair Value, Total	16,697	30,323
AFS - Unrealized Loss
Less than 12 Months	72	512
12 Months or More	236	115
Total	$ 308	$ 627

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Securities - Narrative (Details) $ in Thousands	Dec. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($)
Investments, Debt and Equity Securities [Abstract]
Held-to-maturity securities pledged as collateral | $	$ 256,451	$ 224,674
Number of securities in unrealized loss position	259
Number of securities in unrealized loss position for more than one year	122

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Loans - Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held for sale, at fair value	$ 16,707	$ 21,279
Gross loans held for investment, excluding Warehouse Purchase Program	6,649,450	6,065,423	$ 5,066,507
Deferred costs (fees) and discounts, net	6,380	(2,251)
Allowance for loan losses	(71,301)	(64,576)
Net loans held for investment, excluding Warehouse Purchase Program	6,584,529	5,998,596
Warehouse Purchase Program	1,154,588	1,055,341
Total loans held for investment	7,739,117	7,053,937
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans held for investment, excluding Warehouse Purchase Program	3,019,339	2,670,455	2,177,543
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans held for investment, excluding Warehouse Purchase Program	2,093,307	1,971,160	1,612,669
Construction and land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans held for investment, excluding Warehouse Purchase Program	277,864	294,894	269,708
Consumer real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans held for investment, excluding Warehouse Purchase Program	1,213,434	1,074,923	936,757
Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans held for investment, excluding Warehouse Purchase Program	$ 45,506	$ 53,991	$ 69,830

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Loans - Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Carrying amount, net of allowance	$ 269,000	$ 180,000	$ 150,000
Loans past due over 90 days and still accruing	0	141,000
PCI loans that are considered non-performing	0
Interest that would have been recognized on non-accrual loans if performing	$ 4,229,000	$ 1,746,000	$ 1,594,000
Troubled debt restructuring, default payment	90 days

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Loans - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Allowance for loan losses:
Balance at beginning of period				$ 64,576				$ 47,093	$ 64,576	$ 47,093	$ 25,549
Charge-offs									(34,742)	(8,859)	(4,707)
Recoveries									1,367	942	786
Provision expense (benefit)	$ 3,743	$ 7,157	$ 6,255	22,301	$ 7,833	$ 3,467	$ 6,800	8,800	40,100	25,400	25,465
Balance at end of period	71,301				64,576				71,301	64,576	47,093
Allowance ending balance:
Individually evaluated for impairment	10,791				5,011				10,791	5,011	1,978
Collectively evaluated for impairment	60,510				59,565				60,510	59,565	45,115
Loans:
Individually evaluated for impairment	91,166				106,619				91,166	106,619	33,406
Collectively evaluated for impairment	6,554,720				5,951,831				6,554,720	5,951,831	5,021,147
PCI loans	3,564				6,973				3,564	6,973	11,954
Total	6,649,450				6,065,423				6,649,450	6,065,423	5,066,507
Commercial real estate
Allowance for loan losses:
Balance at beginning of period				18,303				14,123	18,303	14,123	11,830
Charge-offs									(16)	(79)	(167)
Recoveries									205	21	29
Provision expense (benefit)									3,095	4,238	2,431
Balance at end of period	21,587				18,303				21,587	18,303	14,123
Allowance ending balance:
Individually evaluated for impairment	0				300				0	300	366
Collectively evaluated for impairment	21,587				18,003				21,587	18,003	13,757
Loans:
Individually evaluated for impairment	4,134				5,195				4,134	5,195	11,580
Collectively evaluated for impairment	3,012,892				2,659,644				3,012,892	2,659,644	2,155,351
PCI loans	2,313				5,616				2,313	5,616	10,612
Total	3,019,339				2,670,455				3,019,339	2,670,455	2,177,543
Commercial and industrial
Allowance for loan losses:
Balance at beginning of period				35,464				24,975	35,464	24,975	9,068
Charge-offs									(32,846)	(7,746)	(3,129)
Recoveries									405	472	246
Provision expense (benefit)									35,982	17,763	18,790
Balance at end of period	39,005				35,464				39,005	35,464	24,975
Allowance ending balance:
Individually evaluated for impairment	10,527				4,521				10,527	4,521	1,470
Collectively evaluated for impairment	28,478				30,943				28,478	30,943	23,505
Loans:
Individually evaluated for impairment	84,005				86,664				84,005	86,664	16,906
Collectively evaluated for impairment	2,009,126				1,884,263				2,009,126	1,884,263	1,595,548
PCI loans	176				233				176	233	215
Total	2,093,307				1,971,160				2,093,307	1,971,160	1,612,669
Construction and land
Allowance for loan losses:
Balance at beginning of period				5,075				3,013	5,075	3,013	174
Charge-offs									(418)	0	0
Recoveries									75	0	0
Provision expense (benefit)									(88)	2,062	2,839
Balance at end of period	4,644				5,075				4,644	5,075	3,013
Allowance ending balance:
Individually evaluated for impairment	0				0				0	0	0
Collectively evaluated for impairment	4,644				5,075				4,644	5,075	3,013
Loans:
Individually evaluated for impairment	0				11,385				0	11,385	33
Collectively evaluated for impairment	277,864				283,509				277,864	283,509	269,675
PCI loans	0				0				0	0	0
Total	277,864				294,894				277,864	294,894	269,708
Consumer real estate
Allowance for loan losses:
Balance at beginning of period				4,484				3,992	4,484	3,992	4,069
Charge-offs									(96)	(107)	(321)
Recoveries									42	109	85
Provision expense (benefit)									408	490	159
Balance at end of period	4,838				4,484				4,838	4,484	3,992
Allowance ending balance:
Individually evaluated for impairment	230				138				230	138	81
Collectively evaluated for impairment	4,608				4,346				4,608	4,346	3,911
Loans:
Individually evaluated for impairment	2,992				3,300				2,992	3,300	4,767
Collectively evaluated for impairment	1,209,550				1,070,732				1,209,550	1,070,732	931,140
PCI loans	892				891				892	891	850
Total	1,213,434				1,074,923				1,213,434	1,074,923	936,757
Other consumer
Allowance for loan losses:
Balance at beginning of period				$ 1,250				$ 990	1,250	990	408
Charge-offs									(1,366)	(927)	(1,090)
Recoveries									640	340	426
Provision expense (benefit)									703	847	1,246
Balance at end of period	1,227				1,250				1,227	1,250	990
Allowance ending balance:
Individually evaluated for impairment	34				52				34	52	61
Collectively evaluated for impairment	1,193				1,198				1,193	1,198	929
Loans:
Individually evaluated for impairment	35				75				35	75	120
Collectively evaluated for impairment	45,288				53,683				45,288	53,683	69,433
PCI loans	183				233				183	233	277
Total	$ 45,506				$ 53,991				$ 45,506	$ 53,991	$ 69,830

XML

Loans - Allowance for Off-Balance Sheet Credit Losses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Allowance for loan losses:
Balance at beginning of period	$ 64,576	$ 47,093	$ 25,549
Charge-offs on lending-related commitments	(34,742)	(8,859)	(4,707)
Balance at end of period	71,301	64,576	47,093
Other liabilities
Allowance for loan losses:
Balance at beginning of period	1,573	73
Charge-offs on lending-related commitments	0	0
Provision (recovery) for credit losses on lending-related commitments	(644)	1,500
Balance at end of period	$ 929	$ 1,573	$ 73

XML

Loans - Impaired Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Unpaid Contractual Principal Balance	$ 97,740	$ 108,401
Recorded Investment With No Allowance	55,598	92,514
Recorded Investment With Allowance	35,568	14,105
Total Recorded Investment	91,166	106,619
Related Allowance	10,522	4,831
Average Recorded Investment	93,252	39,701	$ 33,328
Interest Income Recognized	26	28	41
Commercial real estate
Financing Receivable, Impaired [Line Items]
Unpaid Contractual Principal Balance	4,411	5,388
Recorded Investment With No Allowance	4,134	4,429
Recorded Investment With Allowance	0	766
Total Recorded Investment	4,134	5,195
Related Allowance	0	272
Average Recorded Investment	4,421	5,240	8,178
Interest Income Recognized	8	9	24
Commercial and industrial
Financing Receivable, Impaired [Line Items]
Unpaid Contractual Principal Balance	89,713	87,756
Recorded Investment With No Allowance	48,463	73,377
Recorded Investment With Allowance	35,542	13,287
Total Recorded Investment	84,005	86,664
Related Allowance	10,502	4,519
Average Recorded Investment	83,508	28,634	19,595
Interest Income Recognized	0	1	8
Construction and land
Financing Receivable, Impaired [Line Items]
Unpaid Contractual Principal Balance		11,384
Recorded Investment With No Allowance		11,385
Recorded Investment With Allowance		0
Total Recorded Investment		11,385
Related Allowance		0
Average Recorded Investment	2,273	901	84
Interest Income Recognized	0	0	0
Consumer real estate
Financing Receivable, Impaired [Line Items]
Unpaid Contractual Principal Balance	3,545	3,766
Recorded Investment With No Allowance	2,985	3,290
Recorded Investment With Allowance	7	10
Total Recorded Investment	2,992	3,300
Related Allowance	7	10
Average Recorded Investment	2,786	4,831	5,269
Interest Income Recognized	14	14	7
Other consumer
Financing Receivable, Impaired [Line Items]
Unpaid Contractual Principal Balance	71	107
Recorded Investment With No Allowance	16	33
Recorded Investment With Allowance	19	42
Total Recorded Investment	35	75
Related Allowance	13	30
Average Recorded Investment	264	95	202
Interest Income Recognized	$ 4	$ 4	$ 2

XML

Loans - Non-Performing (Nonaccrual) Loans (Details) - Non-performing - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-performing loans	$ 94,403	$ 111,389
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-performing loans	4,134	5,195
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-performing loans	84,003	86,664
Construction and land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-performing loans	0	11,385
Consumer real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-performing loans	6,190	7,987
Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-performing loans	$ 76	$ 158

XML

Loans - Outstanding Balances of TDRs (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Troubled Debt Restructuring, Debtor, Current Period [Line Items]
TDRs	$ 18,062	$ 12,155
Outstanding commitments to lend additional funds to borrowers with TDR loans	$ 0	0
Troubled debt restructuring non accrual period	6 months
Nonaccrual TDRs
Troubled Debt Restructuring, Debtor, Current Period [Line Items]
TDRs	$ 17,294	11,701
Performing TDRs
Troubled Debt Restructuring, Debtor, Current Period [Line Items]
TDRs	$ 768	$ 454

XML

Loans - Recorded Balances of Loans Modified as TDRs (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	$ 14,232	$ 7,855	$ 600
Principal Deferrals
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	38	686	310
Combination of Rate Reduction & Principal Deferral
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	131	79	60
Other
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	14,063	7,090	230
Commercial real estate
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR			100
Commercial real estate | Principal Deferrals
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR			100
Commercial real estate | Combination of Rate Reduction & Principal Deferral
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR			0
Commercial real estate | Other
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR			0
Commercial and industrial
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	14,232	7,775	191
Commercial and industrial | Principal Deferrals
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	38	685	0
Commercial and industrial | Combination of Rate Reduction & Principal Deferral
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	131	0	0
Commercial and industrial | Other
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR	14,063	7,090	191
Consumer real estate
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		79	305
Loan modified as a TDR which experienced subsequent payment default	$ 0	31	178
Consumer real estate | Principal Deferrals
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		0	209
Consumer real estate | Combination of Rate Reduction & Principal Deferral
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		79	60
Consumer real estate | Other
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		0	36
Other consumer
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		1	4
Other consumer | Principal Deferrals
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		1	1
Other consumer | Combination of Rate Reduction & Principal Deferral
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		0	0
Other consumer | Other
Financing Receivable, Modifications [Line Items]
Loans modified as a TDR		$ 0	$ 3

XML

Loans - Carrying Amount of Acquired PCI Loans Included in the Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Carrying amount	$ 3,295	$ 6,793
Outstanding balance	3,992	7,597
Carrying amount, net of allowance	$ 269	$ 180	$ 150

XML

Loans - Changes in the Accretable Yield for Acquired PCI Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Balance at beginning of period	$ 2,515	$ 3,356
Reclassifications from nonaccretable	602	429
Disposals	(187)	(359)
Accretion	(651)	(911)
Balance at end of period	$ 2,279	$ 2,515

XML

Loans - Analysis of Age of Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	$ 49,228	$ 59,080
Current Loans	6,600,222	6,006,343
Total Loans	6,649,450	6,065,423
Carrying value of PCI loans acquired	3,338	6,729
30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	37,013	54,266
60-89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	3,246	2,797
90 Days and Greater Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	8,969	2,017
Commercial real estate
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	9,664	2,667
Current Loans	3,009,675	2,667,788
Total Loans	3,019,339	2,670,455
Commercial real estate | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	9,414	1,829
Commercial real estate | 60-89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	0	72
Commercial real estate | 90 Days and Greater Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	250	766
Commercial and industrial
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	8,552	21,451
Current Loans	2,084,755	1,949,709
Total Loans	2,093,307	1,971,160
Commercial and industrial | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	918	20,910
Commercial and industrial | 60-89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	284	495
Commercial and industrial | 90 Days and Greater Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	7,350	46
Construction and land
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	9,354	19,800
Current Loans	268,510	275,094
Total Loans	277,864	294,894
Construction and land | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	9,354	19,517
Construction and land | 60-89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	0	283
Construction and land | 90 Days and Greater Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	0	0
Consumer real estate
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	20,731	13,602
Current Loans	1,192,703	1,061,321
Total Loans	1,213,434	1,074,923
Consumer real estate | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	16,436	10,487
Consumer real estate | 60-89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	2,928	1,916
Consumer real estate | 90 Days and Greater Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	1,367	1,199
Other consumer
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	927	1,560
Current Loans	44,579	52,431
Total Loans	45,506	53,991
Other consumer | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	891	1,523
Other consumer | 60-89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	34	31
Other consumer | 90 Days and Greater Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Past Due	$ 2	$ 6

XML

Loans - Real Estate and Commercial and Industrial Credit Risk Profile by Internally Assigned Grade (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 6,649,450	$ 6,065,423
Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total Loans	3,019,339	2,670,455
Commercial real estate | Pass
Financing Receivable, Recorded Investment [Line Items]
Total Loans	2,980,656	2,648,842
Commercial real estate | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total Loans	30,656	7,972
Commercial real estate | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total Loans	8,027	12,875
Commercial real estate | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total Loans	0	766
Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Total Loans	2,093,307	1,971,160
Commercial and industrial | Pass
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,953,496	1,712,171
Commercial and industrial | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total Loans	43,161	155,110
Commercial and industrial | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total Loans	96,546	103,815
Commercial and industrial | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total Loans	104	64
Construction and land
Financing Receivable, Recorded Investment [Line Items]
Total Loans	277,864	294,894
Construction and land | Pass
Financing Receivable, Recorded Investment [Line Items]
Total Loans	277,864	283,423
Construction and land | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total Loans	0	0
Construction and land | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total Loans	0	11,471
Construction and land | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total Loans	0	0
Consumer real estate
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,213,434	1,074,923
Consumer real estate | Pass
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,203,236	1,062,549
Consumer real estate | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,408	2,083
Consumer real estate | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total Loans	7,762	8,252
Consumer real estate | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 1,028	$ 2,039

XML

Loans - Consumer Credit Exposure Credit Risk Profile Based on Payment Activity (Details) - Other consumer - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Total	$ 45,506	$ 53,991
Performing
Financing Receivable, Recorded Investment [Line Items]
Total	45,430	53,833
Non-performing
Financing Receivable, Recorded Investment [Line Items]
Total	$ 76	$ 158

XML

Fair Value - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	$ 419,717,000	$ 354,515,000
Outstanding principal	16,242,000
Interest rate lock commitments | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	358,000	379,000
Derivative liability	0	0
Forward mortgage-backed securities trades | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	7,000	36,000
Derivative liability	18,000	80,000
Agency residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	189,466,000	218,551,000
Agency commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	9,235,000	9,347,000
Agency residential collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	184,216,000	86,529,000
US government and agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	1,671,000	2,251,000
Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	35,129,000	37,837,000
Level 2 | Recurring | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	419,717,000	354,515,000
Loans held for sale	16,707,000	21,279,000
Level 2 | Recurring | Interest rate lock commitments | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	358,000	379,000
Derivative liability	0	0
Level 2 | Recurring | Forward mortgage-backed securities trades | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	7,000	36,000
Derivative liability	18,000	80,000
Level 2 | Recurring | Commercial loan interest rate swaps and caps: | Loan customer counterparty | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	0	0
Derivative liability	1,735,000	1,369,000
Level 2 | Recurring | Commercial loan interest rate swaps and caps: | Financial institution counterparty | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative asset	1,735,000	1,369,000
Derivative liability	0	0
Level 2 | Recurring | Agency residential mortgage-backed securities | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	189,466,000	218,551,000
Level 2 | Recurring | Agency commercial mortgage-backed securities | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	9,235,000	9,347,000
Level 2 | Recurring | Agency residential collateralized mortgage obligations | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	184,216,000	86,529,000
Level 2 | Recurring | US government and agency securities | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	1,671,000	2,251,000
Level 2 | Recurring | Municipal bonds | Derivatives not designated as hedging instruments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities available for sale	$ 35,129,000	$ 37,837,000

XML

Fair Value - Narrative (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value	$ 0	$ 0
Mortgage loans on real estate, pending foreclosures	$ 400,000

XML

Fair Value - Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis (Details) - Level 3 - Non-recurring - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 25,046	$ 9,274
Commercial real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed assets	6,694	10,638
Construction and land
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed assets	859	194
Consumer real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed assets	192	0
Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed assets	$ 687	$ 6

XML

Fair Value - Fair Value of Financial Instruments Not Recorded at Fair Value (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Financial assets
Cash and cash equivalents	$ 293,456	$ 289,212	$ 615,639	$ 132,021
Securities held to maturity	173,509	210,387
Securities held to maturity	174,926	212,981
Loans held for investment, net	6,584,529	5,998,596
Loans held for investment - Warehouse Purchase Program	1,154,588	1,055,341
FHLB and other restricted securities, at cost	64,790	43,266
Accrued interest receivable	24,596	20,347
Financial liabilities
Deposits	6,767,683	6,365,476
FHLB advances	1,043,163	833,682
Repurchase agreements	84,676	86,691
Subordinated debt	134,522	134,032
Accrued interest payable	2,729	2,111
Level 1
Financial assets
Cash and cash equivalents	293,456	289,212
Securities held to maturity	0	0
Loans held for investment, net	0	0
Loans held for investment - Warehouse Purchase Program	0	0
FHLB and other restricted securities, at cost	0	0
Accrued interest receivable	24,596	20,347
Financial liabilities
Deposits	0	0
FHLB advances	0	0
Repurchase agreements	0	0
Subordinated debt	0	0
Accrued interest payable	2,729	2,111
Level 2
Financial assets
Cash and cash equivalents	0	0
Securities held to maturity	174,926	212,981
Loans held for investment, net	0	0
Loans held for investment - Warehouse Purchase Program	0	0
FHLB and other restricted securities, at cost	64,790	43,266
Accrued interest receivable	0	0
Financial liabilities
Deposits	0	0
FHLB advances	0	0
Repurchase agreements	0	0
Subordinated debt	0	0
Accrued interest payable	0	0
Level 3
Financial assets
Cash and cash equivalents	0	0
Securities held to maturity	0	0
Loans held for investment, net	6,651,207	6,080,165
Loans held for investment - Warehouse Purchase Program	1,171,354	1,055,219
FHLB and other restricted securities, at cost	0	0
Accrued interest receivable	0	0
Financial liabilities
Deposits	6,326,572	5,989,933
FHLB advances	1,043,416	830,930
Repurchase agreements	81,041	84,265
Subordinated debt	141,972	121,743
Accrued interest payable	$ 0	$ 0

XML

Derivative Financial Instruments - Schedule of Outstanding Notional Balances and Fair Values of Outstanding Positions (Details) - Derivatives not designated as hedging instruments - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
IRLC's
Derivative Asset
Outstanding Notional Balance	$ 10,337	$ 10,952
Asset Derivative Fair Value	358	379
Derivative Liability
Liability Derivative Fair Value	0	0
Forward mortgage-backed securities trades
Derivative Asset
Outstanding Notional Balance	19,788	18,613
Asset Derivative Fair Value	7	36
Derivative Liability
Liability Derivative Fair Value	18	80
Commercial loan interest rate swaps and caps: | Commercial loan | Loan customer counterparty
Derivative Asset
Asset Derivative Fair Value	0	0
Derivative Liability
Outstanding Notional Balance	114,594	112,294
Liability Derivative Fair Value	1,735	1,369
Commercial loan interest rate swaps and caps: | Commercial loan | Financial institution counterparty
Derivative Asset
Outstanding Notional Balance	114,594	112,294
Asset Derivative Fair Value	1,735	1,369
Derivative Liability
Liability Derivative Fair Value	$ 0	$ 0

XML

Derivative Financial Instruments - Schedule of Notional Amounts of Outstanding Derivative Positions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative, collateral pledged	$ 1,950	$ 1,950
Commercial loan interest rate swaps and caps:
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Credit exposure	32
IRLC's
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Income/loss	(21)	(43)	$ 8
Forward mortgage-backed securities trades
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Income/loss	(479)	$ 13	$ (195)
Financial institution counterparty | Commercial loan interest rate swaps and caps:
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Credit exposure	$ 1,752
Loan customer counterparty | Commercial loan | Derivatives not designated as hedging instruments | Commercial loan interest rate swaps and caps:
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Received	2.52%	3.12%
Paid	2.54%	2.36%

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Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 109,492	$ 110,169
Less: accumulated depreciation	(39,799)	(35,943)
Total	69,693	74,226
Land
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	22,140	23,636
Buildings
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	57,079	59,298
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	20,218	19,561
Leasehold improvements
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 10,055	$ 7,674

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Premises and Equipment - Narrative (Details) $ in Thousands	1 Months Ended	12 Months Ended
	Jan. 31, 2017 USD ($)	Dec. 31, 2017 USD ($) Parcel_of_land	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Property, Plant and Equipment [Abstract]
Depreciation		$ 6,389	$ 6,186	$ 6,550
Rent expense		7,322	$ 7,928	$ 6,895
Rental income		1,102
Rent payments receivable in the future		$ 105
Number of parcels of land for future development | Parcel_of_land		1
Gain on sale of land	$ 1,304

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Premises and Equipment - Rent Commitments (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Property, Plant and Equipment [Abstract]
2018	$ 5,725
2019	5,069
2020	4,696
2021	4,443
2022	3,735
Thereafter	16,303
Total	$ 39,971

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Goodwill and Core Deposit Intangibles - Changes In Carrying Amount of Company's Goodwill and Core Deposit Intangibles (Cdi) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Goodwill
Balance	$ 178,559	$ 180,776
Disposition of insurance subsidiary goodwill upon the sale of subsidiary operations		(2,217)
Balance	178,559	178,559
Core Deposit Intangibles
Balance	665	1,030
Amortization of core deposit intangible	(263)	(365)
Balance	$ 402	$ 665

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Goodwill and Core Deposit Intangibles - Estimated Aggregate Future Amortization Expense for Intangible Assets Remaining (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Finite-Lived Intangible Assets [Line Items]
2018	$ 156
2019	101
2020	73
2021	48
2022	24
Thereafter	$ 0
Core deposits
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	8 years

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Deposits - Narrative (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Banking and Thrift [Abstract]
FDIC uninsured amount	$ 1,009,855	$ 951,688
Reciprocal deposits	400,716	355,455
Deposits of public funds	972,226	1,001,820
Unsecured customer loans	$ 473	$ 340

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Deposits - Scheduled Maturity of Time Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Balance
2018	$ 860,102
2019	383,687
2020	41,093
2021	59,074
2022 and thereafter	23,434
Total	$ 1,367,390	$ 1,367,904
Weighted Average Rate
2018	1.16%
2019	1.57%
2020	1.47%
2021	1.59%
2022 and thereafter	1.57%
Total	1.31%

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Deposits - Interest Expense on Deposits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Banking and Thrift [Abstract]
Interest-bearing demand	$ 5,475	$ 3,974	$ 3,297
Savings and money market	16,845	7,288	3,644
Time	14,374	9,772	6,186
Total	$ 36,694	$ 21,034	$ 13,127

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Borrowed Funds - Summary of Borrowed Funds (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Nov. 30, 2015
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 1,043,163,000	$ 833,682,000
Repurchase Agreements	84,676,000	86,691,000
FHLB Advances
Debt Instrument [Line Items]
Federal Home Loan Bank advances	$ 1,043,163,000	$ 833,682,000
Federal Home Loan Bank advances, rate	1.51%	0.71%
FHLB Advances | Maximum
Debt Instrument [Line Items]
Federal Home Loan Bank advances, rate	6.00%	6.00%
Subordinated Debt
Debt Instrument [Line Items]
Subordinated debt	$ 125,000,000	$ 125,000,000	$ 50,000,000	$ 75,000,000
Debt, rate	5.50%	5.58%	5.69%	5.50%
Repurchase Agreements | Credit Suisse
Debt Instrument [Line Items]
Repurchase Agreements	$ 25,000,000	$ 25,000,000
Debt, rate	3.02%	3.02%
Repurchase Agreements | Overnight Maturity
Debt Instrument [Line Items]
Repurchase Agreements	$ 59,676,000	$ 61,691,000
Debt, rate	1.18%	0.15%
Trust III Debentures | Junior Subordinated Debt | Legacy Capital Trust III
Debt Instrument [Line Items]
Fixed to floating rate note maturing on December 1, 2025	$ 15,464,000	$ 15,464,000
LIBOR | Trust III Debentures | Junior Subordinated Debt
Debt Instrument [Line Items]
Junior subordinated debentures, rate	3.29%	2.66%

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Borrowed Funds - FHLB Advances (Details) - FHLB Advances - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal home loan bank, interest rate	1.51%	0.71%
Variable rate federal home loan bank advances outstanding	$ 200,000
Restructuring prepayment penalty	0	$ 27
Credit available based on collateralized values	2,084,944	1,821,693
Maximum borrowing capacity	4,072,477	3,601,739
Mortgage and Commercial Loans With Federal Home Loan Bank
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal home loan bank, collateral pledges	$ 2,106,571	$ 1,877,506
Minimum
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal home loan bank, interest rate	1.30%	0.46%
Maximum
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal home loan bank, interest rate	6.00%	6.00%

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Borrowed Funds - Repurchase Agreement (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Investment Holdings [Line Items]
Repurchase agreements	$ 84,676	$ 86,691
Repurchase Agreements
Investment Holdings [Line Items]
Term of repurchase agreement	10 years
Variable rate on repurchase agreement	6.25%
Overnight Maturity
Investment Holdings [Line Items]
Assets sold under agreements to repurchase, market value protection percentage	115.00%
Overnight Maturity | Repurchase Agreements
Investment Holdings [Line Items]
Repurchase agreements	$ 59,676	$ 61,691
Interest rate maximum on repurchase agreement	1.18%	0.15%
Credit Suisse
Investment Holdings [Line Items]
Assets sold under agreements to repurchase, market value protection percentage	112.00%
Credit Suisse | Repurchase Agreements
Investment Holdings [Line Items]
Repurchase agreements	$ 25,000	$ 25,000
Interest rate maximum on repurchase agreement	3.02%	3.02%

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Borrowed Funds - Subordinated Debt and Other Borrowings (Details) - USD ($)		1 Months Ended
	Jan. 01, 2015	Nov. 30, 2015	Dec. 31, 2017	Dec. 31, 2016	Sep. 30, 2016
Debt Instrument [Line Items]
Trust preferred securities, purchase accounting adjustments			$ 3,537,000	$ 3,723,000
Subordinated Debt
Debt Instrument [Line Items]
Debt face amount		$ 75,000,000	$ 125,000,000	$ 125,000,000	$ 50,000,000
Debt, rate		5.50%	5.50%	5.58%	5.69%
Redemption price		100.00%
Unamortized discount and debt issuance costs			$ 2,405,000
LIBOR | Subordinated Debt
Debt Instrument [Line Items]
Basis spread on variable rate		3.99%
Trust III Debentures | LIBOR | Junior Subordinated Debt
Debt Instrument [Line Items]
Basis spread on variable rate	1.70%
Long-term debt, percentage bearing variable interest, percentage rate			3.29%	2.66%
Legacy Capital Trust III
Debt Instrument [Line Items]
Trust preferred securities, value	$ 15,000,000
Trust preferred securities purchased (in shares)	15,000
Trust preferred securities, liquidation amount (in dollars per share)	$ 1,000
Common stock, value	$ 464,000
Legacy Capital Trust III | Trust III Debentures | Junior Subordinated Debt
Debt Instrument [Line Items]
Fixed to floating rate note maturing on December 1, 2025			$ 15,464,000	$ 15,464,000
Legacy Capital Trust II
Debt Instrument [Line Items]
Trust preferred securities, value	15,000,000
Common stock, value	$ 464,000

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Borrowed Funds - Other Borrowing Information (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Jan. 01, 2015
Long-term Debt [Line Items]
2018	$ 1,122,430
2019	2,313
2020	932
2021	856
2022	695
Thereafter	141,077
Total, Balance	1,268,303
Borrowing capacity	250,000	$ 255,000
Federal Reserve Bank
Long-term Debt [Line Items]
Borrowing capacity	78,616	$ 46,725
FHLB Advances
Long-term Debt [Line Items]
2018	1,037,754
2019	2,313
2020	932
2021	856
2022	695
Thereafter	613
Total, Balance	1,043,163
Repurchase Agreements
Long-term Debt [Line Items]
2018	84,676
2019	0
2020	0
2021	0
2022	0
Thereafter	0
Total, Balance	84,676
Subordinated Debt
Long-term Debt [Line Items]
2018	0
2019	0
2020	0
2021	0
2022	0
Thereafter	140,464
Total, Balance	$ 140,464
Notes Payable, Other Payables
Long-term Debt [Line Items]
Total, Balance			$ 8,900

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Benefits - Employee Stock Ownership and 401(k) Plan (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2010
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Matching contributions	100.00%
Employees qualifying compensation, maximum	5.00%
Matching expense	$ 2,571	$ 2,479	$ 2,130
Recourse provision minimum	30 years
Net proceeds from long-term debt				$ 15,886
Shares held in ESOP (in shares)	2,298,076
Allocated ESOP shares (in shares)	1,105,983
Unearned ESOP shares (in shares)	1,192,093	1,245,046
Fair value of unearned ESOP shares	$ 50,318
Employee stock ownership plan (ESOP), cash contributions	842	$ 1,468	2,060
Employee stock ownership plan (ESOP), allocated compensation expense	$ 2,074	$ 3,174	$ 4,914
Common Stock
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items]
Contributed to ESOP (in shares)				1,588,587

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Benefits - Deferred Compensation Plan and Bank-Owned Life Insurance (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Deferred compensation accrued liability	$ 3,393	$ 3,344
Other assets	72,964	80,397
Bank-owned life insurance	57,684	56,477
Non qualified
Defined Benefit Plan Disclosure [Line Items]
Other assets	$ 3,588	$ 3,534

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Share-based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, grants in period, weighted average grant date fair value (in dollars per share)	$ 10.76	$ 7.77	$ 6.82
Estimated forfeiture rate	5.00%
Total intrinsic value of stock options exercised	$ 4,084	$ 2,251	$ 644
Income tax deductions in excess of compensation cost	4,510
Tax benefit	$ 1,578	0	$ 0
2017 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized (in shares)	3,250,000
Fungible share rate	2.5
Shares issued (in shares)	10,500
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expense related to non-vested shares	$ 2,887
Weighted-average period	1 year 1 month 2 days
Vested, weighted-average grant date fair value	$ 2,819	$ 2,615
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expense related to non-vested shares	$ 8,013
Weighted-average period	1 year 11 months 9 days
Contractual term	10 years

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Share-based Compensation - Compensation Cost Charged to Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Compensation cost charged to income for:
Income tax benefit	$ 2,612	$ 2,105	$ 1,917
Restricted stock
Compensation cost charged to income for:
Compensation cost	3,581	3,477	3,459
Stock options
Compensation cost charged to income for:
Compensation cost	$ 3,881	$ 2,537	$ 2,018

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Share-based Compensation - Changes in the Nonvested Shares for the Company's Stock Plans (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Time-Vested Shares
Shares
Beginning non-vested shares (in shares)	200,176	246,461	297,603
Granted (in shares)	19,208	55,180	80,000
Vested (in shares)	(90,796)	(101,465)	(131,142)
Ending non-vested shares (in shares)	128,588	200,176	246,461
Weighted-average grant date fair value per share
Beginning non-vested shares (in dollars per share)	$ 23.79	$ 20.98	$ 20.45
Granted (in dollars per share)	38.92	29.29	21.23
Vested (in dollars per share)	21.67	20.70	19.98
Ending non-vested shares (in dollars per share)	$ 27.27	$ 23.79	$ 20.98
Performance-Based Shares
Shares
Beginning non-vested shares (in shares)	81,400	61,800	82,400
Granted (in shares)	12,208	40,200	0
Vested (in shares)	(20,600)	(20,600)	(20,600)
Ending non-vested shares (in shares)	73,008	81,400	61,800
Weighted-average grant date fair value per share
Beginning non-vested shares (in dollars per share)	$ 43.06	$ 25.02	$ 23.89
Granted (in dollars per share)	39.90	29.29	0.00
Vested (in dollars per share)	41.32	25.02	23.89
Ending non-vested shares (in dollars per share)	$ 42.21	$ 43.06	$ 25.02

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Share-based Compensation - Underlying Assumptions for Fair Value Calculations (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate	2.18%	1.37%	1.80%
Expected term of stock options (years)	6 years 2 months 12 days	6 years 3 months 16 days	6 years 2 months 28 days
Expected stock price volatility	31.85%	32.07%	31.14%
Expected dividends	1.61%	1.93%	1.95%

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Share-based Compensation - Summary of Activity in the Stock Option Portion of the Plans (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Shares
Beginning (in shares)	2,008,080	1,865,750	1,370,873
Granted (in shares)	513,375	392,838	633,000
Exercised (in shares)	(221,984)	(175,192)	(58,855)
Forfeited (in shares)	(92,228)	(75,316)	(79,268)
Ending (in shares)	2,207,243	2,008,080	1,865,750	1,370,873
Fully vested and expected to vest (in shares)	2,191,740
Exercisable (in shares)	966,527
Weighted- Average Exercise Price per Share
Beginning (in dollars per share)	$ 23.71	$ 22.21	$ 20.27
Granted (in dollars per share)	37.15	29.15	25.66
Exercised (in dollars per share)	21.23	19.08	16.12
Forfeited (in dollars per share)	28.80	25.57	20.89
Beginning (in dollars per share)	26.88	$ 23.71	$ 22.21	$ 20.27
Fully vested and expected to vest (in dollars per share)	26.82
Exercisable (in dollars per share)	$ 22.11
Weighted- Average Remaining Contractual Term
Outstanding	10 years 1 month 6 days	9 years 6 months 5 days	7 years 10 months 8 days	8 years 8 days
Fully vested and expected to vest	10 years 1 month 6 days
Exercisable	7 years 6 months
Aggregate Intrinsic Value
Outstanding	$ 33,848	$ 38,850	$ 6,401	$ 5,679
Fully vested and expected to vest	33,725
Exercisable	$ 19,425

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Income Taxes - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Provisional amount recorded related to remeasurement of deferred tax assets	$ 13,493
Combined federal income tax rate and state margin tax rate	36.00%	36.00%	36.00%
Federal statutory rate	35.00%	35.00%	35.00%

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Income Taxes - Income Tax Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Current expense	$ 56,341	$ 59,900	$ 38,648
Deferred expense	(4,115)	(6,798)	(692)
Impact of Tax Cuts and Jobs Act - net future deductions	12,752	0	0
Impact of Tax Cuts and Jobs Act - unrealized loss on AFS securities	741	0	0
Total income tax expense	$ 65,719	$ 53,102	$ 37,956

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Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Allowance for loan losses	$ 15,168	$ 22,602
Deferred compensation arrangements	762	1,261
Self-funded health insurance	251	241
Non-accrual interest	503	966
Restricted stock and stock options	2,577	3,132
Accrued expenses	623	1,255
Fair value mark on purchased loans	965	2,348
Net unrealized loss on securities available for sale	1,111	1,465
Other	1,909	2,121
Deferred tax assets, gross	23,869	35,391
Deferred tax liabilities:
Depreciation	(270)	(336)
Partnerships — CRA-purposed private equity funds	(941)	(1,697)
Fair value mark on subordinated debt	(743)	(1,303)
Other	(1,675)	(2,824)
Deferred tax liabilities, gross	(3,629)	(6,160)
Net deferred tax asset	$ 20,240	$ 29,231

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Income Taxes - Reconciliation of Effective Income Tax Rate (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Federal statutory rate times financial statement income	$ 54,325	$ 52,823	$ 38,105
Effect of:
State taxes, net of federal benefit	239	267	37
Bank-owned life insurance income	(423)	(436)	(419)
Municipal interest income	(978)	(1,041)	(1,025)
ESOP shares released	541	757	1,207
Restricted stock and stock options	(1,578)	0	0
Sale of LegacyTexas Insurance Services, Inc.	0	640	0
DTA write-down due to the Tax Cuts and Jobs Act	13,493	0	0
Other	100	92	51
Total income tax expense	$ 65,719	$ 53,102	$ 37,956
Effective Tax Rate before deferred tax write-down	33.65%	35.18%	34.86%
Effective Tax Rate	42.34%	35.18%	34.86%

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Related Party Transactions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Loans, Related Parties
Beginning balance	$ 15,337
New loans	0
Effect of changes in composition of related parties	0
Repayments	(933)
Ending balance	14,404
Related party deposits	$ 39,615	$ 48,761

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Regulatory Capital Matters (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Company
Total risk-based capital
Actual, Amount	$ 991,713	$ 910,040
Actual, Ratio	11.87%	11.71%
Required for Capital Adequacy Purposes, Amount	$ 668,142	$ 621,870
Required for Capital Adequacy Purposes, Ratio	8.00%	8.00%
To Be Well-Capitalized, Amount	$ 835,178	$ 777,338
To Be Well-Capitalized, Ratio	10.00%	10.00%
Tier 1 risk-based capital
Actual, Amount	$ 796,887	$ 721,600
Actual, Ratio	9.54%	9.28%
Required for Capital Adequacy Purposes, Amount	$ 501,107	$ 466,403
Required for Capital Adequacy Purposes, Ratio	6.00%	6.00%
To Be Well-Capitalized, Amount	$ 501,107	$ 466,403
To Be Well-Capitalized, Ratio	6.00%	6.00%
Common equity tier 1 risk-based capital
Actual, Amount	$ 784,960	$ 709,858
Actual, Ratio	9.40%	9.13%
Required for Capital Adequacy Purposes, Amount	$ 375,830	$ 349,802
Required for Capital Adequacy Purposes, Ratio	4.50%	4.50%
Tier 1 leverage
Actual, Amount	$ 796,887	$ 721,600
Actual, Ratio	9.17%	8.73%
Required for Capital Adequacy Purposes, Amount	$ 347,731	$ 330,782
Required for Capital Adequacy Purposes, Ratio	4.00%	4.00%
Bank
Total risk-based capital
Actual, Amount	$ 939,655	$ 869,523
Actual, Ratio	11.25%	11.19%
Required for Capital Adequacy Purposes, Amount	$ 668,096	$ 621,840
Required for Capital Adequacy Purposes, Ratio	8.00%	8.00%
To Be Well-Capitalized, Amount	$ 835,120	$ 777,300
To Be Well-Capitalized, Ratio	10.00%	10.00%
Tier 1 risk-based capital
Actual, Amount	$ 867,424	$ 803,374
Actual, Ratio	10.39%	10.34%
Required for Capital Adequacy Purposes, Amount	$ 501,072	$ 466,380
Required for Capital Adequacy Purposes, Ratio	6.00%	6.00%
To Be Well-Capitalized, Amount	$ 668,096	$ 621,840
To Be Well-Capitalized, Ratio	8.00%	8.00%
Common equity tier 1 risk-based capital
Actual, Amount	$ 867,424	$ 803,374
Actual, Ratio	10.39%	10.34%
Required for Capital Adequacy Purposes, Amount	$ 375,804	$ 349,785
Required for Capital Adequacy Purposes, Ratio	4.50%	4.50%
To Be Well-Capitalized, Amount	$ 542,828	$ 505,245
To Be Well-Capitalized, Ratio	6.50%	6.50%
Tier 1 leverage
Actual, Amount	$ 867,424	$ 803,374
Actual, Ratio	9.98%	9.71%
Required for Capital Adequacy Purposes, Amount	$ 347,808	$ 330,873
Required for Capital Adequacy Purposes, Ratio	4.00%	4.00%
To Be Well-Capitalized, Amount	$ 434,759	$ 413,591
To Be Well-Capitalized, Ratio	5.00%	5.00%

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Commitments and Contingent Liabilities - Off-Balance Sheet Agreements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other Commitments [Line Items]
Total unused commitments/capacity	$ 2,373,297	$ 2,564,385
Unused capacity on Warehouse Purchase Program loans
Other Commitments [Line Items]
Total unused commitments/capacity	738,412	892,659
Unused commitments to extend credit
Other Commitments [Line Items]
Total unused commitments/capacity	1,600,794	1,642,528
Unused lines of credit | Standby letters of credit
Other Commitments [Line Items]
Total unused commitments/capacity	$ 34,091	$ 29,198

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Commitments and Contingent Liabilities - Narrative (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other Commitments [Line Items]
Overdraft protection	$ 84,727	$ 85,709
Unfunded commitments	1,680
Investment in Community Reinvestment Act private equity funds	$ 11,223
Investment in Community Reinvestment Act private equity funds, ownership	6.20%
Other liabilities
Other Commitments [Line Items]
Mortgage repurchase liability	$ 131	143
Reserve for off-balance sheet activities | Other liabilities
Other Commitments [Line Items]
Valuation reserves	929	1,573
Financial guarantee
Other Commitments [Line Items]
Credit card guarantees	5,257	$ 3,335
FHLB letters of credit
Other Commitments [Line Items]
Loans pledged as collateral	$ 944,370

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Parent Company Only Condensed Financial Information - Condensed Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
ASSETS
Cash on deposit at subsidiary	$ 61,713	$ 59,823
Total assets	9,086,196	8,362,255
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debt	134,522	134,032
Other liabilities	96,278	57,009
Stockholders' Equity Attributable to Parent	959,874	885,365	$ 804,076	$ 568,223
Total liabilities and shareholders’ equity	9,086,196	8,362,255
Parent Company
ASSETS
Cash on deposit at subsidiary	26,692	16,962
Investment in banking subsidiary	1,042,338	978,880
Receivable from banking subsidiary	12,278	10,317
ESOP note receivable and other assets	13,814	13,999
Total assets	1,095,122	1,020,158
LIABILITIES AND SHAREHOLDERS’ EQUITY
Subordinated debt	134,522	134,032
Other liabilities	726	761
Total liabilities and shareholders’ equity	$ 1,095,122	$ 1,020,158

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Parent Company Only Condensed Financial Information - Condensed Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Condensed Financial Statements, Captions [Line Items]
Interest expense	$ 15,912	$ 15,499	$ 13,027	$ 10,988	$ 10,413	$ 9,431	$ 7,982	$ 7,257	$ 55,426	$ 35,083	$ 21,615
Income before income tax expense									155,213	150,923	108,872
Income tax benefit									(65,719)	(53,102)	(37,956)
Net income									89,494	97,821	70,916
Parent Company
Condensed Financial Statements, Captions [Line Items]
Cash dividends from subsidiary									35,000	0	24,500
Excess of earnings over dividend from subsidiary									61,341	103,572	48,677
Interest income on ESOP loan									449	487	565
Interest income on subordinated debt									13	11	17
Other income									0	0	5
Gross income before expenses									96,803	104,070	73,764
Interest expense									7,819	6,040	1,046
Operating expenses									3,754	3,236	3,009
Income before income tax expense									85,230	94,794	69,709
Income tax benefit									4,264	3,027	1,207
Net income									$ 89,494	$ 97,821	$ 70,916

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Parent Company Only Condensed Financial Information - Condensed Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Net income	$ 89,494	$ 97,821	$ 70,916
Adjustments to reconcile net income to net cash from operating activities:
Net change in other assets	(1,299)	(2,947)	8,444
Net change in other liabilities	40,176	5,913	(16,250)
Net cash provided by operating activities	189,016	132,448	89,202
Cash flows from investing activities
Cash received in excess of cash paid for acquisition of LegacyTexas Group, Inc.	0	0	128,598
Net cash (used in) investing activities	(769,880)	(1,019,429)	(1,131,445)
Cash flows from financing activities
Repayments of borrowings	(2,015)	(24,929)	(32,953)
Share repurchase	0	0	(7,989)
Payment of dividends	(29,277)	(27,676)	(25,747)
Net cash provided by financing activities	585,108	560,554	1,525,861
Net change in cash and cash equivalents	4,244	(326,427)	483,618
Beginning cash and cash equivalents	289,212	615,639	132,021
Ending cash and cash equivalents	293,456	289,212	615,639
Parent Company
Cash flows from operating activities
Net income	89,494	97,821	70,916
Adjustments to reconcile net income to net cash from operating activities:
Excess of earnings over dividend from subsidiary	(61,341)	(103,572)	(48,677)
Amortization	490	530	171
Activity in share-based compensation plans	5,501	3,152	3,068
Net change in other assets	(207)	(481)	6,931
Net change in other liabilities	(35)	(38)	(14,544)
Net cash provided by operating activities	33,902	(2,588)	17,865
Cash flows from investing activities
Capital contribution (to) from subsidiary	0	(49,000)	(40,000)
Cash received in excess of cash paid for acquisition of LegacyTexas Group, Inc.	0	0	201
Payments received on ESOP notes receivable	393	981	1,495
Net cash (used in) investing activities	393	(48,019)	(38,304)
Cash flows from financing activities
Proceeds from borrowings	0	73,439	73,407
Repayments of borrowings	0	(24,929)	(24,364)
Share repurchase	0	0	(7,989)
Net issuance of common stock under employee stock plans	4,712	3,755	1,284
Payment of dividends	(29,277)	(27,676)	(25,747)
Net cash provided by financing activities	(24,565)	24,589	16,591
Net change in cash and cash equivalents	9,730	(26,018)	(3,848)
Beginning cash and cash equivalents	16,962	42,980	46,828
Ending cash and cash equivalents	$ 26,692	$ 16,962	$ 42,980

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Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Loans and Leases Receivable Disclosure [Line Items]
Interest Income	$ 96,111	$ 94,463	$ 88,747	$ 87,536	$ 84,497	$ 82,911	$ 77,336	$ 72,608	$ 366,857	$ 317,352	$ 262,692
Interest Expense	15,912	15,499	13,027	10,988	10,413	9,431	7,982	7,257	55,426	35,083	21,615
Net interest income	80,199	78,964	75,720	76,548	74,084	73,480	69,354	65,351	311,431	282,269	241,077
Provision for Credit Losses	3,743	7,157	6,255	22,301	7,833	3,467	6,800	8,800	$ 40,100	$ 25,400	$ 25,465
Securities Gains and (Losses)	0	(20)	0	(19)	(6)	(3)	65	0
Net Income	$ 14,660	$ 28,709	$ 27,935	$ 18,190	$ 25,305	$ 27,217	$ 23,217	$ 22,082
Basic earnings per common share (in dollars per share)	$ 0.31	$ 0.61	$ 0.60	$ 0.39	$ 0.54	$ 0.59	$ 0.50	$ 0.48	$ 1.91	$ 2.11	$ 1.54
Diluted earnings per common share (in dollars per share)	$ 0.31	$ 0.61	$ 0.59	$ 0.38	$ 0.54	$ 0.58	$ 0.50	$ 0.48	$ 1.89	$ 2.09	$ 1.53
Charge-off									$ 34,742	$ 8,859	$ 4,707
Income tax adjustment to deferred tax asset related to the Tax Cuts and Jobs Act									13,493	0	0
Commercial and industrial
Loans and Leases Receivable Disclosure [Line Items]
Provision for Credit Losses									35,982	17,763	18,790
Charge-off									32,846	$ 7,746	$ 3,129
Commercial and industrial | Healthcare Finance Relationship
Loans and Leases Receivable Disclosure [Line Items]
Charge-off									$ 16,360