3.	LOANS AND ALLOWANCE FOR LOAN LOSSES:

Loans held-for-investment by class of financing receivables are as follows (in thousands):


	December 31,
	2015		2014
Commercial	$	696,163	$	639,954
Agricultural		102,351		105,694
Real estate		2,136,233		1,822,854
Consumer		382,303		360,686

Total loans held-for-investment	$	3,317,050	$	2,929,188

Loans held-for-sale totaled $33,543,000 and $8,803,000 at December 31, 2015 and 2014, respectively, which are valued using the lower of cost or market method.

The Company’s non-accrual loans, loan still accruing and past due 90 days or more and restructured loans are as follows (in thousands):


	December 31,
	2015		2014

Non-accrual loans*	$	28,601	$	20,194
Loans still accruing and past due 90 days or more		341		261
Troubled debt restructured loans**		199		226


Total	$	29,141	$	20,681

*	Includes $2,178,000 and $2,151,000, respectively, of purchased credit impaired loans as of December 31, 2015 and 2014.

**	Troubled debt restructured loans of $6,113,000 and $9,073,000, whose interest collection, after considering economic and business conditions and collection efforts, is doubtful are included in non-accrual loans as of December 31, 2015 and 2014, respectively.

The Company’s recorded investment in impaired loans and the related valuation allowance are as follows (in thousands):


December 31, 2015				December 31, 2014
Recorded Investment		Valuation Allowance		Recorded Investment		Valuation Allowance

$	28,601	$	5,071	$	20,194	$	4,213

The average recorded investment in impaired loans for the years ended December 31, 2015, 2014, and 2013 was $21,735,000, $24,497,000 and $31,293,000, respectively. The Company had $29,769,000 and $21,716,000 in non-accrual, past due 90 days or more and still accruing, restructured loans and foreclosed assets at December 31, 2015 and 2014, respectively. Non-accrual loans totaled $28,601,000 and $20,194,000 at December 31, 2015 and 2014, respectively, and consisted of the following amounts by type (in thousands):


	December 31,
	2015		2014

Commercial	$	8,761	$	3,193
Agricultural		97		165
Real Estate		18,766		16,218
Consumer		977		618

Total	$	28,601	$	20,194

No significant additional funds are committed to be advanced in connection with impaired loans as of December 31, 2015.

The Company’s impaired loans and related allowance as of December 31, 2015 and 2014 are summarized in the following tables by class of financing receivables (in thousands). No interest income was recognized on impaired loans subsequent to their classification as impaired.


December 31, 2015	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance*		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		12 Month Average Recorded Investment
Commercial	$	10,056	$	608	$	8,153	$	8,761	$	2,030	$	5,812
Agricultural		97		—		97		97		70		48
Real Estate		23,710		5,314		13,452		18,766		2,827		15,211
Consumer		1,167		624		353		977		144		664


Total	$	35,030	$	6,546	$	22,055	$	28,601	$	5,071	$	21,735

*	Includes $2,178,000 of purchased credit impaired loans.


December 31, 2014	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance*		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		12 Month Average Recorded Investment
Commercial	$	3,749	$	287	$	2,906	$	3,193	$	1,171	$	3,698
Agricultural		177		—		165		165		57		179
Real Estate		22,177		4,859		11,359		16,218		2,867		19,837
Consumer		838		420		198		618		118		783


Total	$	26,941	$	5,566	$	14,628	$	20,194	$	4,213	$	24,497

*	Includes $2,151,000 of purchased credit impaired loans.

The Company recognized interest income on impaired loans prior to being recognized as impaired of approximately $922,000, $162,000 and $685,000 during the years ended December 31, 2015, 2014, and 2013, respectively.

From a credit risk standpoint, the Company rates its loans in one of four categories: (i) pass, (ii) special mention, (iii) substandard or (iv) doubtful. Loans rated as loss are charged-off.

The ratings of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on our credits as part of our on-going monitoring of the credit quality of our loan portfolio. Ratings are adjusted to reflect the degree of risk and loss that are felt to be inherent in each credit as of each reporting period. Our methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.

Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.

Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on non-accrual.

The following summarizes the Company’s internal ratings of its loans held-for-investment by class of financing receivables and portfolio segments, which classes are the same, at December 31, 2015 and 2014 (in thousands):


December 31, 2015	Pass		Special Mention		Substandard		Doubtful		Total

Commercial	$	633,083	$	9,762	$	53,318	$	—	$	696,163
Agricultural		99,862		1,398		1,091		—		102,351
Real Estate		2,054,738		29,000		52,458		37		2,136,233
Consumer		379,941		416		1,946		—		382,303

Total	$	3,167,624	$	40,576	$	108,813	$	37	$	3,317,050


December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Total

Commercial	$	626,266	$	3,853	$	9,835	$	—	$	639,954
Agricultural		105,101		91		502		—		105,694
Real Estate		1,765,886		15,106		41,722		140		1,822,854
Consumer		358,953		403		1,329		1		360,686

Total	$	2,856,206	$	19,453	$	53,388	$	141	$	2,929,188

At December 31, 2015 and 2014, the Company’s past due loans are as follows (in thousands):


December 31, 2015	15-59 Days Past Due*		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Total Current		Total Loans		Total 90 Days Past Due Still Accruing
Commercial	$	3,099	$	3,652	$	1,024	$	7,775	$	688,388	$	696,163	$	54
Agricultural		348		83		—		431		101,920		102,351		—
Real Estate		12,247		2,226		2,874		17,347		2,118,886		2,136,233		217
Consumer		1,645		183		266		2,094		380,209		382,303		70

Total	$	17,339	$	6,144	$	4,164	$	27,647	$	3,289,403	$	3,317,050	$	341


December 31, 2014	15-59 Days Past Due*		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Total Current		Total Loans		Total 90 Days Past Due Still Accruing
Commercial	$	4,611	$	94	$	175	$	4,880	$	635,074	$	639,954	$	24
Agricultural		437		42		—		479		105,215		105,694		—
Real Estate		12,002		707		1,868		14,577		1,808,277		1,822,854		207
Consumer		2,322		496		134		2,952		357,734		360,686		30

Total	$	19,372	$	1,339	$	2,177	$	22,888	$	2,906,300	$	2,929,188	$	261

*	The Company monitors commercial, agricultural and real estate loans after such loans are 15 days past due. Consumer loans are monitored after such loans are 30 days past due.

The allowance for loan losses as of December 31, 2015 and 2014, is presented below. Management has evaluated the appropriateness of the allowance for loan losses by estimating the probable losses in various categories of the loan portfolio, which are identified below (in thousands):


	2015		2014
Allowance for loan losses provided for:
Loans specifically evaluated as impaired	$	5,071	$	4,213
Remaining portfolio		36,806		32,611


Total allowance for loan losses	$	41,877	$	36,824

The following table details the allowance for loan losses at December 31, 2015 and 2014 by portfolio segment (in thousands). There were no allowances for purchased credit impaired loans at December 31, 2015 or 2014. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


December 31, 2015	Commercial		Agricultural		Real Estate		Consumer		Total

Loans individually evaluated for impairment	$	2,030	$	70	$	2,827	$	144	$	5,071
Loan collectively evaluated for impairment		10,614		1,121		21,548		3,523		36,806

Total	$	12,644	$	1,191	$	24,375	$	3,667	$	41,877


December 31, 2014	Commercial		Agricultural		Real Estate		Consumer		Total

Loans individually evaluated for impairment	$	1,171	$	57	$	2,867	$	118	$	4,213
Loan collectively evaluated for impairment		6,819		470		23,790		1,532		32,611

Total	$	7,990	$	527	$	26,657	$	1,650	$	36,824

The table above for 2014 has been changed to conform to the 2015 presentation.

Changes in the allowance for loan losses for the years ended December 31, 2015 and 2014 are summarized as follows (in thousands):


December 31, 2015	Commercial			Agricultural			Real Estate			Consumer			Total

Beginning balance	$	7,990		$	527		$	26,657		$	1,650		$	36,824
Provision for loan losses		8,044			773			(2,399	)		3,267			9,685
Recoveries		344			55			558			450			1,407
Charge-offs		(3,734	)		(164	)		(441	)		(1,700	)		(6,039	)

Ending balance	$	12,644		$	1,191		$	24,375		$	3,667		$	41,877


December 31, 2014	Commercial			Agricultural			Real Estate			Consumer			Total

Beginning balance	$	6,440		$	383		$	24,940		$	2,137		$	33,900
Provision for loan losses		1,787			128			2,287			263			4,465
Recoveries		346			18			505			472			1,341
Charge-offs		(583	)		(2	)		(1,075	)		(1,222	)		(2,882	)

Ending balance	$	7,990		$	527		$	26,657		$	1,650		$	36,824

The Company’s recorded investment in loans as of December 31, 2015 and 2014 related to the balance in the allowance for loan losses on the basis of the Company’s impairment methodology was as follows (in thousands). Purchased credit impaired loans of $2,178,000 and $2,151,000, respectively, at December 31, 2015 and 2014 are included in loans individually evaluated for impairment.


December 31, 2015	Commercial		Agricultural		Real Estate		Consumer		Total

Loans individually evaluated for impairment	$	8,761	$	97	$	18,766	$	977	$	28,601
Loan collectively evaluated for impairment		687,402		102,254		2,117,467		381,326		3,288,449

Total	$	696,163	$	102,351	$	2,136,233	$	382,303	$	3,317,050


December 31, 2014	Commercial		Agricultural		Real Estate		Consumer		Total

Loans individually evaluated for impairment	$	3,193	$	165	$	16,218	$	618	$	20,194
Loan collectively evaluated for impairment		636,761		105,529		1,806,636		360,068		2,908,994

Total	$	639,954	$	105,694	$	1,822,854	$	360,686	$	2,929,188

The table above for 2014 has been changed to conform to the 2015 presentation.

The Company’s loans that were modified in the years ended December 31, 2015 and 2014, and considered a troubled debt restructuring are as follows (in thousands):


	Year Ended December 31, 2015						Year Ended December 31, 2014
	Number		Pre-Modification Recorded Investment		Post- Modification Recorded Investment		Number		Pre-Modification Recorded Investment		Post- Modification Recorded Investment
Commercial		8	$	447	$	447		7	$	668	$	668
Agricultural		3		128		128		1		39		39
Real Estate		5		598		598		5		630		630
Consumer		7		255		255		3		11		11

Total		23	$	1,428	$	1,428		16	$	1,348	$	1,348

The balances below provide information as to how the loans were modified as troubled debt restructured loans during the year ended December 31, 2015 and 2014 (in thousands):


	Year Ended December 31, 2015						Year Ended December 31, 2014
	Adjusted Interest Rate		Extended Maturity		Combined Rate and Maturity		Adjusted Interest Rate		Extended Maturity		Combined Rate and Maturity
Commercial	$	—	$	182	$	265	$	—	$	366	$	302
Agricultural		—		128		—		—		—		39
Real Estate		15		150		433		—		118		512
Consumer		—		56		199		—		8		3

Total	$	15	$	516	$	897	$	—	$	492	$	856

During the years ended December 31, 2015 and 2014, certain loans were modified as a troubled debt restructured loans within the previous 12 months and for which there was a payment default. A default for purposes of this disclosure is a troubled debt restructured loan in which the borrower is 90 days past or more due or results in the foreclosure and repossession of the applicable collateral. The loans with payment default are as follows (dollars in thousands):


	Year Ended December 31, 2015				Year Ended December 31, 2014
	Number		Balance		Number		Balance
Commercial		1	$	66		—	$	—
Agriculture		—		—		—		—
Real Estate		1		15		—		—
Consumer		2		32		1		32

Total		4	$	113		1	$	32

As of December 31, 2015, the Company has no commitments to lend additional funds to loan customers whose terms have been modified in troubled debt restructurings.

An analysis of the changes in loans to officers, directors, principal shareholders, or associates of such persons for the year ended December 31, 2015 (determined as of each respective year-end) follows (in thousands):


	Beginning Balance		Additional Loans		Payments		Ending Balance

Year ended December 31, 2015	$	54,797	$	118,819	$	107,887	$	65,729

In the opinion of management, those loans are on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with unaffiliated persons.

Our subsidiary bank has established a line of credit with the Federal Home Loan Bank of Dallas (FHLB) to provide liquidity and meet pledging requirements for those customers eligible to have securities pledged to secure certain uninsured deposits. At December 31, 2015, $1,970,002,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit. At December 31, 2015, $299,020,000 in advances were outstanding under this line of credit.