XML 23 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Loans Held for Investment and Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Loans Held for Investment and Allowance for Credit Losses
Note 3 – Loans Held-for-Investment and Allowance for Loan Losses
Loans
held-for-investment
by class of financing receivables are as follows (in thousands):
 
                                                     
    
June 30,
     
December 31,
  
  
2020
   
2019
   
2019
 
Commercial
  $
1,509,454
    $
813,887
    $
856,326
 
Agricultural
   
97,448
     
97,535
     
103,640
 
Real estate
   
3,235,208
     
2,730,585
     
2,823,372
 
Consumer
   
410,957
     
398,945
     
411,631
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
held-for-investment
  $
5,253,067
    $
4,040,952
    $
4,194,969
 
                         
The Company’s
non-accrual
loans, loans still accruing and past due 90 days or more and restructured loans are as follows (in thousands):
 
                                                     
    
June 30,
     
December 31,
  
  
202
0
    
2019
   
2019
 
Non-accrual
loans*
   $
39,320
    $
26,408
    $
24,582
 
Loans still accruing and past due 90 days or more
   
92
     
300
     
153
 
Troubled debt restructured
loans
 
still
accruing**
    
25
     
471
     
26
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
  $
39,437
    $
27,179
    $
24,761
 
                         
 
* Includes $7,275,000, $464,000 and $251,000 of purchased credit impaired loans as of June 30, 2020 and 2019, and December 31, 2019, respectively.
** Troubled debt restructured loans of $4,673,000, $3,906,000 and $4,791,000, whose interest collection, after considering economic and business conditions and collection efforts, is doubtful are included in
non-accrual
loans at June 30, 2020 and 2019, and December 31, 2019, respectively.
The Company’s recorded investment in impaired loans and the related valuation allowance are as follows (in thousands):
 
June 30, 2020
     
June 30, 2019
     
December 31, 2019
  
Recorded
Investment
   
Valuation
Allowance
   
Recorded
Investment
   
Valuation
Allowance
   
Recorded
Investment
   
Valuation
Allowance
 
                                             
$
39,320
    $
3,046
    $
26,408
    $
3,866
    $
24,582
    $
3,228
 
                                             
The Company had $39,724,000, $27,860,000 and $25,770,000 in
non-accrual,
past due 90 days or more and still accruing, restructured loans and foreclosed assets at June 30, 2020 and 2019, and December 31, 2019, respectively.
Non-accrual
loans at June 30, 2020 and 2019, and December 31, 2019, consisted of the following by class of financing receivables (in thousands):
 
                                                     
    
June 30,
     
December 31,
  
  
2020
   
2019
   
2019
 
Commercial
  $
4,618
    $
8,189
    $
3,093
 
Agricultural
   
1,056
     
1,047
     
1,376
 
Real estate
   
33,170
     
16,787
     
19,787
 
Consumer
   
476
     
385
     
326
 
                         
Total
  $
39,320
    $
26,408
    $
24,582
 
                         
No significant additional funds are committed to be advanced in connection with impaired loans as of June 30, 2020.
The Company’s impaired loans and related allowance 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.
 
June 30, 2020
 
Unpaid
Contractual
Principal
Balance
   
Recorded
Investment
With No
Allowance*
   
Recorded
Investment
With
Allowance
   
Total
Recorded
Investment
   
Related
Allowance
   
Year-to-date
Average
Recorded
Investment
   
Three-
Month
Average
Recorded
Investment
 
Commercial
  $
6,013
    $
739
    $
3,879
    $
4,618
    $
1,250
    $
24,270
    $
23,572
 
Agricultural
   
1,287
     
529
     
527
     
1,056
     
83
     
219
     
179
 
Real Estate
   
45,703
     
20,370
     
12,800
     
33,170
     
1,711
     
17,586
     
17,107
 
Consumer
   
585
     
—  
      
476
     
476
     
2
     
606
     
552
 
                                                         
Total
  $
53,588
    $
21,638
    $
17,682
    $
39,320
    $
3,046
    $
42,681
    $
41,410
 
                                                         
 
* Includes $7,275,000 of purchased credit impaired loans.
 
June 30, 2019
 
Unpaid
Contractual
Principal
Balance
   
Recorded
Investment
With No
Allowance*
   
Recorded
Investment
With
Allowance
   
Total
Recorded
Investment
   
Related
Allowance
   
Year-to-date

Average
Recorded
Investment
   
Three-
Month
Average
Recorded
Investment
 
Commercial
  $
9,340
    $
6,212
    $
1,977
    $
8,189
    $
1,022
    $
8,699
    $
8,562
 
Agricultural
   
1,108
     
434
     
613
     
1,047
     
119
     
1,090
     
1,071
 
Real Estate
   
24,262
     
5,034
     
11,753
     
16,787
     
2,515
     
18,054
     
17,105
 
Consumer
   
525
     
27
     
358
     
385
     
210
     
465
     
427
 
                                                         
Total
  $
35,235
    $
11,707
    $
14,701
    $
26,408
    $
3,866
    $
28,308
    $
27,165
 
                                                         
 
* Includes $464,000 of purchased credit impaired loans.
 
December 31, 2019
 
Unpaid
Contractual
Principal
Balance
   
Recorded
Investment
With No
Allowance*
   
Recorded
Investment
With
Allowance
   
Total
Recorded
Investment
   
Related
Allowance
   
Year-to
-
date

Average

Recorded

Investment
 
Commercial
  $
4,511
    $
630
    $
2,463
    $
3,093
    $
1,042
    $
3,488
 
Agricultural
   
1,603
     
658
     
718
     
1,376
     
235
     
1,644
 
Real Estate
   
27,366
     
7,081
     
12,706
     
19,787
     
1,950
     
21,726
 
Consumer
   
469
     
—  
      
326
     
326
     
1
     
449
 
                                                 
Total
  $
33,949
    $
8,369
    $
16,213
    $
24,582
    $
3,228
    $
27,307
 
                                                 
 
* Includes $251,000 of purchased credit impaired loans.
The Company recognized interest income on impaired loans prior to being recognized as impaired of approximately $750,000 during the year ended December 31, 2019. Such amounts for the three-month and
six-month
periods ended June 30, 2020 and 2019 were not significant.
From a credit risk standpoint, the Company rates its loans in one of f
ive
 categories: (i) pass, (ii) special mention, (iii) substandard, (iv) doubtful or (v) loss (which 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 are the same (in thousands):
 
June 30, 2020
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
Commercial
  $
1,465,595
    $
8,950
    $
34,909
    $
 —  
     $
1,509,454
 
Agricultural
   
90,824
     
4,790
     
1,834
     
—  
      
97,448
 
Real Estate
   
3,086,894
     
49,493
     
98,821
     
—  
      
3,235,208
 
Consumer
   
408,857
     
256
     
1,844
     
—  
      
410,957
 
                                         
Total
  $
5,052,170
    $
63,489
    $
137,408
    $
—  
     $
5,253,067
 
                                         
 
June 30, 2019
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
Commercial
  $
767,275
    $
31,124
    $
15,488
    $
—  
     $
813,887
 
Agricultural
   
94,481
     
58
     
2,996
     
—  
      
97,535
 
Real Estate
   
2,656,139
     
20,044
     
54,402
     
—  
      
2,730,585
 
Consumer
   
397,017
     
264
     
1,664
     
—  
      
398,945
 
                                         
Total
  $
3,914,912
    $
51,490
    $
74,550
    $
 —  
     $
4,040,952
 
                                         
 
December 31, 2019
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Total
 
Commercial
  $
825,775
    $
20,971
    $
9,580
    $
—  
     $
856,326
 
Agricultural
   
101,614
     
64
     
1,962
     
—  
      
103,640
 
Real Estate
   
2,717,227
     
42,036
     
64,109
     
—  
      
2,823,372
 
Consumer
   
409,698
     
300
     
1,633
     
—  
      
411,631
 
                                         
Total
  $
4,054,314
    $
63,371
    $
77,284
    $
—  
     $
4,194,969
 
                                         
The Company’s past due loans are as follows (in thousands):
 
June 30, 2020
 
15-59

Days
Past
Due*
   
60-89

Days
Past
Due
   
Greater
Than
 
90
Days
   
Total
Past
Due
   
Current
   
Total
Loans
   
90 Days
Past Due
Still
Accruing
 
Commercial
  $
 
4,563
    $
 
474
    $
129
    $
5,166
    $
1,504,288
    $
1,509,454
    $
—  
  
Agricultural
   
1,080
     
15
     
—  
      
1,095
     
96,353
     
97,448
     
—  
  
Real Estate
   
13,678
     
110
     
726
     
14,514
     
3,220,694
     
3,235,208
     
—  
  
Consumer
   
410
     
83
     
105
     
598
     
410,359
     
410,957
     
92
 
                                                         
Total
  $
19,731
    $
682
    $
960
    $
21,373
    $
5,231,694
    $
5,253,067
    $
92
 
                                                         
 
June 30, 2019
 
15-59

Days
Past
Due*
   
60-89

Days
Past
Due
   
Greater
Than
90
Days
   
Total
Past
Due
   
Current
   
Total
Loans
   
90 Days
Past Due
Still
Accruing
 
Commercial
  $
 
2,671
    $
352
    $
610
    $
3,633
    $
810,254
    $
813,887
    $
58
 
Agricultural
   
315
     
163
     
30
     
508
     
97,027
     
97,535
     
30
 
Real Estate
   
16,130
     
712
     
865
     
17,707
     
2,712,878
     
2,730,585
     
180
 
Consumer
   
821
     
99
     
40
     
960
     
397,985
     
398,945
     
32
 
                                                         
Total
  $
19,937
    $
1,326
    $
1,545
    $
22,808
    $
4,018,144
    $
4,040,952
    $
300
 
                                                         
 
December 31, 2019
 
15-59

Days
Past
Due*
   
60-89

Days
Past
Due
   
Greater
Than
90
Days
   
Total
Past
Due
   
Current
   
Total
Loans
   
90 Days
Past Due
Still
Accruing
 
Commercial
  $
3,257
    $
557
    $
722
    $
4,536
    $
851,790
    $
856,326
    $
112
 
Agricultural
   
183
     
44
     
400
     
627
     
103,013
     
103,640
     
—  
  
Real Estate
   
12,890
     
288
     
195
     
13,373
     
2,809,999
     
2,823,372
     
—  
  
Consumer
   
572
     
151
     
45
     
768
     
410,863
     
411,631
     
41
 
                                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Total
  $
16,902
    $
1,040
    $
1,362
    $
19,304
    $
4,175,665
    $
4,194,969
    $
153
 
                                                         
 
* 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 following table details the allowance for loan losses by portfolio segment (in thousands). There were no allowances for purchased credit impaired loans at June 30, 2020 and 2019, and December 31, 2019. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
 
June 30, 2020
 
Commercial
   
Agricultural
   
Real Estate
   
Consumer
   
Total
 
Loans individually evaluated for impairment
  $
1,250
    $
83
    $
1,711
    $
2
    $
3,046
 
Loans collectively evaluated for impairment
   
17,322
     
2,461
     
40,912
     
5,206
     
65,901
 
                                         
Total
  $
18,572
    $
2,544
    $
42,623
    $
5,208
    $
68,947
 
                                         
 
June 30, 2019
 
Commercial
   
Agricultural
   
Real Estate
   
Consumer
   
Total
 
Loans individually evaluated for impairment
  $
1,022
    $
119
    $
2,515
    $
210
    $
3,866
 
Loans collectively evaluated for impairment
   
12,877
     
1,241
     
28,284
     
5,552
     
47,954
 
                                         
Total
  $
13,899
    $
1,360
    $
30,799
    $
5,762
    $
51,820
 
                                         
December 31, 2019
    Commercial      Agricultural      Real Estate      Consumer      Total  
Loans individually evaluated for impairment
  $
1,042
    $
235
    $
1,950
    $
1
    $
3,228
 
Loans collectively evaluated for impairment
   
11,080
     
971
     
32,024
     
5,196
     
49,271
 
                                         
Total
  $
12,122
    $
1,206
    $
33,974
    $
5,197
    $
52,499
 
                                         
Changes in the allowance for loan losses are summarized as follows by portfolio segment (in thousands):
 
Three months ended June 30, 2020
    Commercial     Agricultural      Real Estate     Consumer     Total  
Beginning balance
  $
11,773
    $
2,154
    $
41,256
    $
5,257
    $
60,440
 
Provision for loan losses
   
6,820
     
361
     
1,469
     
50
     
8,700
 
Recoveries
   
540
     
29
     
59
     
73
     
701
 
Charge-offs
   
(561
 )    
—  
      
(161
 )    
(172
 )    
(894
 ) 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
  $
18,572
    $
2,544
    $
42,623
    $
5,208
    $
68,947
 
                                         
 
Three months ended June 30, 2019
    Commercial     Agricultural     Real Estate     Consumer     Total  
Beginning balance
  $
12,475
    $
1,430
    $
31,887
    $
5,793
    $
51,585
 
Provision for loan losses
   
1,418
     
61
     
(929
 )    
50
     
600
 
Recoveries
   
423
     
5
     
60
     
209
     
697
 
Charge-offs
   
(417
 )    
(136
 )    
(219
 )    
(290
 )    
(1,062
 ) 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
  $
13,899
    $
1,360
    $
30,799
    $
5,762
    $
51,820
 
                                         
 
Six months ended June 30, 2020
    Commercial     Agricultural     Real Estate     Consumer     Total  
Beginning balance
  $
12,122
    $
1,206
    $
33,974
    $
5,197
    $
52,499
 
Provision for loan losses
   
7,615
     
1,310
     
9,390
     
235
     
18,550
 
Recoveries
   
690
     
30
     
135
     
164
     
1,019
 
Charge-offs
   
(1,855
 )    
(2
 )    
(876
 )    
(388
 )    
(3,121
 ) 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
  $
18,572
    $
2,544
    $
42,623
    $
5,208
    $
68,947
 
                                         
 
Six months ended June 30, 2019
    Commercial     Agricultural     Real Estate     Consumer     Total  
Beginning balance
  $
11,948
    $
1,446
    $
32,342
    $
5,466
    $
51,202
 
Provision for loan losses
   
1,612
     
42
     
(531
 )    
442
     
1,565
 
Recoveries
   
1,073
     
7
     
149
     
349
     
1,578
 
Charge-offs
   
(734
 )    
(135
 )    
(1,161
 )    
(495
 )    
(2,525
 ) 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
  $
13,899
    $
1,360
    $
30,799
    $
5,762
    $
51,820
 
                                         
The Company’s recorded investment in loans related to the balance in the allowance for loan losses on the basis of the Company’s impairment methodology is as follows (in thousands). Purchased credit impaired loans of $7,275,000, $464,000 and $251,000 at June 30, 2020 and 2019, and December 31, 2019, respectively, are included in loans individually evaluated for impairment.
 
June 30, 2020
    Commercial      Agricultural      Real Estate      Consumer      Total  
Loans individually evaluated for impairment
  $
4,618
    $
1,056
    $
33,170
    $
476
    $
39,320
 
Loans collectively evaluated for impairment
   
1,504,836
     
96,392
     
3,202,038
     
410,481
     
5,213,747
 
                                         
Total
  $
1,509,454
    $
97,448
    $
3,235,208
    $
410,957
    $
5,253,067
 
                                         
June 30, 2019
 
Commercial
   
Agricultural
   
Real Estate
   
Consumer
   
Total
 
Loans individually evaluated for impairment
  $
8,189
    $
1,047
    $
16,787
    $
385
    $
26,408
 
Loans collectively evaluated for impairment
   
805,698
     
96,488
     
2,713,798
     
398,560
     
4,014,544
 
                                         
Total
  $
813,887
    $
97,535
    $
2,730,585
    $
398,945
    $
4,040,952
 
                                         
 
December 31, 2019
 
Commercial
   
Agricultural
   
Real Estate
   
Consumer
   
Total
 
Loans individually evaluated for impairment
  $
3,093
    $
1,376
    $
19,787
    $
326
    $
24,582
 
Loans collectively evaluated for impairment
   
853,233
     
102,264
     
2,803,585
     
411,305
     
4,170,387
 
                                         
Total
  $
856,326
    $
103,640
    $
2,823,372
    $
411,631
    $
4,194,969
 
                                         
The Company’s loans that were modified and considered troubled debt restructurings are as follows (in thousands):
 
  
Three Months Ended June 30, 2020
   
Six Months Ended June 30, 2020
 
 
Number
   
Pre-

Modification
Recorded
Investment
    
Post-
Modification
Recorded
Investment
   
Number
   
Pre-

Modification
Recorded
Investment
    
Post-
Modification
Recorded
Investment
 
Commercial
   
4
    $
196
    $
196
     
9
    $
484
    $
484
 
Agricultural
   
—  
      
—  
      
—  
      
1
     
134
     
134
 
Real Estate
   
1
     
123
     
123
     
1
     
123
     
123
 
Consumer
   
—  
      
—  
      
—  
      
1
     
14
     
14
 
                                                 
Total
   
5
    $
319
    $
319
     
12
    $
755
    $
755
 
                                                 
 
  
Three Months Ended June 30, 2019
   
Six Months Ended June 30, 2019
 
 
Number
   
Pre-

Modification
Recorded
Investment
    
Post-
Modification
Recorded
Investment
   
Number
   
Pre-

Modification
Recorded
Investment
    
Post-
Modification
Recorded
Investment
 
Commercial
   
2
    $
122
    $
122
     
3
    $
279
    $
279
 
Agricultural
   
2
     
253
     
253
     
10
     
619
     
619
 
Real Estate
   
—  
      
—  
      
—  
      
4
     
650
     
650
 
Consumer
   
—  
      
—  
      
—  
      
—  
      
—  
      
—  
  
                                                 
Total
   
4
    $
375
    $
375
     
17
    $
1,548
    $
1,548
 
                                                 
The balances below provide information as to how the loans were modified as troubled debt restructured loans (in thousands):
 
  
Three Months Ended June 30, 2020
   
Six Months Ended June 30, 2020
 
 
Adjusted
Interest
Rate
   
Extended
Maturity
   
Combined
Rate and
Maturity
   
Adjusted
Interest
Rate
   
Extended
Maturity
   
Combined
Rate and
Maturity
 
Commercial
  $
—  
     $
—  
     $
196
    $
—  
     $
260
    $
224
 
Agricultural
   
—  
      
—  
      
—  
      
—  
      
134
     
—  
  
Real Estate
   
—  
      
—  
      
123
     
—  
      
—  
      
123
 
Consumer
   
—  
      
—  
      
—  
      
—  
      
14
     
—  
  
                                                 
Total
  $
—  
     $
—  
     $
319
    $
—  
     $
408
    $
347
 
                                                 
 
Three Months Ended June 30, 2019
   
Six Months Ended June 30, 2019
 
 
Adjusted
Interest
Rate
   
Extended
Maturity
   
Combined
Rate and
Maturity
   
Adjusted
Interest
Rate
   
Extended
Maturity
   
Combined
Rate and
Maturity
 
Commercial
  $
—  
     $
122
    $
—  
     $
—  
     $
279
    $
—  
  
Agricultural
   
—  
      
253
     
—  
      
—  
      
354
     
265
 
Real Estate
   
—  
      
—  
      
—  
      
—  
      
202
     
448
 
Consumer
   
—  
      
—  
      
—  
      
—  
      
—  
      
—  
  
                                                 
Total
  $
—  
     $
375
    $
—  
     $
—  
     $
835
    $
713
 
                                                 
During the three
-
months ended June 30, 2020 and 2019, no loans were modified as a troubled debt restructured loan within the previous 12 months and for which there was a payment default. During the six
-
months ended June 30, 2020 and 2019, no loans were modified as a troubled debt
restructured
loan 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 due or more or results in the foreclosure and repossession of the applicable collateral.
As of June 30, 2020, the Company has no commitments to lend additional funds to loan customers whose terms have been modified in troubled debt restructurings.
As discussed in note 1 to these financial statements, the CARES Act provided banks an option to elect to not account for certain loan modifications related to
COVID-19
as troubled debt restructurings as long as the borrowers were not more than 30 days past due as of December 31, 2019. The above disclosed troubled debt restructurings were not related to
COVID-19
modifications.
Beginning in mid-March of 2020, the Company began offering deferral and modification of principle and/or interest payments to selected borrowers on a case-by-case basis. At June 30, 2020, the Company had approximately 2,
2
00 loans totaling $468,539,000 million in outstanding loans subject to deferral and modification agreements, representing 10.30% of outstanding loans held for investment, excluding PPP loans.
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 June 30, 2020, $3,134,584,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit. At June 30, 2020, there was no balance outstanding under this line of credit.