(4)	LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

	June 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Commercial and financial:
Commercial and industrial	$	800,313		18.50	%	$	795,803		18.80	%
Oil & gas production and equipment		79,930		1.85			87,304		2.06
Agriculture		142,303		3.29			150,620		3.56
State and political subdivisions:
Taxable		33,187		0.77			17,605		0.42
Tax-exempt		42,788		0.99			33,575		0.79
Real estate:
Construction		405,417		9.37			403,664		9.54
Farmland		189,820		4.39			184,707		4.36
One to four family residences		843,081		19.48			821,251		19.41
Multifamily residential properties		58,815		1.36			65,477		1.55
Commercial		1,421,075		32.84			1,356,430		32.05
Consumer		272,387		6.29			283,636		6.70
Other (not classified above)		37,520		0.87			31,976		0.76
Total loans	$	4,326,636		100.00	%	$	4,232,048		100.00	%

The Company’s commercial and industrial loan category includes a small percentage of loans to companies that provide ancillary services to the oil and gas industry, such as transportation, preparation contractors and equipment manufacturers. The balance of these loans at June 30, 2016 was approximately $52 million.

The Company’s loans are mostly to customers within Oklahoma and over 65% of the loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained, if any, to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral.

Accounting policies related to appraisals, nonaccruals and charge-offs are disclosed in Note (1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Nonperforming and Restructured Assets

The following is a summary of nonperforming and restructured assets:

	June 30,		December 31,
	2016		2015
	(Dollars in thousands)
Past due 90 days or more and still accruing	$	2,695	$	1,841
Nonaccrual		30,063		30,096
Restructured		1,974		15,143
Total nonperforming and restructured loans		34,732		47,080
Other real estate owned and repossessed assets		4,469		8,214
Total nonperforming and restructured assets	$	39,201	$	55,294

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $982,000 for the six months ended June 30, 2016 and approximately $922,000 for the six months ended June 30, 2015.

Restructured loans at December 31, 2015 consisted primarily of one relationship restructured in prior periods to defer certain principal payments. This relationship was re-evaluated and removed from restructured loans in 2016 due to sustained improvement in financial condition, performance and the commercially reasonable nature of its structure. The Company charges interest on principal balances outstanding during deferral periods. As a result, the current and future financial effects of the recorded balance of loans considered to be restructured were not considered to be material.

Loans are segregated into classes based upon the nature of the collateral and the borrower. These classes are used to estimate the credit risk component in the allowance for loan losses.

The following table is a summary of amounts included in nonaccrual loans, segregated by class of loans. Residential real estate refers to one-to-four family real estate.

	June 30,		December 31,
	2016		2015
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied	$	279	$	261
Non-residential real estate other		4,179		3,957
Residential real estate permanent mortgage		735		656
Residential real estate all other		6,302		1,833
Commercial and financial:
Non-consumer non-real estate		6,246		10,159
Consumer non-real estate		291		312
Other loans		8,910		9,381
Acquired loans		3,121		3,537
Total	$	30,063	$	30,096

The following table presents an age analysis of past due loans, segregated by class of loans:

	Age Analysis of Past Due Loans
	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 Days or More Past Due
	(Dollars in thousands)
As of June 30, 2016
Real estate:
Non-residential real estate owner occupied	$	686	$	170	$	240	$	1,096	$	518,872	$	519,968	$	70
Non-residential real estate other		1,248		—		278		1,526		1,140,659		1,142,185		207
Residential real estate permanent mortgage		2,725		418		590		3,733		330,668		334,401		86
Residential real estate all other		2,691		569		5,798		9,058		710,143		719,201		268
Commercial and financial:
Non-consumer non-real estate		1,961		608		2,024		4,593		1,000,014		1,004,607		1,477
Consumer non-real estate		1,948		695		573		3,216		273,495		276,711		418
Other loans		1,277		775		3,284		5,336		148,364		153,700		119
Acquired loans		1,407		171		465		2,043		173,820		175,863		50
Total	$	13,943	$	3,406	$	13,252	$	30,601	$	4,296,035	$	4,326,636	$	2,695
As of December 31, 2015
Real estate:
Non-residential real estate owner occupied	$	441	$	179	$	183	$	803	$	502,094	$	502,897	$	—
Non-residential real estate other		1,149		108		568		1,825		1,108,935		1,110,760		521
Residential real estate permanent mortgage		2,840		636		648		4,124		328,477		332,601		493
Residential real estate all other		2,842		609		824		4,275		672,414		676,689		193
Commercial and financial:
Non-consumer non-real estate		2,278		161		187		2,626		982,136		984,762		152
Consumer non-real estate		2,237		772		349		3,358		265,511		268,869		278
Other loans		3,565		295		1,761		5,621		156,995		162,616		132
Acquired loans		1,052		71		918		2,041		190,813		192,854		72
Total	$	16,404	$	2,831	$	5,438	$	24,673	$	4,207,375	$	4,232,048	$	1,841

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect the full amount of scheduled principal and interest payments in accordance with the original contractual terms of the loan agreement. If a loan is impaired, a specific valuation allowance may be allocated, if necessary, so that the loan is reported, net of allowance for loss, at the present value of future cash flows using the loan’s existing rate, or the fair value of collateral if repayment is expected solely from the collateral.

The following table presents impaired loans, segregated by class of loans. No material amount of interest income was recognized on impaired loans subsequent to their classification as impaired.

	Impaired Loans
	Unpaid Principal Balance		Recorded Investment with Allowance		Related Allowance		Average Recorded Investment
	(Dollars in thousands)
As of June 30, 2016
Real estate:
Non-residential real estate owner occupied	$	546	$	457	$	14	$	484
Non-residential real estate other		6,420		4,387		164		4,368
Residential real estate permanent mortgage		1,078		878		79		1,131
Residential real estate all other		7,063		6,800		1,517		5,725
Commercial and financial:
Non-consumer non-real estate		13,862		8,948		1,900		7,930
Consumer non-real estate		877		843		168		707
Other loans		10,896		9,029		924		8,930
Acquired loans		5,529		3,584		—		3,894
Total	$	46,271	$	34,926	$	4,766	$	33,169

As of December 31, 2015
Real estate:
Non-residential real estate owner occupied	$	507	$	383	$	14	$	446
Non-residential real estate other		21,068		19,052		357		19,655
Residential real estate permanent mortgage		1,401		1,209		81		1,125
Residential real estate all other		2,498		2,235		242		1,958
Commercial and financial:
Non-consumer non-real estate		13,897		10,312		2,062		11,786
Consumer non-real estate		738		715		181		652
Other loans		10,722		9,513		331		10,335
Acquired loans		6,295		4,248		—		4,564
Total	$	57,126	$	47,667	$	3,268	$	50,521

Credit Risk Monitoring and Loan Grading

The Company considers various factors to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loan loss experience and economic conditions.

An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.

The general characteristics of the risk grades are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The following table presents internal loan grading by class of loans:

	Internal Loan Grading
	Grade
		1		2		3		4		5	Total
	(Dollars in thousands)
As of June 30, 2016
Real estate:
Non-residential real estate owner occupied	$	429,378	$	79,044	$	11,251	$	295	$	—	$	519,968
Non-residential real estate other		951,915		181,582		4,302		4,386		—		1,142,185
Residential real estate permanent mortgage		295,151		31,233		7,049		968		—		334,401
Residential real estate all other		591,982		111,956		8,566		6,697		—		719,201
Commercial and financial:
Non-consumer non-real estate		831,214		139,601		27,372		6,420		—		1,004,607
Consumer non-real estate		258,257		15,094		1,853		1,507		—		276,711
Other loans		144,008		5,577		1,720		2,395		—		153,700
Acquired loans		131,830		28,611		11,985		3,437		—		175,863
Total	$	3,633,735	$	592,698	$	74,098	$	26,105		—	$	4,326,636

As of December 31, 2015
Real estate:
Non-residential real estate owner occupied	$	417,529	$	76,749	$	8,304	$	315	$	—	$	502,897
Non-residential real estate other		945,993		156,159		4,580		4,028		—		1,110,760
Residential real estate permanent mortgage		295,265		29,793		6,315		1,228		—		332,601
Residential real estate all other		554,007		111,879		9,109		1,694		—		676,689
Commercial and financial:
Non-consumer non-real estate		821,394		140,384		12,687		10,297		—		984,762
Consumer non-real estate		251,994		14,433		1,779		662		1		268,869
Other loans		153,416		5,851		872		2,477		—		162,616
Acquired loans		165,305		12,566		11,049		3,858		76		192,854
Total	$	3,604,903	$	547,814	$	54,695	$	24,559	$	77	$	4,232,048

Allowance for Loan Losses Methodology

The allowance for loan losses (“ALL”) methodology is disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The following table details activity in the ALL by class of loans for the period presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	ALL
	Balance at beginning of period		Charge- offs			Recoveries		Net charge-offs			Provisions charged to operations		Balance at end of period
	(Dollars in thousands)
Three Months Ended June 30, 2016
Real estate:
Non-residential real estate owner occupied	$	4,832	$	(9	)	$	—	$	(9	)	$	73	$	4,896
Non-residential real estate other		10,211		(3	)		1		(2	)		93		10,302
Residential real estate permanent mortgage		3,164		(49	)		21		(28	)		67		3,203
Residential real estate all other		7,989		(70	)		7		(63	)		367		8,293
Commercial and financial:
Non-consumer non-real estate		12,813		(502	)		35		(467	)		1,095		13,441
Consumer non-real estate		2,553		(134	)		38		(96	)		292		2,749
Other loans		2,790		(149	)		7		(142	)		729		3,377
Acquired loans		219		(13	)		11		(2	)		88		305
Total	$	44,571	$	(929	)	$	120	$	(809	)	$	2,804	$	46,566

Six Months Ended June 30, 2016
Real estate:
Non-residential real estate owner occupied	$	4,661	$	(10	)	$	—	$	(10	)	$	245	$	4,896
Non-residential real estate other		9,921		(4	)		2		(2	)		383		10,302
Residential real estate permanent mortgage		3,148		(99	)		38		(61	)		116		3,203
Residential real estate all other		6,725		(137	)		11		(126	)		1,694		8,293
Commercial and financial:
Non-consumer non-real estate		11,754		(1,305	)		46		(1,259	)		2,946		13,441
Consumer non-real estate		2,642		(355	)		76		(279	)		386		2,749
Other loans		2,648		(282	)		13		(269	)		998		3,377
Acquired loans		167		(17	)		16		(1	)		139		305
Total	$	41,666	$	(2,209	)	$	202	$	(2,007	)	$	6,907	$	46,566

	ALL
	Balance at beginning of period		Charge- offs			Recoveries		Net charge-offs			Provisions charged to operations			Balance at end of period
	(Dollars in thousands)
Three Months Ended June 30, 2015
Real estate:
Non-residential real estate owner occupied	$	4,461	$	—		$	—	$	—		$	42		$	4,503
Non-residential real estate other		9,898		—			1		1			(19	)		9,880
Residential real estate permanent mortgage		2,984		(56	)		5		(51	)		177			3,110
Residential real estate all other		6,578		(7	)		4		(3	)		(90	)		6,485
Commercial and financial:
Non-consumer non-real estate		13,068		(16	)		7		(9	)		654			13,713
Consumer non-real estate		2,327		(103	)		40		(63	)		235			2,499
Other loans		2,241		(50	)		—		(50	)		240			2,431
Acquired loans		—		(34	)		2		(32	)		32			—
Total	$	41,557	$	(266	)	$	59	$	(207	)	$	1,271		$	42,621

Six Months Ended June 30, 2015
Real estate:
Non-residential real estate owner occupied	$	4,406	$	(1	)	$	1	$	—		$	97		$	4,503
Non-residential real estate other		9,616		—			1		1			263			9,880
Residential real estate permanent mortgage		2,948		(96	)		14		(82	)		244			3,110
Residential real estate all other		6,269		(75	)		9		(66	)		282			6,485
Commercial and financial:
Non-consumer non-real estate		12,771		(169	)		38		(131	)		1,073			13,713
Consumer non-real estate		2,404		(230	)		55		(175	)		270			2,499
Other loans		2,359		(263	)		9		(254	)		326			2,431
Acquired loans		116		(194	)		28		(166	)		50			—
Total	$	40,889	$	(1,028	)	$	155	$	(873	)	$	2,605		$	42,621

The following table details the amount of ALL by class of loans for the period presented, detailed on the basis of the impairment methodology used by the Company.

	ALL
	June 30, 2016				December 31, 2015

	Individually evaluated for impairment		Collectively evaluated for impairment		Individually evaluated for impairment		Collectively evaluated for impairment
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied.	$	433	$	4,463	$	323	$	4,338
Non-residential real estate other		436		9,866		323		9,598
Residential real estate permanent mortgage		436		2,767		399		2,749
Residential real estate all other		2,102		6,191		839		5,886
Commercial and financial:
Non-consumer non-real estate		4,769		8,672		3,365		8,389
Consumer non-real estate		572		2,177		445		2,197
Other loans		895		2,482		291		2,357
Acquired loans		—		305		—		167
Total	$	9,643	$	36,923	$	5,985	$	35,681

The following table details the loans outstanding by class of loans for the period presented, on the basis of the impairment methodology used by the Company.

	Loans
	June 30, 2016						December 31, 2015
	Individually evaluated for impairment		Collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Individually evaluated for impairment		Collectively evaluated for impairment		Loans acquired with deteriorated credit quality
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied	$	11,546	$	508,422	$	—	$	8,619	$	494,278	$	—
Non-residential real estate other		8,688		1,133,497		—		8,608		1,102,152		—
Residential real estate permanent mortgage		8,016		326,385		—		7,543		325,058		—
Residential real estate all other		15,263		703,938		—		10,803		665,886		—
Commercial and financial:
Non-consumer non-real estate		33,792		970,815		—		22,983		961,779		—
Consumer non-real estate		3,282		273,429		—		2,416		266,453		—
Other loans		2,235		151,465		—		2,323		160,293		—
Acquired loans		—		160,443		15,420		—		177,871		14,983
Total	$	82,822	$	4,228,394	$	15,420	$	63,295	$	4,153,770	$	14,983

Transfers from Loans

Transfers from loans to other real estate owned and repossessed assets are non-cash transactions, and are not included in the statements of cash flow. Transfers from loans to other real estate owned and repossessed assets during the periods presented, are summarized as follows:

	Six Months Ended June 30,
	2016		2015
	(Dollars in thousands)
Other real estate owned	$	1,210	$	2,522
Repossessed assets		750		424
Total	$	1,960	$	2,946