(4)	LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a schedule of loans outstanding by category:

	September 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Commercial and financial:
Commercial and industrial	$	792,335		18.39	%	$	795,803		18.80	%
Oil & gas production and equipment		75,627		1.76			87,304		2.06
Agriculture		136,150		3.16			150,620		3.56
State and political subdivisions:
Taxable		39,160		0.91			17,605		0.42
Tax-exempt		39,930		0.93			33,575		0.79
Real estate:
Construction		402,901		9.35			403,664		9.54
Farmland		191,218		4.44			184,707		4.36
One to four family residences		845,360		19.62			821,251		19.41
Multifamily residential properties		59,967		1.39			65,477		1.55
Commercial		1,410,730		32.75			1,356,430		32.05
Consumer		277,671		6.45			283,636		6.70
Other (not classified above)		36,778		0.85			31,976		0.76
Total loans	$	4,307,827		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 September 30, 2016 was approximately $54 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:

	September 30,		December 31,
	2016		2015
	(Dollars in thousands)
Past due 90 days or more and still accruing	$	1,906	$	1,841
Nonaccrual		31,014		30,096
Restructured		1,842		15,143
Total nonperforming and restructured loans		34,762		47,080
Other real estate owned and repossessed assets		4,339		8,214
Total nonperforming and restructured assets	$	39,101	$	55,294

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1.5 million for the nine months ended September 30, 2016 and approximately $1.5 million for the nine months ended September 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.

	September 30,		December 31,
	2016		2015
	(Dollars in thousands)
Real estate:
Non-residential real estate owner occupied	$	274	$	261
Non-residential real estate other		5,910		3,957
Residential real estate permanent mortgage		829		656
Residential real estate all other		4,694		1,833
Commercial and financial:
Non-consumer non-real estate		4,849		10,159
Consumer non-real estate		472		312
Other loans		9,008		9,381
Acquired loans		4,978		3,537
Total	$	31,014	$	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 September 30, 2016
Real estate:
Non-residential real estate owner occupied	$	3,899	$	704	$	506	$	5,109	$	521,548	$	526,657	$	269
Non-residential real estate other		504		86		1,995		2,585		1,126,466		1,129,051		91
Residential real estate permanent mortgage		2,278		895		1,029		4,202		327,619		331,821		468
Residential real estate all other		1,952		526		1,459		3,937		730,581		734,518		469
Commercial and financial:
Non-consumer non-real estate		5,203		1,522		465		7,190		989,351		996,541		196
Consumer non-real estate		2,020		758		456		3,234		278,381		281,615		270
Other loans		1,208		235		8,199		9,642		138,276		147,918		—
Acquired loans		473		1,023		460		1,956		157,750		159,706		143
Total	$	17,537	$	5,749	$	14,569	$	37,855	$	4,269,972	$	4,307,827	$	1,906
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 September 30, 2016
Real estate:
Non-residential real estate owner occupied	$	728	$	645	$	48	$	531
Non-residential real estate other		8,049		6,001		335		5,653
Residential real estate permanent mortgage		1,545		1,353		108		1,019
Residential real estate all other		5,704		5,465		1,428		6,007
Commercial and financial:
Non-consumer non-real estate		11,644		6,255		1,470		7,347
Consumer non-real estate		898		863		235		909
Other loans		10,440		9,008		1,851		9,191
Acquired loans		7,265		5,344		—		4,015
Total	$	46,273	$	34,934	$	5,475	$	34,672

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 September 30, 2016
Real estate:
Non-residential real estate owner occupied	$	432,000	$	78,484	$	15,602	$	571	$	—	$	526,657
Non-residential real estate other		941,523		166,984		14,607		5,937		—		1,129,051
Residential real estate permanent mortgage		291,611		31,830		6,918		1,462		—		331,821
Residential real estate all other		604,144		113,822		11,347		5,205		—		734,518
Commercial and financial:
Non-consumer non-real estate		807,385		162,879		21,309		4,968		—		996,541
Consumer non-real estate		261,859		16,461		2,499		796		—		281,615
Other loans		138,497		5,464		1,505		2,452		—		147,918
Acquired loans		102,002		32,236		20,145		5,323		—		159,706
Total	$	3,579,021	$	608,160	$	93,932	$	26,714		—	$	4,307,827

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 September 30, 2016
Real estate:
Non-residential real estate owner occupied	$	4,896	$	(1	)	$	—	$	(1	)	$	214		$	5,109
Non-residential real estate other		10,302		(5	)		1		(4	)		285			10,583
Residential real estate permanent mortgage		3,203		(58	)		10		(48	)		52			3,207
Residential real estate all other		8,293		(10	)		8		(2	)		212			8,503
Commercial and financial:
Non-consumer non-real estate		13,441		(1,053	)		31		(1,022	)		(385	)		12,034
Consumer non-real estate		2,749		(374	)		61		(313	)		443			2,879
Other loans		3,377		(18	)		2		(16	)		812			4,173
Acquired loans		305		(41	)		2		(39	)		1,307			1,573
Total	$	46,566	$	(1,560	)	$	115	$	(1,445	)	$	2,940		$	48,061

Nine Months Ended September 30, 2016
Real estate:
Non-residential real estate owner occupied	$	4,661	$	(11	)	$	—	$	(11	)	$	459		$	5,109
Non-residential real estate other		9,921		(9	)		3		(6	)		668			10,583
Residential real estate permanent mortgage		3,148		(157	)		48		(109	)		168			3,207
Residential real estate all other		6,725		(147	)		19		(128	)		1,906			8,503
Commercial and financial:
Non-consumer non-real estate		11,754		(2,358	)		77		(2,281	)		2,561			12,034
Consumer non-real estate		2,642		(729	)		137		(592	)		829			2,879
Other loans		2,648		(300	)		15		(285	)		1,810			4,173
Acquired loans		167		(58	)		18		(40	)		1,446			1,573
Total	$	41,666	$	(3,769	)	$	317	$	(3,452	)	$	9,847		$	48,061

	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 September 30, 2015
Real estate:
Non-residential real estate owner occupied	$	4,503	$	—		$	—	$	—		$	36		$	4,539
Non-residential real estate other		9,880		(708	)		1		(707	)		814			9,987
Residential real estate permanent mortgage		3,110		(28	)		15		(13	)		(26	)		3,071
Residential real estate all other		6,485		(48	)		4		(44	)		168			6,609
Commercial and financial:
Non-consumer non-real estate		13,713		(2,180	)		38		(2,142	)		86			11,657
Consumer non-real estate		2,499		(152	)		35		(117	)		160			2,542
Other loans		2,431		(20	)		6		(14	)		134			2,551
Acquired loans		—		(38	)		—		(38	)		52			14
Total	$	42,621	$	(3,174	)	$	99	$	(3,075	)	$	1,424		$	40,970

Nine Months Ended September 30, 2015
Real estate:
Non-residential real estate owner occupied	$	4,406	$	(1	)	$	1	$	—		$	133		$	4,539
Non-residential real estate other		9,616		(708	)		2		(706	)		1,077			9,987
Residential real estate permanent mortgage		2,948		(124	)		29		(95	)		218			3,071
Residential real estate all other		6,269		(123	)		13		(110	)		450			6,609
Commercial and financial:
Non-consumer non-real estate		12,771		(2,349	)		76		(2,273	)		1,159			11,657
Consumer non-real estate		2,404		(382	)		90		(292	)		430			2,542
Other loans		2,359		(283	)		15		(268	)		460			2,551
Acquired loans		116		(232	)		28		(204	)		102			14
Total	$	40,889	$	(4,202	)	$	254	$	(3,948	)	$	4,029		$	40,970

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
	September 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.	$	633	$	4,476	$	323	$	4,338
Non-residential real estate other		880		9,703		323		9,598
Residential real estate permanent mortgage		460		2,747		399		2,749
Residential real estate all other		2,190		6,313		839		5,886
Commercial and financial:
Non-consumer non-real estate		3,445		8,589		3,365		8,389
Consumer non-real estate		580		2,299		445		2,197
Other loans		1,812		2,361		291		2,357
Acquired loans		—		1,573		—		167
Total	$	10,000	$	38,061	$	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
	September 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	$	16,173	$	510,484	$	—	$	8,619	$	494,278	$	—
Non-residential real estate other		20,544		1,108,507		—		8,608		1,102,152		—
Residential real estate permanent mortgage		8,380		323,441		—		7,543		325,058		—
Residential real estate all other		16,552		717,966		—		10,803		665,886		—
Commercial and financial:
Non-consumer non-real estate		26,278		970,263		—		22,983		961,779		—
Consumer non-real estate		3,212		278,403		—		2,416		266,453		—
Other loans		2,219		145,699		—		2,323		160,293		—
Acquired loans		—		134,238		25,468		—		177,871		14,983
Total	$	93,358	$	4,189,001	$	25,468	$	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:

	Nine Months Ended September 30,
	2016		2015
	(Dollars in thousands)
Other real estate owned	$	2,453	$	3,155
Repossessed assets		1,117		794
Total	$	3,570	$	3,949