LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)
 12 Months Ended
Dec. 31, 2016
Receivables [Abstract]  
Schedule of Accounts, Notes, Loans and Financing Receivable
The loan portfolio balances, net of unearned income and fees, consist of various types of loans primarily all made to borrowers located within Texas and are classified by major type as follows:
 
December 31,
 
2016
 
2015
 
(Dollars in thousands)
Loans held for sale(1)
$
—

 
$
27,887

 
 
 
 
Commercial and industrial
416,752

 
383,044

Mortgage warehouse(2)
67,038

 
59,071

Real estate:
 

 
 

Commercial real estate (including multi-family residential)
891,989

 
745,595

Commercial real estate construction and land development
159,247

 
154,646

1-4 family residential (including home equity)
246,987

 
205,200

Residential construction
98,657

 
93,848

Consumer and other
10,965

 
11,761

Total loans held for investment
1,891,635

 
1,653,165

Total loans
1,891,635

 
1,681,052

Allowance for loan losses
(17,911
)
 
(13,098
)
Loans, net
$
1,873,724

 
$
1,667,954



(1)
Consists of loans at two former F&M Bancshares locations acquired on January 1, 2015. As of December 31, 2015, loans held for sale consists of $13.2 million of commercial and industrial loans, $11.6 million of commercial real estate (including multi-family residential) loans, $2.3 million of 1-4 family residential (including home equity) loans and $803 thousand of consumer and other loans. Loans held for sale are carried at lower of aggregate cost or fair value. On January 31, 2016, the Company completed the sale of these former F&M Bancshares branches and their related assets located in Central Texas.
(2)
Mortgage warehouse loans are to unaffiliated mortgage loan originators collateralized by mortgage promissory notes which are segregated in the Company’s mortgage warehouse portfolio.  These promissory notes originated by the Company’s mortgage warehouse customers carry terms and conditions as would be expected in the competitive permanent mortgage market and serve as collateral under a traditional mortgage warehouse arrangement whereby such promissory notes are warehoused under a revolving credit facility to allow for the end investor (or purchaser) of the note to receive a complete loan package and remit funds to the bank. The maturity of each revolving line of credit facility is normally less than 24 months, while the promissory notes that are warehoused under such facilities may have a much shorter length of time outstanding. For mortgage promissory notes secured by residential property, the warehouse time is normally 10 to 20 days.  For mortgage promissory notes secured by commercial property, the warehouse time is normally 40 to 50 days.  The funded balance of the mortgage warehouse portfolio can have significant fluctuation based upon market demand for the product, level of home sales and refinancing activity, market interest rates and velocity of end investor processing times.
Schedule of Related Party Transactions
An analysis of activity with respect to these related-party loans is as follows:
 
2016
 
(Dollars in thousands)
Beginning balance on January 1
$
2,459

New loans and reclassified related loans
1,629

Repayments
(145
)
Ending balance on December 31
$
3,943
Past Due Financing Receivables
An aging analysis of the recorded investment in past due loans, segregated by class of loans, is as follows:
 
December 31, 2016
 
Loans Past Due and Still Accruing
 
 
 
 
 
 
 
30-89
 Days
 
90 or More
Days
 
Total Past
Due Loans
 
Nonaccrual Loans
 
Current
Loans
 
Total Loans
 
(Dollars in thousands)
Commercial and industrial
$
1,028

 
$
911

 
$
1,939

 
$
3,896

 
$
410,917

 
$
416,752

Mortgage warehouse
—

 
—

 
—

 
—

 
67,038

 
67,038

Real estate:
 

 
 

 
 

 
 

 
 

 
 

    Commercial real estate (including multi-family residential)
1,661

 
—

 
1,661

 
11,663

 
878,665

 
891,989

    Commercial real estate construction and land development
263

 
—

 
263

 
—

 
158,984

 
159,247

    1-4 family residential (including home equity)
280

 
—

 
280

 
217

 
246,490

 
246,987

    Residential construction
—

 
—

 
—

 
—

 
98,657

 
98,657

Consumer and other
125

 
—

 
125

 
12

 
10,828

 
10,965

Total loans
$
3,357

 
$
911

 
$
4,268

 
$
15,788

 
$
1,871,579

 
$
1,891,635

 
December 31, 2015
 
Loans Past Due and Still Accruing
 
 
 
 
 
 
 
30-89
 Days(1)
 
90 or More
Days
 
Total Past
Due Loans
 
Nonaccrual Loans(2)
 
Current
Loans
 
Total Loans
 
(Dollars in thousands)
Loans held for sale
$
539

 
$
—

 
$
539

 
$
209

 
$
27,139

 
$
27,887

 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,474

 
$
—

 
$
1,474

 
$
2,664

 
$
378,906

 
$
383,044

Mortgage warehouse
—

 
—

 
—

 
—

 
59,071

 
59,071

Real estate:
 

 
 

 
 

 
 

 
 

 
 

  Commercial real estate (including multi-family residential)
1,866

 
—

 
1,866

 
2,006

 
741,723

 
745,595

  Commercial real estate construction and land development
77

 
—

 
77

 
—

 
154,569

 
154,646

  1-4 family residential (including home equity)
1,904

 
—

 
1,904

 
239

 
203,057

 
205,200

  Residential construction
—

 
—

 
—

 
—

 
93,848

 
93,848

Consumer and other
36

 
—

 
36

 
66

 
11,659

 
11,761

Total loans held for investment
5,357

 
—

 
5,357

 
4,975

 
1,642,833

 
1,653,165

Total loans
$
5,896

 
$
—

 
$
5,896

 
$
5,184

 
$
1,669,972

 
$
1,681,052



(1) Includes $1.3 million of loans acquired from F&M Bancshares.
(2) Includes $676 thousand of loans acquired from F&M Bancshares.
Impaired Financing Receivables
The following table presents the average recorded investment of impaired loans and interest recognized on impaired loans.
 
Years Ended December 31,
 
2016
 
2015
 
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
 
(Dollars in thousands)
Commercial and industrial
$
9,427

 
$
442

 
$
5,738

 
$
309

Mortgage warehouse
—

 
—

 
—

 
—

Real estate:
 
 
 
 
 
 
 
     Commercial real estate (including multi-family residential)
12,840

 
393

 
5,955

 
362

     Commercial real estate construction and land development
—

 
—

 
—

 
—

     1-4 family residential (including home equity)
228

 
24

 
248

 
13

     Residential construction
—

 
—

 
—

 
—

Consumer and other
26

 
3

 
123

 
9

          Total
$
22,521

 
$
862

 
$
12,064

 
$
693

Impaired loans by class of loans are set forth in the following tables.
 
December 31, 2016
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
(Dollars in thousands)
With no related allowance recorded:
 

 
 

 
 

Commercial and industrial
$
5,300

 
$
5,414

 
$
—

Mortgage warehouse
—

 
—

 
—

Real estate:
 

 
 

 
 

Commercial real estate (including multi-family residential)
11,748

 
11,833

 
—

Commercial real estate construction and land development
—

 
—

 
—

1-4 family residential (including home equity)
217

 
217

 
—

Residential construction
—

 
—

 
—

Consumer and other
5

 
5

 
—

Total
17,270

 
17,469

 
—

 
 
 
 
 
 
With an allowance recorded:
 

 
 

 
 

Commercial and industrial
3,108

 
3,328

 
1,543

Mortgage warehouse
—

 
—

 
—

Real estate:
 

 
 

 
 

Commercial real estate (including multi-family residential)
573

 
573

 
105

Commercial real estate construction and land development
—

 
—

 
—

1-4 family residential (including home equity)
—

 
—

 
—

Residential construction
—

 
—

 
—

Consumer and other
6

 
6

 
6

Total
3,687

 
3,907

 
1,654

 
 
 
 
 
 
Total:
 

 
 

 
 

Commercial and industrial
8,408

 
8,742

 
1,543

Mortgage warehouse
—

 
—

 
—

Real estate:
 

 
 

 
 

Commercial real estate (including multi-family residential)
12,321

 
12,406

 
105

Commercial real estate construction and land development
—

 
—

 
—

1-4 family residential (including home equity)
217

 
217

 
—

Residential construction
—

 
—

 
—

Consumer and other
11

 
11

 
6

 
$
20,957

 
$
21,376

 
$
1,654

    
 
December 31, 2015
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
(Dollars in thousands)
With no related allowance recorded:
 

 
 

 
 

Commercial and industrial
$
3,842

 
$
4,216

 
$
—

Mortgage warehouse
—

 
—

 
—

Real estate:
 

 
 

 
 

Commercial real estate (including multi-family residential)
4,700

 
4,700

 
—

Commercial real estate construction and land development
—

 
—

 
—

1-4 family residential (including home equity)
239

 
239

 
—

Residential construction
—

 
—

 
—

Consumer and other
82

 
97

 
—

Total
8,863

 
9,252

 
—

 
 
 
 
 
 
With an allowance recorded:
 

 
 

 
 

Commercial and industrial
1,573

 
1,573

 
670

Mortgage warehouse
—

 
—

 
—

Real estate:
 

 
 

 
 

Commercial real estate (including multi-family residential)
1,146

 
1,146

 
180

Commercial real estate construction and land development
—

 
—

 
—

1-4 family residential (including home equity)
—

 
—

 
—

Residential construction
—

 
—

 
—

Consumer and other
19

 
19

 
9

Total
2,738

 
2,738

 
859

 
 
 
 
 
 
Total:
 

 
 

 
 

Commercial and industrial
5,415

 
5,789

 
670

Mortgage warehouse
—

 
—

 
—

Real estate:
 

 
 

 
 

Commercial real estate (including multi-family residential)
5,846

 
5,846

 
180

Commercial real estate construction and land development
—

 
—

 
—

1-4 family residential (including home equity)
239

 
239

 
—

Residential construction
—

 
—

 
—

Consumer and other
101

 
116

 
9

 
$
11,601

 
$
11,990

 
$
859
Financing Receivable Credit Quality Indicators
Based on the most recent analysis performed, the risk category of loans by class of loan at December 31, 2016 is as follows:
 
Pass
 
Watch
 
Special Mention
 
Substandard
 
Doubtful
 
Total
 
(Dollars in thousands)
Commercial and industrial
$
384,979

 
$
11,784

 
$
3,344

 
$
16,645

 
$
—

 
$
416,752

Mortgage warehouse
67,038

 
—

 
—

 
—

 
—

 
67,038

Real estate:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate (including multi-family residential)
834,781

 
16,009

 
6,804

 
34,395

 
—

 
891,989

Commercial real estate construction and land development
149,010

 
8,124

 
—

 
2,113

 
—

 
159,247

1-4 family residential (including home equity)
242,208

 
512

 
2,069

 
2,198

 
—

 
246,987

Residential construction
97,808

 
—

 
415

 
434

 
—

 
98,657

Consumer and other
10,520

 
364

 
4

 
77

 
—

 
10,965

Total loans
$
1,786,344

 
$
36,793

 
$
12,636

 
$
55,862

 
$
—

 
$
1,891,635



The following table presents the risk category of loans by class of loan at December 31, 2015:
 
Pass
 
Watch
 
Special Mention
 
Substandard
 
Doubtful
 
Total
 
(Dollars in thousands)
Loans held for sale
$
26,570

 
$
477

 
$
19

 
$
821

 
$
—

 
$
27,887

 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
366,479

 
$
8,094

 
$
1,253

 
$
7,218

 
$
—

 
$
383,044

Mortgage warehouse
59,071

 
—

 
—

 
—

 
—

 
59,071

Real estate:
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate (including multi-family residential)
721,781

 
7,186

 
790

 
15,838

 
—

 
745,595

Commercial real estate construction and land development
152,380

 
1,846

 
—

 
420

 
—

 
154,646

1-4 family residential (including home equity)
200,262

 
2,385

 
390

 
2,163

 
—

 
205,200

Residential construction
93,848

 
—

 
—

 
—

 
—

 
93,848

Consumer and other
11,522

 
155

 
18

 
66

 
—

 
11,761

Total loans held for investment
1,605,343

 
19,666

 
2,451

 
25,705

 
—

 
1,653,165

Total loans
$
1,631,913

 
$
20,143

 
$
2,470

 
$
26,526

 
$
—

 
$
1,681,052
Allowance for Credit Losses on Financing Receivables
The following table presents the activity in the allowance for loan losses by portfolio type for the years ended December 31, 2016, 2015 and 2014:
 
Commercial
and
Industrial 
 
Mortgage
Warehouse
 
Commercial real estate (including multi-family residential)
 
Commercial real estate construction and land development
 
1-4 family  residential (including  home equity)
 
Residential Construction
 
Consumer and Other 
 
Total 
 
(Dollars in thousands)
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Balance December 31, 2015
$
3,644

 
$
—

 
$
5,914

 
$
1,221

 
$
1,432

 
$
820

 
$
67

 
$
13,098

Provision for loan losses
1,951

 
—

 
3,122

 
(4
)
 
434

 
(72
)
 
38

 
5,469

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(722
)
 
—

 
(129
)
 
—

 
—

 
—

 
(49
)
 
(900
)
Recoveries
186

 
—

 
43

 
—

 
10

 
—

 
5

 
244

Net charge-offs
(536
)
 
—

 
(86
)
 
—

 
10

 
—

 
(44
)
 
(656
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2016
$
5,059

 
$
—

 
$
8,950

 
$
1,217

 
$
1,876

 
$
748

 
$
61

 
$
17,911

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Balance December 31, 2014
$
2,334

 
$
—

 
$
3,799

 
$
578

 
$
1,008

 
$
475

 
$
52

 
$
8,246

Provision for loan losses
2,193

 
—

 
2,115

 
625

 
464

 
321

 
74

 
5,792

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(935
)
 
—

 
—

 
—

 
(40
)
 
—

 
(65
)
 
(1,040
)
Recoveries
52

 
—

 
—

 
18

 
—

 
24

 
6

 
100

Net charge-offs
(883
)
 
—

 
—

 
18

 
(40
)
 
24

 
(59
)
 
(940
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2015
$
3,644

 
$
—

 
$
5,914

 
$
1,221

 
$
1,432

 
$
820

 
$
67

 
$
13,098

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Balance December 31, 2013
$
2,729

 
$
—

 
$
2,175

 
$
357

 
$
558

 
$
598

 
$
238

 
$
6,655

Provision for loan losses
140

 
—

 
1,624

 
221

 
450

 
(123
)
 
(162
)
 
2,150

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(567
)
 
—

 
—

 
—

 
—

 
—

 
(40
)
 
(607
)
Recoveries
32

 
—

 
—

 
—

 
—

 
—

 
16

 
48

Net charge-offs
(535
)
 
—

 
—

 
—

 
—

 
—

 
(24
)
 
(559
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2014
$
2,334

 
$
—

 
$
3,799

 
$
578

 
$
1,008

 
$
475

 
$
52

 
$
8,246



The following table presents the balance in the allowance for loan losses by portfolio type based on the impairment method as of December 31, 2016 and 2015:
 
Commercial and Industrial 
 
Mortgage Warehouse
 
Commercial real estate (including multi-family residential)
 
Commercial real estate construction and land development
 
1-4 family  residential (including home equity)
 
Residential Construction
 
Consumer and Other 
 
Total 
 
(Dollars in thousands)
Allowance for loan losses related to:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
1,543

 
$
—

 
$
105

 
$
—

 
$
—

 
$
—

 
$
6

 
$
1,654

Collectively evaluated for impairment
3,516

 
—

 
8,845

 
1,217

 
1,876

 
748

 
55

 
16,257

Total allowance for loan losses
$
5,059

 
$
—

 
$
8,950

 
$
1,217

 
$
1,876

 
$
748

 
$
61

 
$
17,911

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
670

 
$
—

 
$
180

 
$
—

 
$
—

 
$
—

 
$
9

 
$
859

Collectively evaluated for impairment
2,974

 
—

 
5,734

 
1,221

 
1,432

 
820

 
58

 
12,239

Total allowance for loan losses
$
3,644

 
$
—

 
$
5,914

 
$
1,221

 
$
1,432

 
$
820

 
$
67

 
$
13,098


The following table presents the recorded investment in loans held for investment by portfolio type based on the impairment method as of December 31, 2016 and 2015:
 
Commercial and Industrial 
 
Mortgage Warehouse
 
Commercial real estate (including multi-family residential)
 
Commercial real estate construction and land development
 
1-4 family  residential (including home equity)
 
Residential Construction
 
Consumer and Other 
 
Total 
 
(Dollars in thousands)
Recorded investment in loans:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
8,408

 
$
—

 
$
12,321

 
$
—

 
$
217

 
$
—

 
$
11

 
$
20,957

Collectively evaluated for impairment
408,344

 
67,038

 
879,668

 
159,247

 
246,770

 
98,657

 
10,954

 
1,870,678

  Total loans evaluated for impairment
$
416,752

 
$
67,038

 
$
891,989

 
$
159,247

 
$
246,987

 
$
98,657

 
$
10,965

 
$
1,891,635

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
5,415

 
$
—

 
$
5,846

 
$
—

 
$
239

 
$
—

 
$
101

 
$
11,601

Collectively evaluated for impairment
377,629

 
59,071

 
739,749

 
154,646

 
204,961

 
93,848

 
11,660

 
1,641,564

  Total loans evaluated for impairment
$
383,044

 
$
59,071

 
$
745,595

 
$
154,646

 
$
205,200

 
$
93,848

 
$
11,761

 
$
1,653,165
Troubled Debt Restructurings on Financing Receivables
The following table presents information regarding loans modified in a troubled debt restructuring during the years ended December 31, 2016, 2015 and 2014:
 
As of December 31,
 
2016
 
2015
 
2014
 
Number of Contracts
 
Pre-Modification of Outstanding Recorded Investment
 
Post-Modification of Outstanding Recorded Investment
 
Number of Contracts
 
Pre-Modification of Outstanding Recorded Investment
 
Post-Modification of Outstanding Recorded Investment
 
Number of Contracts
 
Pre-Modification of Outstanding Recorded Investment
 
Post-Modification of Outstanding Recorded Investment
 
(Dollars in thousands)
Commercial and industrial
21

 
$
3,939

 
$
3,939

 
6

 
$
2,959

 
$
2,959

 
—

 
$
—

 
$
—

Mortgage warehouse


 


 


 


 


 


 


 


 


Real estate:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate (including multi-family residential)
8

 
7,144

 
7,144

 
1

 
63

 
63

 
1

 
161

 
161

Commercial real estate construction and land development
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1-4 family residential (including home equity)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
1

 
6

 
6

 
2

 
20

 
20

 
—

 
—

 
—

Total
30

 
$
11,089

 
$
11,089

 
9

 
$
3,042

 
$
3,042

 
1

 
$
161

 
$
161