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Loans | 9 Months Ended
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Sep. 30, 2023
Receivables [Abstract] |
Loans | Loans Loans were as follows:
| September 30, 2023 |  | December 31, 2022
Commercial and industrial | $ | 5,836,877 |  |  | $ | 5,674,798 |
Energy: |  |  |
Production | 743,746 |  |  | 696,570 |
Service | 191,880 |  |  | 133,542 |
Other | 71,233 |  |  | 95,617 |
Total energy | 1,006,859 |  |  | 925,729 |
Paycheck Protection Program | 17,945 |  |  | 34,852 |
Commercial real estate: |  |  |
Commercial mortgages | 6,660,367 |  |  | 6,168,910 |
Construction | 1,544,666 |  |  | 1,477,247 |
Land | 533,418 |  |  | 537,168 |
Total commercial real estate | 8,738,451 |  |  | 8,183,325 |
Consumer real estate: |  |  |
Home equity lines of credit | 753,020 |  |  | 691,841 |
Home equity loans | 662,827 |  |  | 449,507 |
Home improvement loans | 733,120 |  |  | 577,377 |
Other | 190,396 |  |  | 124,814 |
Total consumer real estate | 2,339,363 |  |  | 1,843,539 |
Total real estate | 11,077,814 |  |  | 10,026,864 |
Consumer and other | 459,764 |  |  | 492,726 |
Total loans | $ | 18,399,259 |  |  | $ | 17,154,969 |
Concentrations of Credit. Most of our lending activity occurs within the State of Texas, including the four largest metropolitan areas of Austin, Dallas/Ft. Worth, Houston, and San Antonio, as well as other markets. The majority of our loan portfolio consists of commercial and industrial and commercial real estate loans. As of September 30, 2023, there were no concentrations of loans related to any single industry in excess of 10% of total loans. At that date, the largest industry concentrations were related to the automobile dealerships industry, which totaled 5.6% of total loans and the energy industry, which totaled 5.5% of total loans. Unfunded commitments to extend credit and standby letters of credit issued to customers in the automobile dealership industry totaled $459.5 million and $20.2 million, respectively, as of September 30, 2023, while unfunded commitments to extend credit and standby letters of credit issued to customers in the energy industry totaled $1.0 billion and $87.2 million, respectively, as of September 30, 2023. Foreign Loans. We have U.S. dollar denominated loans and commitments to borrowers in Mexico. The outstanding balance of these loans and the unfunded amounts available under these commitments were not significant at September 30, 2023 or December 31, 2022. Related Party Loans. In the ordinary course of business, we have granted loans to certain directors, executive officers, and their affiliates (collectively referred to as “related parties”). Such loans totaled $396.7 million at September 30, 2023 and $391.3 million at December 31, 2022. Accrued Interest Receivable. Accrued interest receivable on loans totaled $83.9 million and $68.7 million at September 30, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets. Non-Accrual and Past Due Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Non-accrual loans, segregated by class of loans, were as follows:
| September 30, 2023 |  | December 31, 2022
| Total Non-Accrual |  | Non-Accrual with No Credit Loss Allowance |  | Total Non-Accrual |  | Non-Accrual with No Credit Loss Allowance
Commercial and industrial | $ | 27,326 |  |  | $ | 3,693 |  |  | $ | 18,130 |  |  | $ | 8,514 |
Energy | 14,200 |  |  | 9,698 |  |  | 15,224 |  |  | 7,139 |
Commercial real estate: |  |  |  |  |  |  |
Buildings, land, and other | 23,112 |  |  | 5,100 |  |  | 3,552 |  |  | 1,991 |
Construction | — |  |  | — |  |  | — |  |  | — |
Consumer real estate | 2,537 |  |  | 202 |  |  | 927 |  |  | 927 |
Consumer and other | — |  |  | — |  |  | — |  |  | — |
Total | $ | 67,175 |  |  | $ | 18,693 |  |  | $ | 37,833 |  |  | $ | 18,571 |
The following table presents non-accrual loans as of September 30, 2023 by class and year of origination.
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term |  | Total
Commercial and industrial | $ | — |  |  | $ | 359 |  |  | $ | 84 |  |  | $ | 747 |  |  | $ | 2,812 |  |  | $ | 1,068 |  |  | $ | 21,924 |  |  | $ | 332 |  |  | $ | 27,326 |
Energy | 8,148 |  |  | — |  |  | — |  |  | 56 |  |  | 1,348 |  |  | — |  |  | 4,502 |  |  | 146 |  |  | 14,200 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other | 18,438 |  |  | 105 |  |  | 296 |  |  | — |  |  | 1,463 |  |  | 2,810 |  |  | — |  |  | — |  |  | 23,112 |
Construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer real estate | — |  |  | — |  |  | — |  |  | 38 |  |  | 2,335 |  |  | 93 |  |  | — |  |  | 71 |  |  | 2,537 |
Consumer and other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 26,586 |  |  | $ | 464 |  |  | $ | 380 |  |  | $ | 841 |  |  | $ | 7,958 |  |  | $ | 3,971 |  |  | $ | 26,426 |  |  | $ | 549 |  |  | $ | 67,175 |
In the table above, energy and commercial real estate loans reported as 2023 originations as of September 30, 2023 were first originated in years prior to 2023 but were renewed in the current year. Had non-accrual loans performed in accordance with their original contract terms, we would have recognized additional interest income, net of tax, of approximately $1.2 million and $2.7 million for the three and nine months ended September 30, 2023, respectively, and approximately $372 thousand and $1.2 million for the three and nine months ended September 30, 2022, respectively. An age analysis of past due loans (including both accruing and non-accruing loans), segregated by class of loans, as of September 30, 2023 was as follows:
| Loans 30-89 Days Past Due |  | Loans 90 or More Days Past Due |  | Total Past Due Loans |  | Current Loans |  | Total Loans |  | Accruing Loans 90 or More Days Past Due
Commercial and industrial | $ | 29,967 |  |  | $ | 9,682 |  |  | $ | 39,649 |  |  | $ | 5,797,228 |  |  | $ | 5,836,877 |  |  | $ | 5,404 |
Energy | 1,684 |  |  | 6,052 |  |  | 7,736 |  |  | 999,123 |  |  | 1,006,859 |  |  | — |
Paycheck Protection Program | 2,000 |  |  | 1,954 |  |  | 3,954 |  |  | 13,991 |  |  | 17,945 |  |  | 1,954 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other | 11,364 |  |  | 1,452 |  |  | 12,816 |  |  | 7,180,969 |  |  | 7,193,785 |  |  | 1,056 |
Construction | 8,523 |  |  | — |  |  | 8,523 |  |  | 1,536,143 |  |  | 1,544,666 |  |  | — |
Consumer real estate | 12,106 |  |  | 6,999 |  |  | 19,105 |  |  | 2,320,258 |  |  | 2,339,363 |  |  | 6,801 |
Consumer and other | 5,041 |  |  | 523 |  |  | 5,564 |  |  | 454,200 |  |  | 459,764 |  |  | 523 |
Total | $ | 70,685 |  |  | $ | 26,662 |  |  | $ | 97,347 |  |  | $ | 18,301,912 |  |  | $ | 18,399,259 |  |  | $ | 15,738 |
Modifications to Borrowers Experiencing Financial Difficulty. From time to time, we may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications may result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of a principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension or a combination thereof, among other things. The period-end balance of loan modifications, segregated by type of modification, to borrowers experiencing financial difficulty during the nine months ended September 30, 2023 and September 30, 2022 are set forth in the table below, regardless of whether such modifications resulted in a new loan. There were no commitments to lend additional funds to these borrowers at September 30, 2023.
|  |  |  |  | Payment Delay |  | Percent of Total Class of Loans |  | Combination: Payment Delay and Term Extension |  | Percent of Total Class of Loans |  | Combination: Interest Rate Reduction and Term Extension |  | Percent of Total Class of Loans
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  |  |  | $ | — |  |  | — | % |  | $ | 15,912 |  |  | 0.3 | % |  | $ | — |  |  | — | %
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other |  |  |  |  | — |  |  | — |  |  | 19,785 |  |  | 0.3 |  |  | 2,100 |  |  | — |
|  |  |  |  | $ | — |  |  | — |  |  | $ | 35,697 |  |  | 0.2 |  |  | $ | 2,100 |  |  | — |
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other |  |  |  |  | $ | 1,083 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |
|  |  |  |  | $ | 1,083 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |
During the third quarter of 2023, we modified the interest rate on one loan from a variable rate of prime plus a spread of 1.75% (10.25% as of the modification date) to a fixed rate of 6.74% in addition to extending the term of the loan. The financial effects of the other loan modifications made to borrowers experiencing financial difficulty during the nine months ended September 30, 2023 were not significant. The loan modifications reported in the table above did not significantly impact our determination of the allowance for credit losses on loans during the nine months ended September 30, 2023. Information as of or for the nine months ended September 30, 2023 and September 30, 2022 related to loans modified (by type of modification) in the preceding twelve months, respectively, whereby the borrower was experiencing financial difficulty at the time of modification is set forth in the following table.
|  |  |  | September 30, 2023 |  |  |  |  |  | September 30, 2022
|  |  |  |  | Combination: Payment Delay and Term Extension |  | Combination: Interest Rate Reduction and Term Extension |  |  |  |  |  | Payment Delay |  | Combination: Payment Delay and Term Extension
Past due in excess of 90 days or on non-accrual status at period-end: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other |  |  |  |  | $ | — |  |  | $ | 2,100 |  |  |  |  |  |  | $ | 1,083 |  |  | $ | — |
|  |  |  |  | $ | — |  |  | $ | 2,100 |  |  |  |  |  |  | $ | 1,083 |  |  | $ | — |
Charge-offs during the period: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other |  |  |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | 371 |  |  | $ | 352 |
|  |  |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | 371 |  |  | $ | 352 |
Proceeds from sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, and other |  |  |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 1,070 |
|  |  |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 1,070 |
Credit Quality Indicators. As part of the on-going monitoring of the credit quality of our loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk grade of commercial loans, (ii) the level of classified commercial loans, (iii) the delinquency status of consumer loans, (iv) non-performing loans (see details above) and (v) the general economic conditions in the State of Texas. We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of 1 to 14. A description of the general characteristics of the 14 risk grades is set forth in our 2022 Form 10-K. We monitor portfolio credit quality by the weighted-average risk grade of each class of commercial loan. Individual relationship managers, under the oversight of credit administration, review updated financial information for all pass grade loans to reassess the risk grade on at least an annual basis. When a loan has a risk grade of 9, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” where a significant risk-modifying action is anticipated in the near term. When a loan has a risk grade of 10 or higher, a special assets officer monitors the loan on an on-going basis. The following table presents weighted-average risk grades for all commercial loans, by class and year of origination/renewal, as of September 30, 2023. Paycheck Protection Program (“PPP”) loans are excluded as such loans are fully guaranteed by the Small Business Administration (“SBA”).
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term |  | Total |  | W/A Risk Grade
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk grades 1-8 | $ | 1,360,645 |  |  | $ | 860,771 |  |  | $ | 495,449 |  |  | $ | 383,880 |  |  | $ | 182,663 |  |  | $ | 221,704 |  |  | $ | 2,034,460 |  |  | $ | 42,098 |  |  | $ | 5,581,670 |  |  | 6.29 |
Risk grade 9 | 16,491 |  |  | 9,544 |  |  | 5,764 |  |  | 2,837 |  |  | 1,492 |  |  | 9,823 |  |  | 49,123 |  |  | 5,016 |  |  | 100,090 |  |  | 9.00 |
Risk grade 10 | 9,184 |  |  | 904 |  |  | 912 |  |  | 312 |  |  | 4,121 |  |  | 619 |  |  | 34,027 |  |  | 1,021 |  |  | 51,100 |  |  | 10.00 |
Risk grade 11 | 5,232 |  |  | 5,422 |  |  | 26,626 |  |  | 8,652 |  |  | 2,619 |  |  | 1,389 |  |  | 13,336 |  |  | 13,415 |  |  | 76,691 |  |  | 11.00 |
Risk grade 12 | — |  |  | 359 |  |  | 84 |  |  | 641 |  |  | 2,663 |  |  | 1,068 |  |  | 16,817 |  |  | 332 |  |  | 21,964 |  |  | 12.00 |
Risk grade 13 | — |  |  | — |  |  | — |  |  | 106 |  |  | 149 |  |  | — |  |  | 5,107 |  |  | — |  |  | 5,362 |  |  | 13.00 |
| $ | 1,391,552 |  |  | $ | 877,000 |  |  | $ | 528,835 |  |  | $ | 396,428 |  |  | $ | 193,707 |  |  | $ | 234,603 |  |  | $ | 2,152,870 |  |  | $ | 61,882 |  |  | $ | 5,836,877 |  |  | 6.46 |
W/A risk grade | 6.24 |  |  | 6.79 |  |  | 7.22 |  |  | 5.85 |  |  | 6.15 |  |  | 6.10 |  |  | 6.43 |  |  | 7.86 |  |  | 6.46 |  |  |
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term |  | Total |  | W/A Risk Grade
Energy |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk grades 1-8 | $ | 288,729 |  |  | $ | 65,086 |  |  | $ | 78,601 |  |  | $ | 3,959 |  |  | $ | 2,057 |  |  | $ | 4,164 |  |  | $ | 453,243 |  |  | $ | 7,871 |  |  | $ | 903,710 |  |  | 5.67 |
Risk grade 9 | 35,025 |  |  | 7,492 |  |  | 1,184 |  |  | — |  |  | 475 |  |  | — |  |  | 4,355 |  |  | 18 |  |  | 48,549 |  |  | 9.00 |
Risk grade 10 | — |  |  | — |  |  | 38 |  |  | — |  |  | 326 |  |  | 710 |  |  | 34,925 |  |  | — |  |  | 35,999 |  |  | 10.00 |
Risk grade 11 | — |  |  | — |  |  | 88 |  |  | 147 |  |  | 3,031 |  |  | — |  |  | — |  |  | 1,135 |  |  | 4,401 |  |  | 11.00 |
Risk grade 12 | 8,148 |  |  | — |  |  | — |  |  | 56 |  |  | 1,348 |  |  | — |  |  | 1,802 |  |  | 146 |  |  | 11,500 |  |  | 12.00 |
Risk grade 13 | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,700 |  |  | — |  |  | 2,700 |  |  | 13.00 |
| $ | 331,902 |  |  | $ | 72,578 |  |  | $ | 79,911 |  |  | $ | 4,162 |  |  | $ | 7,237 |  |  | $ | 4,874 |  |  | $ | 497,025 |  |  | $ | 9,170 |  |  | $ | 1,006,859 |  |  | 6.10 |
W/A risk grade | 6.35 |  |  | 6.86 |  |  | 6.05 |  |  | 6.92 |  |  | 9.94 |  |  | 7.19 |  |  | 5.73 |  |  | 7.90 |  |  | 6.10 |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land, other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk grades 1-8 | $ | 1,185,417 |  |  | $ | 1,718,438 |  |  | $ | 1,303,804 |  |  | $ | 792,410 |  |  | $ | 547,600 |  |  | $ | 924,632 |  |  | $ | 223,084 |  |  | $ | 100,763 |  |  | $ | 6,796,148 |  |  | 7.01 |
Risk grade 9 | 8,476 |  |  | 22,301 |  |  | 53,874 |  |  | 38,898 |  |  | 16,916 |  |  | 26,598 |  |  | 2,175 |  |  | 541 |  |  | 169,779 |  |  | 9.00 |
Risk grade 10 | 217 |  |  | 29,842 |  |  | 7,268 |  |  | 29,238 |  |  | 775 |  |  | 3,219 |  |  | — |  |  | 2,599 |  |  | 73,158 |  |  | 10.00 |
Risk grade 11 | 4,723 |  |  | 5,985 |  |  | 49,075 |  |  | 10,716 |  |  | 1,697 |  |  | 55,729 |  |  | 2,993 |  |  | 670 |  |  | 131,588 |  |  | 11.00 |
Risk grade 12 | 17,288 |  |  | 105 |  |  | — |  |  | — |  |  | 1,463 |  |  | 2,810 |  |  | — |  |  | — |  |  | 21,666 |  |  | 12.00 |
Risk grade 13 | 1,150 |  |  | — |  |  | 296 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,446 |  |  | 13.00 |
| $ | 1,217,271 |  |  | $ | 1,776,671 |  |  | $ | 1,414,317 |  |  | $ | 871,262 |  |  | $ | 568,451 |  |  | $ | 1,012,988 |  |  | $ | 228,252 |  |  | $ | 104,573 |  |  | $ | 7,193,785 |  |  | 7.17 |
W/A risk grade | 7.21 |  |  | 7.13 |  |  | 7.34 |  |  | 7.22 |  |  | 6.83 |  |  | 7.18 |  |  | 7.29 |  |  | 6.49 |  |  | 7.17 |  |  |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk grades 1-8 | $ | 390,535 |  |  | $ | 526,048 |  |  | $ | 331,652 |  |  | $ | 47,871 |  |  | $ | 305 |  |  | $ | 1,638 |  |  | $ | 138,353 |  |  | $ | — |  |  | $ | 1,436,402 |  |  | 7.25 |
Risk grade 9 | — |  |  | 16,259 |  |  | 29,569 |  |  | — |  |  | — |  |  | — |  |  | 4,773 |  |  | — |  |  | 50,601 |  |  | 9.00 |
Risk grade 10 | 23,446 |  |  | — |  |  | 5,353 |  |  | — |  |  | — |  |  | — |  |  | 7,311 |  |  | — |  |  | 36,110 |  |  | 10.00 |
Risk grade 11 | 5,838 |  |  | 13,104 |  |  | 2,611 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 21,553 |  |  | 11.00 |
Risk grade 12 | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12.00 |
Risk grade 13 | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13.00 |
| $ | 419,819 |  |  | $ | 555,411 |  |  | $ | 369,185 |  |  | $ | 47,871 |  |  | $ | 305 |  |  | $ | 1,638 |  |  | $ | 150,437 |  |  | $ | — |  |  | $ | 1,544,666 |  |  | 7.43 |
W/A risk grade | 7.59 |  |  | 7.30 |  |  | 7.84 |  |  | 4.39 |  |  | 7.23 |  |  | 6.78 |  |  | 7.42 |  |  | — |  |  | 7.43 |  |  |
Total commercial real estate | $ | 1,637,090 |  |  | $ | 2,332,082 |  |  | $ | 1,783,502 |  |  | $ | 919,133 |  |  | $ | 568,756 |  |  | $ | 1,014,626 |  |  | $ | 378,689 |  |  | $ | 104,573 |  |  | $ | 8,738,451 |  |  | 7.22 |
W/A risk grade | 7.30 |  |  | 7.17 |  |  | 7.44 |  |  | 7.07 |  |  | 6.83 |  |  | 7.18 |  |  | 7.35 |  |  | 6.49 |  |  | 7.22 |  |  |
In the table above, certain loans are reported as 2023 originations and have risk grades of 11 or higher. These loans were, for the most part, first originated in various years prior to 2023 but were renewed in the current year. The following tables present weighted average risk grades for all commercial loans by class as of December 31, 2022. Refer to our 2022 Form 10-K for details of these loans by year of origination/renewal.
| Commercial and Industrial |  | Energy |  | Commercial Real Estate - Buildings, Land and Other |  | Commercial Real Estate - Construction |  | Total Commercial Real Estate
| W/A Risk Grade |  | Loans |  | W/A Risk Grade |  | Loans |  | W/A Risk Grade |  | Loans |  | W/A Risk Grade |  | Loans |  | W/A Risk Grade |  | Loans
Risk grades 1-8 | 6.24 |  |  | $ | 5,435,917 |  |  | 5.44 |  |  | $ | 887,182 |  |  | 6.94 |  |  | $ | 6,340,028 |  |  | 7.04 |  |  | $ | 1,430,012 |  |  | 6.96 |  |  | $ | 7,770,040 |
Risk grade 9 | 9.00 |  |  | 146,192 |  |  | 9.00 |  |  | 11,112 |  |  | 9.00 |  |  | 189,928 |  |  | 9.00 |  |  | 34,952 |  |  | 9.00 |  |  | 224,880 |
Risk grade 10 | 10.00 |  |  | 37,596 |  |  | 10.00 |  |  | 642 |  |  | 10.00 |  |  | 91,020 |  |  | 10.00 |  |  | 931 |  |  | 10.00 |  |  | 91,951 |
Risk grade 11 | 11.00 |  |  | 36,963 |  |  | 11.00 |  |  | 11,569 |  |  | 11.00 |  |  | 81,550 |  |  | 11.00 |  |  | 11,352 |  |  | 11.00 |  |  | 92,902 |
Risk grade 12 | 12.00 |  |  | 12,521 |  |  | 12.00 |  |  | 10,840 |  |  | 12.00 |  |  | 2,957 |  |  | 12.00 |  |  | — |  |  | 12.00 |  |  | 2,957 |
Risk grade 13 | 13.00 |  |  | 5,609 |  |  | 13.00 |  |  | 4,384 |  |  | 13.00 |  |  | 595 |  |  | 13.00 |  |  | — |  |  | 13.00 |  |  | 595 |
Total | 6.39 |  |  | $ | 5,674,798 |  |  | 5.67 |  |  | $ | 925,729 |  |  | 7.09 |  |  | $ | 6,706,078 |  |  | 7.12 |  |  | $ | 1,477,247 |  |  | 7.10 |  |  | $ | 8,183,325 |
Information about the payment status of consumer loans, segregated by portfolio segment and year of origination, as of September 30, 2023 was as follows:
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term |  | Total
Consumer real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Past due 30-89 days | $ | 222 |  |  | $ | 1,201 |  |  | $ | 1,034 |  |  | $ | 535 |  |  | $ | 283 |  |  | $ | 2,329 |  |  | $ | 6,240 |  |  | $ | 262 |  |  | $ | 12,106 |
Past due 90 or more days | — |  |  | 534 |  |  | 650 |  |  | 38 |  |  | 22 |  |  | 1,186 |  |  | 1,509 |  |  | 3,060 |  |  | 6,999 |
Total past due | 222 |  |  | 1,735 |  |  | 1,684 |  |  | 573 |  |  | 305 |  |  | 3,515 |  |  | 7,749 |  |  | 3,322 |  |  | 19,105 |
Current loans | 470,908 |  |  | 439,461 |  |  | 288,751 |  |  | 176,252 |  |  | 61,336 |  |  | 141,551 |  |  | 734,358 |  |  | 7,641 |  |  | 2,320,258 |
Total | $ | 471,130 |  |  | $ | 441,196 |  |  | $ | 290,435 |  |  | $ | 176,825 |  |  | $ | 61,641 |  |  | $ | 145,066 |  |  | $ | 742,107 |  |  | $ | 10,963 |  |  | $ | 2,339,363 |
Consumer and other: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Past due 30-89 days | $ | 2,403 |  |  | $ | 377 |  |  | $ | 193 |  |  | $ | 47 |  |  | $ | 35 |  |  | $ | 49 |  |  | $ | 1,818 |  |  | $ | 119 |  |  | $ | 5,041 |
Past due 90 or more days | 95 |  |  | 62 |  |  | — |  |  | — |  |  | — |  |  | 11 |  |  | 350 |  |  | 5 |  |  | 523 |
Total past due | 2,498 |  |  | 439 |  |  | 193 |  |  | 47 |  |  | 35 |  |  | — |  |  | 2,168 |  |  | 124 |  |  | 5,564 |
Current loans | 59,223 |  |  | 32,960 |  |  | 9,543 |  |  | 4,076 |  |  | 1,641 |  |  | 1,645 |  |  | 323,629 |  |  | 21,483 |  |  | 454,200 |
Total | $ | 61,721 |  |  | $ | 33,399 |  |  | $ | 9,736 |  |  | $ | 4,123 |  |  | $ | 1,676 |  |  | $ | 1,645 |  |  | $ | 325,797 |  |  | $ | 21,607 |  |  | $ | 459,764 |
Revolving loans that converted to term during the three and nine months ended September 30, 2023 and 2022 were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Commercial and industrial | $ | 13,144 |  |  | $ | 2,368 |  |  | $ | 18,246 |  |  | $ | 22,579 |
Energy | 3,451 |  |  | 1,582 |  |  | 4,050 |  |  | 1,806 |
Commercial real estate: |  |  |  |  |  |  |
Buildings, land and other | — |  |  | — |  |  | 5,635 |  |  | 10,759 |
Construction | — |  |  | — |  |  | — |  |  | 4,414 |
Consumer real estate | 709 |  |  | 700 |  |  | 1,630 |  |  | 2,223 |
Consumer and other | 1,699 |  |  | 1,963 |  |  | 5,151 |  |  | 7,691 |
Total | $ | 19,003 |  |  | $ | 6,613 |  |  | $ | 34,712 |  |  | $ | 49,472 |
In assessing the general economic conditions in the State of Texas, management monitors and tracks the Texas Leading Index (“TLI”), which is produced by the Federal Reserve Bank of Dallas. The TLI, the components of which are more fully described in our 2022 Form 10-K, totaled 129.0 at September 30, 2023 and 130.4 at December 31, 2022. A lower TLI value implies less favorable economic conditions. Allowance For Credit Losses - Loans. The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectibility over the loans' contractual terms, adjusted for expected prepayments when appropriate. Credit loss expense related to loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications. Our allowance methodology is more fully described in our 2022 Form 10-K. During the first quarter of 2023, we recalibrated and updated all of our commercial loan models, with the exception of the models related to commercial real estate - non-owner-occupied loans, as well as our consumer real estate loan models. While the fundamental modeling methodologies remain unchanged, the updates included (i) separating the energy loan pool from the commercial and industrial pool as a result of differences in loss characteristics observed in recent history and (ii) changing the modeling approach related to loan renewals whereby each renewal is treated as a separate loan which impacted loan life assumptions. For modeling purposes, our loan pools now include (i) commercial and industrial non-revolving, (ii) commercial and industrial revolving, (iii) energy, (iv) commercial real estate - owner occupied, (v) commercial real estate - non-owner occupied, (vi) commercial real estate - construction/land development, (vii) consumer real estate and (viii) consumer and other. The overall approximate impact of the model updates during the first quarter was a $45.0 million decrease in modeled expected credit losses on loans though the impact of this decrease was largely offset with qualitative adjustments. The decrease in modeled expected credit losses on loans was largely driven by lower measurements for probability of default (“PD”) and loss given default (“LGD”) based on the historical data series (2008 through 2018) used for the recalibration. This period was one of relatively low losses and included higher levels of government stimulus. The lower PD and LGD measurements were also impacted by shorter loan life assumptions due to the aforementioned change in the modeling approach related to loan renewals. The following table presents details of the allowance for credit losses on loans segregated by loan portfolio segment as of September 30, 2023 and December 31, 2022. No allowance for credit losses has been recognized for PPP loans as such loans are fully guaranteed by the SBA.
September 30, 2023 | Commercial and Industrial |  | Energy |  | Commercial Real Estate |  | Consumer Real Estate |  | Consumer and Other |  | Total
Modeled expected credit losses | $ | 45,398 |  |  | $ | 7,065 |  |  | $ | 16,366 |  |  | $ | 14,239 |  |  | $ | 5,258 |  |  | $ | 88,326 |
Q-Factor and other qualitative adjustments | 23,547 |  |  | 7,301 |  |  | 108,680 |  |  | 498 |  |  | 4,073 |  |  | 144,099 |
Specific allocations | 5,362 |  |  | 2,700 |  |  | 1,446 |  |  | 302 |  |  | — |  |  | 9,810 |
Total | $ | 74,307 |  |  | $ | 17,066 |  |  | $ | 126,492 |  |  | $ | 15,039 |  |  | $ | 9,331 |  |  | $ | 242,235 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Modeled expected credit losses | $ | 61,918 |  |  | $ | 8,531 |  |  | $ | 27,013 |  |  | $ | 7,847 |  |  | $ | 4,983 |  |  | $ | 110,292 |
Q-Factor and other qualitative adjustments | 36,237 |  |  | 5,148 |  |  | 61,572 |  |  | 157 |  |  | 2,034 |  |  | 105,148 |
Specific allocations | 6,082 |  |  | 4,383 |  |  | 1,716 |  |  | — |  |  | — |  |  | 12,181 |
Total | $ | 104,237 |  |  | $ | 18,062 |  |  | $ | 90,301 |  |  | $ | 8,004 |  |  | $ | 7,017 |  |  | $ | 227,621 |
The following table details activity in the allowance for credit losses on loans by portfolio segment for the three and nine months ended September 30, 2023 and 2022. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. No allowance for credit losses has been recognized for PPP loans as such loans are fully guaranteed by the SBA.
| Commercial and Industrial |  | Energy |  | Commercial Real Estate |  | Consumer Real Estate |  | Consumer and Other |  | Total
Three months ended: |  |  |  |  |  |  |  |  |  |  |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 75,166 |  |  | $ | 14,929 |  |  | $ | 120,926 |  |  | $ | 13,035 |  |  | $ | 9,563 |  |  | $ | 233,619 |
Credit loss expense (benefit) | (623) |  |  | 1,784 |  |  | 5,424 |  |  | 2,130 |  |  | 4,893 |  |  | 13,608 |
Charge-offs | (943) |  |  | — |  |  | (62) |  |  | (170) |  |  | (8,189) |  |  | (9,364) |
Recoveries | 707 |  |  | 353 |  |  | 204 |  |  | 44 |  |  | 3,064 |  |  | 4,372 |
Net (charge-offs) recoveries | (236) |  |  | 353 |  |  | 142 |  |  | (126) |  |  | (5,125) |  |  | (4,992) |
Ending balance | $ | 74,307 |  |  | $ | 17,066 |  |  | $ | 126,492 |  |  | $ | 15,039 |  |  | $ | 9,331 |  |  | $ | 242,235 |
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 87,270 |  |  | $ | 16,267 |  |  | $ | 117,106 |  |  | $ | 6,854 |  |  | $ | 12,135 |  |  | $ | 239,632 |
Credit loss expense (benefit) | 10,844 |  |  | 2,491 |  |  | (16,522) |  |  | 940 |  |  | (216) |  |  | (2,463) |
Charge-offs | (572) |  |  | — |  |  | — |  |  | (68) |  |  | (6,549) |  |  | (7,189) |
Recoveries | 1,288 |  |  | 93 |  |  | 23 |  |  | 309 |  |  | 2,622 |  |  | 4,335 |
Net (charge-offs) recoveries | 716 |  |  | 93 |  |  | 23 |  |  | 241 |  |  | (3,927) |  |  | (2,854) |
Ending balance | $ | 98,830 |  |  | $ | 18,851 |  |  | $ | 100,607 |  |  | $ | 8,035 |  |  | $ | 7,992 |  |  | $ | 234,315 |
| Commercial and Industrial |  | Energy |  | Commercial Real Estate |  | Consumer Real Estate |  | Consumer and Other |  | Total
Nine months ended: |  |  |  |  |  |  |  |  |  |  |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 104,237 |  |  | $ | 18,062 |  |  | $ | 90,301 |  |  | $ | 8,004 |  |  | $ | 7,017 |  |  | $ | 227,621 |
Credit loss expense (benefit) | (18,903) |  |  | (1,683) |  |  | 35,918 |  |  | 7,235 |  |  | 15,649 |  |  | 38,216 |
Charge-offs | (14,259) |  |  | (518) |  |  | (62) |  |  | (1,500) |  |  | (22,147) |  |  | (38,486) |
Recoveries | 3,232 |  |  | 1,205 |  |  | 335 |  |  | 1,300 |  |  | 8,812 |  |  | 14,884 |
Net (charge-offs) recoveries | (11,027) |  |  | 687 |  |  | 273 |  |  | (200) |  |  | (13,335) |  |  | (23,602) |
Ending balance | $ | 74,307 |  |  | $ | 17,066 |  |  | $ | 126,492 |  |  | $ | 15,039 |  |  | $ | 9,331 |  |  | $ | 242,235 |
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 72,091 |  |  | $ | 17,217 |  |  | $ | 144,936 |  |  | $ | 6,585 |  |  | $ | 7,837 |  |  | $ | 248,666 |
Credit loss expense (benefit) | 29,347 |  |  | 874 |  |  | (44,363) |  |  | 1,497 |  |  | 10,250 |  |  | (2,395) |
Charge-offs | (5,918) |  |  | (371) |  |  | (702) |  |  | (430) |  |  | (17,642) |  |  | (25,063) |
Recoveries | 3,310 |  |  | 1,131 |  |  | 736 |  |  | 383 |  |  | 7,547 |  |  | 13,107 |
Net (charge-offs) recoveries | (2,608) |  |  | 760 |  |  | 34 |  |  | (47) |  |  | (10,095) |  |  | (11,956) |
Ending balance | $ | 98,830 |  |  | $ | 18,851 |  |  | $ | 100,607 |  |  | $ | 8,035 |  |  | $ | 7,992 |  |  | $ | 234,315 |
The following table presents year-to-date gross charge-offs by year of origination as of September 30, 2023.
| 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term |  | Total
Commercial and industrial | $ | 124 |  |  | $ | 952 |  |  | $ | 178 |  |  | $ | 54 |  |  | $ | 25 |  |  | $ | 29 |  |  | $ | 7,594 |  |  | $ | 5,303 |  |  | $ | 14,259 |
Energy | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 518 |  |  | 518 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Buildings, land and other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 62 |  |  | — |  |  | — |  |  | 62 |
Construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer real estate | — |  |  | — |  |  | 280 |  |  | — |  |  | — |  |  | 130 |  |  | 1,090 |  |  | — |  |  | 1,500 |
Consumer and other | 15,543 |  |  | 4,389 |  |  | 60 |  |  | 12 |  |  | 1 |  |  | 23 |  |  | 1,692 |  |  | 427 |  |  | 22,147 |
Total | $ | 15,667 |  |  | $ | 5,341 |  |  | $ | 518 |  |  | $ | 66 |  |  | $ | 26 |  |  | $ | 244 |  |  | $ | 10,376 |  |  | $ | 6,248 |  |  | $ | 38,486 |
In the table above, $15.5 million of the consumer and other loan charge-offs reported as 2023 originations and $4.2 million of the total reported as 2022 originations were related to deposit overdrafts. The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan portfolio segment, as of September 30, 2023 and December 31, 2022.
| September 30, 2023 |  | December 31, 2022
Loan Balance |  | Specific Allocations |  | Loan Balance |  | Specific Allocations
Commercial and industrial | $ | 26,455 |  |  | $ | 5,362 |  |  | $ | 18,980 |  |  | $ | 6,082 |
Energy | 14,054 |  |  | 2,700 |  |  | 15,058 |  |  | 4,383 |
Paycheck Protection Program | — |  |  | — |  |  | — |  |  | — |
Commercial real estate: |  |  |  |  |  |  |
Buildings, land and other | 22,318 |  |  | 1,446 |  |  | 17,711 |  |  | 1,716 |
Construction | — |  |  | — |  |  | — |  |  | — |
Consumer real estate | 2,335 |  |  | 302 |  |  | 827 |  |  | — |
Consumer and other | — |  |  | — |  |  | — |  |  | — |
Total | $ | 65,162 |  |  | $ | 9,810 |  |  | $ | 52,576 |  |  | $ | 12,181 |

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