Loans and Allowances for Credit Losses

Loans

Loans are either secured or unsecured based on the type of loan and the financial condition of the borrower. Repayment is generally expected from cash flow or proceeds from the sale of selected assets of the borrower. BOK Financial is exposed to risk of loss on loans due to the borrower’s difficulties, which may arise from any number of factors, including problems within the respective industry or local economic conditions. Access to collateral, in the event of borrower default, is reasonably assured through adherence to applicable lending laws and through sound lending standards and credit review procedures. Accounting policies for all loans, excluding residential mortgage loans guaranteed by U.S. government agencies, are as follows.

Interest is accrued at the applicable interest rate on the principal amount outstanding. Loans are placed on nonaccruing status when, in the opinion of management, full collection of principal or interest is uncertain. Internally risk graded loans are individually evaluated for nonaccruing status quarterly. Non-risk graded loans are generally placed on nonaccruing status when more than 90 days past due or within 60 days of being notified of the borrower's bankruptcy filing. Interest previously accrued but not collected is charged against interest income when the loan is placed on nonaccruing status. Payments on nonaccruing loans are applied to principal or recognized as interest income, according to management’s judgment as to the collectability of principal. Loans may be returned to accruing status when, in the opinion of management, full collection of principal and interest, including principal previously charged off, is probable based on improvements in the borrower’s financial condition or a sustained period of performance.

Loans to borrowers experiencing financial difficulties may be modified in troubled debt restructurings ("TDRs"). All TDRs are classified as nonaccruing, excluding loans guaranteed by U.S. government agencies. Modifications generally consist of extension of payment terms or interest rate concessions and may result either voluntarily through negotiations with the borrower or involuntarily through court order. Generally, principal and accrued but unpaid interest is not voluntarily forgiven.

Performing loans may be renewed under the current collateral value, debt service ratio and other underwriting standards. Nonaccruing loans may be renewed and will remain classified as nonaccruing.

Occasionally, loans, other than residential mortgage loans, may be held for sale in order to manage credit concentration. These loans are carried at the lower of cost or fair value with gains or losses recognized in other gains (losses), net in the Statements of Earnings.

All loans are charged off when the loan balance or a portion of the loan balance is no longer supported by the paying capacity of the borrower or when the required cash flow is reduced in a TDR. The charge-off amount is determined through a quarterly evaluation of available cash resources and collateral value and charge-offs are taken in the quarter in which the loss is identified. Non-risk graded loans that are past due between 60 days and 180 days, based on the loan product type, are charged off. Loans to borrowers whose personal obligation has been discharged through Chapter 7 bankruptcy proceedings are charged off within 60 days of notice of the bankruptcy filing, regardless of payment status.

Loan origination and commitment fees and direct loan acquisition and origination costs are deferred and amortized as an adjustment to yield over the life of the loan or over the commitment period, as applicable. Amortization does not anticipate loan prepayments. Net unamortized fees are recognized in full at time of payoff.

Qualifying residential mortgage loans guaranteed by U.S. government agencies have been sold into GNMA pools. Under certain performance conditions specified in government programs, the Company may have the right, but not the obligation to repurchase loans from GNMA pools. These loans no longer qualify for sale accounting and are recognized in the Consolidated Balance Sheets. Guaranteed loans are considered impaired because we do not expect to receive all principal and interest based on the loan's contractual terms. The principal balance continues to be guaranteed; however, interest accrues at a curtailed rate as specified in the programs. The carrying value of these loans is reduced based on an estimate of the expected cash flows discounted at the original note rate plus a liquidity spread. Guaranteed loans may be modified in TDRs in accordance with U.S. government agency guidelines. Interest continues to accrue based on the modified rate. Guaranteed loans may either be resold into GNMA pools after a performance period specified by the programs or foreclosed and conveyed to the guarantors.

Loans are disaggregated into portfolio segments and further disaggregated into classes. The portfolio segment is the level at which the Company develops and documents a systematic method for determining its allowance for credit losses. Classes are a further disaggregation of portfolio segments based on the risk characteristics of the loans and the Company’s method for monitoring and assessing credit risk.

Portfolio segments of the loan portfolio are as follows (in thousands):



	March 31, 2018								December 31, 2017
	Fixed Rate		Variable Rate		Non-accrual		Total		Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	2,193,469	$	8,594,738	$	131,460	$	10,919,667	$	2,217,432	$	8,379,240	$	137,303	$	10,733,975
Commercial real estate	538,291		2,966,021		2,470		3,506,782		548,692		2,928,440		2,855		3,479,987
Residential mortgage	1,587,416		312,559		45,794		1,945,769		1,608,655		317,584		47,447		1,973,686
Personal	158,845		806,447		340		965,632		154,517		810,990		269		965,776
Total	$	4,478,021	$	12,679,765	$	180,064	$	17,337,850	$	4,529,296	$	12,436,254	$	187,874	$	17,153,424
Accruing loans past due (90 days)¹							$	90							$	633



	March 31, 2017
	Fixed Rate		Variable Rate		Non-accrual		Total
Commercial	$	2,201,040	$	7,969,245	$	156,825	$	10,327,110
Commercial real estate	590,375		3,276,213		4,475		3,871,063
Residential mortgage	1,616,328		283,865		46,081		1,946,274
Personal	149,312		697,912		235		847,459
Total	$	4,557,055	$	12,227,235	$	207,616	$	16,991,906
Accruing loans past due (90 days)¹							$	95


¹	Excludes residential mortgage loans guaranteed by agencies of the U.S. government

At March 31, 2018, $5.9 billion or 34 percent of our total loan portfolio is to businesses and individuals attributed to the Texas market and $3.3 billion or 19 percent of the total loan portfolio is to businesses and individuals attributed to the Oklahoma market. These geographic concentrations subject the loan portfolio to the general economic conditions within these areas.

Commercial

Commercial loans represent loans for working capital, facilities acquisition or expansion, purchases of equipment and other needs of commercial customers primarily located within our geographical footprint. Commercial loans are underwritten individually and represent ongoing relationships based on a thorough knowledge of the customer, the customer’s industry and market. While commercial loans are generally secured by the customer’s assets including real property, inventory, accounts receivable, operating equipment, interest in mineral rights and other property and may also include personal guarantees of the owners and related parties, the primary source of repayment of the loans is the ongoing cash flow from operations of the customer’s business. Inherent lending risk is centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with commercial lending policies.

At March 31, 2018, commercial loans attributed to the Texas market totaled $3.7 billion or 34 percent of the commercial loan portfolio segment, commercial loans attributed to the Oklahoma market totaled $1.9 billion or 18 percent of the commercial loan portfolio segment and commercial loans attributed to the Colorado market totaled $1.0 billion or 10 percent of the commercial loan portfolio segment.

The commercial loan portfolio segment is further divided into loan classes. The energy loan class totaled $3.0 billion or 17 percent of total loans at March 31, 2018, including $2.5 billion of outstanding loans to energy producers. Approximately 56 percent of committed production loans are secured by properties primarily producing oil and 44 percent are secured by properties producing natural gas. The services loan class totaled $2.9 billion or 17 percent of total loans at March 31, 2018. Approximately $1.4 billion of loans in the services category consist of loans with individual balances of less than $10 million. Businesses included in the services class include governmental, educational services, commercial services, loans to entities providing services for real estate and construction and consumer services. The healthcare loan class totaled $2.4 billion or 14 percent of total loans at March 31, 2018. The healthcare loan class consists primarily of loans for the development and operation of senior housing and care facilities, including independent living, assisted living and skilled nursing. Healthcare also includes loans to hospitals and other medical service providers.

Commercial Real Estate

Commercial real estate loans are for the construction of buildings or other improvements to real estate and property held by borrowers for investment purposes primarily within our geographical footprint. We require collateral values in excess of the loan amounts, demonstrated cash flows in excess of expected debt service requirements, equity investment in the project and a portion of the project already sold, leased or permanent financing already secured. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. As with commercial loans, inherent lending risks are centrally monitored on a continuous basis from underwriting throughout the life of the loan for compliance with applicable lending policies.

At March 31, 2018, 34 percent of commercial real estate loans are secured by properties primarily located in the Dallas and Houston areas of Texas. An additional 12 percent of commercial real estate loans are secured by properties located primarily in the Tulsa and Oklahoma City metropolitan areas of Oklahoma.

Residential Mortgage and Personal

Residential mortgage loans provide funds for our customers to purchase or refinance their primary residence or to borrow against the equity in their home. Residential mortgage loans are secured by a first or second mortgage on the customer’s primary residence. Personal loans consist primarily of loans secured by the cash surrender value of insurance policies and marketable securities. It also includes direct loans secured by and for the purchase of automobiles, recreational and marine equipment as well as unsecured loans. Residential mortgage and personal loans are made in accordance with underwriting policies we believe to be conservative and are fully documented. Loans may be individually underwritten or credit scored based on size and other criteria. Credit scoring is assessed based on significant credit characteristics including credit history, residential and employment stability. Residential mortgage loans retained in the Company’s portfolio are primarily composed of various mortgage programs to support customer relationships including jumbo mortgage loans, non-builder construction loans and special loan programs for high net worth individuals and certain professionals. Jumbo loans may be fixed or variable rate and are fully amortizing. Jumbo loans generally conform to government sponsored entity standards, except that the loan size exceeds maximums required under these standards. These loans generally require a minimum FICO score of 720 and a maximum debt-to-income ratio (“DTI”) of 38 percent. Loan-to-value (“LTV”) ratios are tiered from 60 percent to 100 percent, depending on the market. Special mortgage programs include fixed and variable fully amortizing loans tailored to the needs of certain healthcare professionals. Variable rate loans are fully indexed at origination and may have fixed rates for three to ten years, then adjust annually thereafter.

At March 31, 2018, residential mortgage loans included $178 million of loans guaranteed by U.S. government agencies previously sold into GNMA mortgage pools. These loans either have been repurchased or are eligible to be repurchased by the Company when certain defined delinquency criteria are met. Although payments on these loans generally are past due more than 90 days, interest continues to accrue based on the government guarantee.

Home equity loans totaled $720 million at March 31, 2018. Approximately 63 percent of the home equity loan portfolio is comprised of first lien loans and 37 percent of the home equity portfolio is comprised of junior lien loans. Junior lien loans are distributed 46 percent to amortizing term loans and 54 percent to revolving lines of credit. Home equity loans generally require a minimum FICO score of 700 and a maximum DTI of 40 percent. The maximum loan amount available for our home equity loan products is generally $400 thousand. Revolving loans have a 5 year revolving period followed by a 15 year term of amortizing repayments. Interest-only home equity loans may not be extended for any additional revolving time. All other home equity loans may be extended at management's discretion for an additional 5 year revolving term, subject to an update of certain credit information.

Credit Commitments

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At March 31, 2018, outstanding commitments totaled $10.2 billion. Because some commitments are expected to expire before being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BOK Financial uses the same credit policies in making commitments as it does loans.

The amount of collateral obtained, if deemed necessary, is based upon management’s credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Because the credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan commitments, BOK Financial uses the same credit policies in evaluating the creditworthiness of the customer. Additionally, BOK Financial uses the same evaluation process in obtaining collateral on standby letters of credit as it does for loan commitments. The term of these standby letters of credit is defined in each commitment and typically corresponds with the underlying loan commitment. At March 31, 2018, outstanding standby letters of credit totaled $664 million.

Allowances for Credit Losses

BOK Financial maintains an allowance for loan losses and an accrual for off-balance sheet credit risk. The accrual for off-balance sheet credit risk is maintained at a level that is appropriate to cover estimated losses associated with credit instruments that are not currently recognized as assets such as loan commitments, standby letters of credit or guarantees. As discussed in greater detail in Note 5, the Company also has separate accruals for off-balance sheet credit risk related to residential mortgage loans previously sold with full or partial recourse and for residential mortgage loans sold to government sponsored agencies under standard representations and warranties.

The appropriateness of the allowance for loan losses and accrual for off-balance sheet credit losses (collectively "allowance for credit losses") is assessed by management based on an ongoing quarterly evaluation of the probable estimated losses inherent in the portfolio, including probable losses on both outstanding loans and unused commitments.

The allowance for loan losses consists of specific allowances attributed to impaired loans that have not yet been charged down to amounts we expect to recover, general allowances for unimpaired loans based on estimated loss rates by loan class and nonspecific allowances based on general economic conditions, risk concentration and related factors. There have been no material changes in the approach or techniques utilized in developing the allowance for loan losses and the accrual for off-balance sheet credit losses for the three months ended March 31, 2018.

Loans are considered to be impaired when it becomes probable that BOK Financial will be unable to collect all amounts due according to the contractual terms of the loan agreements. Internally risk graded loans are evaluated individually for impairment. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on evaluation of the borrowers' ability to repay. Certain commercial loans and most residential mortgage and consumer loans are small balance, homogeneous pools of loans that are not risk graded. Non-risk graded loans are identified as impaired based on performance status. Generally, non-risk graded loans 90 days or more past due or modified in a TDR or in bankruptcy are considered to be impaired.

Specific allowances for impaired loans are measured by an evaluation of estimated future cash flows discounted at the loans’ initial effective interest rate or the fair value of collateral for certain collateral dependent loans. Collateral value of real property is generally based on third party appraisals that conform to Uniform Standards of Professional Appraisal Practice, less estimated selling costs. Appraised values are on an "as-is" basis and are generally not adjusted by the Company. Updated appraisals are obtained at least annually or more frequently if market conditions indicate collateral values have declined. Collateral value of mineral rights is generally determined by our internal staff of engineers based on projected cash flows under current market conditions. Collateral values and available cash resources that support impaired loans are evaluated quarterly. Historical statistics may be used as a practical way to estimate impairment in limited situations, such as when a collateral dependent loan is identified as impaired at the end of a reporting period, until an updated appraisal of collateral value is received or a full assessment of future cash flows is completed. Estimates of future cash flows and collateral values require significant judgments and may be volatile.

General allowances for unimpaired loans are based on estimated loss rates by loan class. The gross loss rate for each loan class is determined by the greater of the current gross loss rate based on the most recent twelve months or a ten-year gross loss rate. Recoveries are not directly considered in the estimation of loss rates. Recoveries generally do not follow predictable patterns and are not received until well after the charge-off date as a result of protracted legal actions. For risk graded loans, gross loss rates are adjusted for changes in risk grading. For each loan class, the current weighted average risk grade is compared to the long-term average risk grade. This comparison determines whether credit risk in each loan class is increasing or decreasing. Loss rates are adjusted upward or downward in proportion to changes in average risk grading. General allowances for unimpaired loans also consider inherent risks identified for each loan class. Inherent risks consider loss rates that most appropriately represent the current credit cycle and other factors attributable to specific loan classes which have not yet been represented in the gross loss rates or risk grading. These factors include changes in commodity prices or engineering imprecision, which may affect the value of reserves that secure our energy loan portfolio, construction risk that may affect commercial real estate loans, changes in regulations and public policy that may disproportionately impact health care loans and changes in loan products.

Nonspecific allowances are maintained for risks beyond factors specific to a particular loan or loan class. These factors include trends in the economy of our primary lending areas, concentrations in large balance loans and other relevant factors.

An accrual for off-balance sheet credit losses is included in Other liabilities in the Consolidated Balance Sheets. The appropriateness of this accrual is determined in the same manner as the allowance for loan losses.

A provision for credit losses is charged against or credited to earnings in amounts necessary to maintain an appropriate allowance for credit losses. Recoveries of loans previously charged off are added to the allowance when received.

The activity in the allowance for loan losses and the allowance for off-balance sheet credit losses related to loan commitments and standby letters of credit for the three months ended March 31, 2018 is summarized as follows (in thousands):



	Commercial			Commercial Real Estate			Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	124,269		$	56,621		$	18,451		$	9,124		$	22,217		$	230,682
Provision for loan losses	(3,111		)	266			(162		)	(152		)	(2,242		)	(5,401		)
Loans charged off	(1,563		)	—			(100		)	(1,227		)	—			(2,890		)
Recoveries	488			183			242			663			—			1,576
Ending balance	$	120,083		$	57,070		$	18,431		$	8,408		$	19,975		$	223,967
Allowance for off-balance sheet credit losses:
Beginning balance	$	3,644		$	45		$	43		$	2		$	—		$	3,734
Provision for off-balance sheet credit losses	383			(1		)	19			—			—			401
Ending balance	$	4,027		$	44		$	62		$	2		$	—		$	4,135

Total provision for credit losses	$	(2,728	)	$	265		$	(143	)	$	(152	)	$	(2,242	)	$	(5,000	)



	Commercial			Commercial Real Estate			Residential Mortgage			Personal			Nonspecific Allowance			Total
Allowance for loan losses:
Beginning balance	$	140,213		$	50,749		$	18,224		$	8,773		$	28,200		$	246,159
Provision for loan losses	(3,355		)	6,859			(39		)	(788		)	(873		)	1,804
Loans charged off	(424		)	—			(236		)	(1,493		)	—			(2,153		)
Recoveries	1,182			735			228			755			—			2,900
Ending balance	$	137,616		$	58,343		$	18,177		$	7,247		$	27,327		$	248,710
Allowance for off-balance sheet credit losses:
Beginning balance	$	11,063		$	123		$	50		$	8		$	—		$	11,244
Provision for off-balance sheet credit losses	(1,775		)	(17		)	(10		)	(2		)	—			(1,804		)
Ending balance	$	9,288		$	106		$	40		$	6		$	—		$	9,440

Total provision for credit losses	$	(5,130	)	$	6,842		$	(49	)	$	(790	)	$	(873	)	$	—

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at March 31, 2018 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,788,207	$	106,721	$	131,460	$	13,362	$	10,919,667	$	120,083
Commercial real estate	3,504,312		57,070		2,470		—		3,506,782		57,070
Residential mortgage	1,899,975		18,431		45,794		—		1,945,769		18,431
Personal	965,292		8,408		340		—		965,632		8,408
Total	17,157,786		190,630		180,064		13,362		17,337,850		203,992

Nonspecific allowance	—		—		—		—		—		19,975

Total	$	17,157,786	$	190,630	$	180,064	$	13,362	$	17,337,850	$	223,967

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at December 31, 2017 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,596,672	$	115,438	$	137,303	$	8,831	$	10,733,975	$	124,269
Commercial real estate	3,477,132		56,621		2,855		—		3,479,987		56,621
Residential mortgage	1,926,239		18,451		47,447		—		1,973,686		18,451
Personal	965,507		9,124		269		—		965,776		9,124
Total	16,965,550		199,634		187,874		8,831		17,153,424		208,465

Nonspecific allowance	—		—		—		—		—		22,217

Total	$	16,965,550	$	199,634	$	187,874	$	8,831	$	17,153,424	$	230,682

The allowance for loan losses and recorded investment of the related loans by portfolio segment for each impairment measurement method at March 31, 2017 is as follows (in thousands):



	Collectively Measured for Impairment				Individually Measured for Impairment				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,170,285	$	134,164	$	156,825	$	3,452	$	10,327,110	$	137,616
Commercial real estate	3,866,588		58,343		4,475		—		3,871,063		58,343
Residential mortgage	1,900,193		18,132		46,081		45		1,946,274		18,177
Personal	847,224		7,247		235		—		847,459		7,247
Total	16,784,290		217,886		207,616		3,497		16,991,906		221,383

Nonspecific allowance	—		—		—		—		—		27,327

Total	$	16,784,290	$	217,886	$	207,616	$	3,497	$	16,991,906	$	248,710

Credit Quality Indicators

The Company utilizes loan class and risk grading as primary credit quality indicators. Substantially all commercial and commercial real estate loans and certain residential mortgage and consumer loans are risk graded based on a quarterly evaluation of the borrowers’ ability to repay the loans. Certain commercial loans and most residential mortgage and consumer loans are small, homogeneous pools that are not risk graded.

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at March 31, 2018 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,894,979	$	119,202	$	24,688	$	881	$	10,919,667	$	120,083
Commercial real estate	3,506,782		57,070		—		—		3,506,782		57,070
Residential mortgage	229,996		2,949		1,715,773		15,482		1,945,769		18,431
Personal	880,694		6,570		84,938		1,838		965,632		8,408
Total	15,512,451		185,791		1,825,399		18,201		17,337,850		203,992

Nonspecific allowance	—		—		—		—		—		19,975

Total	$	15,512,451	$	185,791	$	1,825,399	$	18,201	$	17,337,850	$	223,967

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at December 31, 2017 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,706,035	$	123,383	$	27,940	$	886	$	10,733,975	$	124,269
Commercial real estate	3,479,987		56,621		—		—		3,479,987		56,621
Residential mortgage	234,477		2,947		1,739,209		15,504		1,973,686		18,451
Personal	877,390		6,461		88,386		2,663		965,776		9,124
Total	15,297,889		189,412		1,855,535		19,053		17,153,424		208,465

Nonspecific allowance	—		—		—		—		—		22,217

Total	$	15,297,889	$	189,412	$	1,855,535	$	19,053	$	17,153,424	$	230,682

The allowance for loan losses and recorded investment of the related loans by portfolio segment for risk graded and non-risk graded loans at March 31, 2017 is as follows (in thousands):



	Internally Risk Graded				Non-Graded				Total
	Recorded Investment		Related Allowance		Recorded Investment		Related Allowance		Recorded Investment		Related Allowance
Commercial	$	10,302,774	$	136,672	$	24,336	$	944	$	10,327,110	$	137,616
Commercial real estate	3,871,063		58,343		—		—		3,871,063		58,343
Residential mortgage	211,846		2,958		1,734,428		15,219		1,946,274		18,177
Personal	749,028		5,136		98,431		2,111		847,459		7,247
Total	15,134,711		203,109		1,857,195		18,274		16,991,906		221,383

Nonspecific allowance	—		—		—		—		—		27,327

Total	$	15,134,711	$	203,109	$	1,857,195	$	18,274	$	16,991,906	$	248,710

Loans are considered to be performing if they are in compliance with the original terms of the agreement and currently exhibit no factors that cause management to have doubts about the borrowers' ability to remain in compliance with the original terms of the agreement, which is consistent with the regulatory guideline of “pass.” Performing loans also include past due residential mortgages that are guaranteed by agencies of the U.S. government that continue to accrue interest based on criteria of the guarantors' programs. Other loans especially mentioned are currently performing in compliance with the original terms of the agreement but may have a potential weakness that deserves management’s close attention, consistent with regulatory guidelines.

The risk grading process identified certain loans that have a well-defined weakness (e.g. inadequate debt service coverage or liquidity or marginal capitalization; repayment may depend on collateral or other risk mitigation) that may jeopardize liquidation of the debt and represent a greater risk due to deterioration in the financial condition of the borrower. This is consistent with the regulatory guideline for “substandard.” Because the borrowers are still performing in accordance with the original terms of the loan agreements, these loans were not placed in nonaccruing status.

Nonaccruing loans represent loans for which full collection of principal and interest is uncertain. This is substantially the same criteria used to determine whether a loan is impaired and includes certain loans considered “substandard” and all loans considered “doubtful” by regulatory guidelines.

The following table summarizes the Company’s loan portfolio at March 31, 2018 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,745,169	$	10,750	$	123,757	$	89,942	$	—	$	—	$	2,969,618
Services	2,872,017		23,155		31,013		2,109		—		—		2,928,294
Wholesale/retail	1,507,322		2,705		18,985		2,564		—		—		1,531,576
Manufacturing	540,580		9,047		7,066		3,002		—		—		559,695
Healthcare	2,316,962		—		27,624		15,342		—		—		2,359,928
Other commercial and industrial	516,970		—		10,421		18,477		24,664		24		570,556
Total commercial	10,499,020		45,657		218,866		131,436		24,664		24		10,919,667

Commercial real estate:
Residential construction and land development	113,894		1,828		123		1,613		—		—		117,458
Retail	728,045		21,993		94		264		—		—		750,396
Office	729,824		7,045		—		275		—		—		737,144
Multifamily	1,008,863		—		40		—		—		—		1,008,903
Industrial	613,608		—		—		—		—		—		613,608
Other commercial real estate	278,955		—		—		318		—		—		279,273
Total commercial real estate	3,473,189		30,866		257		2,470		—		—		3,506,782

Residential mortgage:
Permanent mortgage	224,232		1,499		3,147		1,118		794,329		23,460		1,047,785
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		168,997		8,883		177,880
Home equity	—		—		—		—		707,771		12,333		720,104
Total residential mortgage	224,232		1,499		3,147		1,118		1,671,097		44,676		1,945,769

Personal	880,509		48		55		82		84,680		258		965,632

Total	$	15,076,950	$	78,070	$	222,325	$	135,106	$	1,780,441	$	44,958	$	17,337,850

The following table summarizes the Company’s loan portfolio at December 31, 2017 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	2,632,986	$	60,288	$	144,598	$	92,284	$	—	$	—	$	2,930,156
Services	2,943,869		13,927		26,533		2,620		—		—		2,986,949
Wholesale/retail	1,443,917		19,263		5,502		2,574		—		—		1,471,256
Manufacturing	472,869		6,653		11,290		5,962		—		—		496,774
Healthcare	2,253,497		3,186		43,305		14,765		—		—		2,314,753
Other commercial and industrial	478,951		7		8,161		19,028		27,870		70		534,087
Total commercial	10,226,089		103,324		239,389		137,233		27,870		70		10,733,975

Commercial real estate:
Residential construction and land development	113,190		1,828		395		1,832		—		—		117,245
Retail	686,915		4,243		98		276		—		—		691,532
Office	824,408		7,087		—		275		—		—		831,770
Multifamily	979,969		—		48		—		—		—		980,017
Industrial	573,014		—		—		—		—		—		573,014
Other commercial real estate	285,506		145		286		472		—		—		286,409
Total commercial real estate	3,463,002		13,303		827		2,855		—		—		3,479,987

Residential mortgage:
Permanent mortgage	232,492		—		822		1,163		784,928		24,030		1,043,435
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		188,327		9,179		197,506
Home equity	—		—		—		—		719,670		13,075		732,745
Total residential mortgage	232,492		—		822		1,163		1,692,925		46,284		1,973,686

Personal	875,696		1,548		63		83		88,200		186		965,776

Total	$	14,797,279	$	118,175	$	241,101	$	141,334	$	1,808,995	$	46,540	$	17,153,424

The following table summarizes the Company’s loan portfolio at March 31, 2017 by the risk grade categories (in thousands):



	Internally Risk Graded								Non-Graded
	Performing
	Pass		Other Loans Especially Mentioned		Accruing Substandard		Nonaccrual		Performing		Nonaccrual		Total
Commercial:
Energy	$	1,988,392	$	144,157	$	294,138	$	110,425	$	—	$	—	$	2,537,112
Services	2,960,912		13,931		30,819		7,713		—		—		3,013,375
Wholesale/retail	1,459,703		21,970		13,480		11,090		—		—		1,506,243
Manufacturing	504,824		1,917		30,782		5,907		—		—		543,430
Healthcare	2,196,517		35,704		32,474		909		—		—		2,265,604
Other commercial and industrial	407,317		4,641		4,315		20,737		24,292		44		461,346
Total commercial	9,517,665		222,320		406,008		156,781		24,292		44		10,327,110

Commercial real estate:
Residential construction and land development	132,127		—		1,251		2,616		—		—		135,994
Retail	738,978		5,754		—		314		—		—		745,046
Office	857,582		2,894		—		413		—		—		860,889
Multifamily	918,542		—		4,425		24		—		—		922,991
Industrial	871,387		—		—		76		—		—		871,463
Other commercial real estate	333,554		—		94		1,032		—		—		334,680
Total commercial real estate	3,852,170		8,648		5,770		4,475		—		—		3,871,063

Residential mortgage:
Permanent mortgage	207,886		1,710		490		1,760		743,469		22,428		977,743
Permanent mortgages guaranteed by U.S. government agencies	—		—		—		—		194,073		10,108		204,181
Home equity	—		—		—		—		752,565		11,785		764,350
Total residential mortgage	207,886		1,710		490		1,760		1,690,107		44,321		1,946,274

Personal	748,000		49		888		91		98,287		144		847,459

Total	$	14,325,721	$	232,727	$	413,156	$	163,107	$	1,812,686	$	44,509	$	16,991,906

Impaired Loans

Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. This includes all nonaccruing loans, all loans modified in a TDR and all loans repurchased from GNMA pools.

A summary of impaired loans follows (in thousands):



	As of										For the
	March 31, 2018										Three Months Ended
			Recorded Investment								March 31, 2018
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Commercial:
Energy	$	111,002	$	89,942	$	22,816	$	67,126	$	12,701	$	91,113	$	—
Services	4,865		2,109		2,109		—		—		2,365		—
Wholesale/retail	9,089		2,564		2,564		—		—		2,569		—
Manufacturing	3,111		3,002		2,741		261		261		4,482		—
Healthcare	26,019		15,342		9,107		6,235		400		15,053		—
Other commercial and industrial	27,421		18,501		18,501		—		—		18,799		—
Total commercial	181,507		131,460		57,838		73,622		13,362		134,381		—

Commercial real estate:
Residential construction and land development	3,059		1,613		1,613		—		—		1,723		—
Retail	498		264		264		—		—		270		—
Office	287		275		275		—		—		275		—
Multifamily	—		—		—		—		—		—		—
Industrial	—		—		—		—		—		—		—
Other commercial real estate	522		318		318		—		—		395		—
Total commercial real estate	4,366		2,470		2,470		—		—		2,663		—

Residential mortgage:
Permanent mortgage	29,686		24,578		24,578		—		—		24,885		306
Permanent mortgage guaranteed by U.S. government agencies¹	183,476		177,880		177,880		—		—		199,380		1,848
Home equity	13,898		12,333		12,333		—		—		12,704		—
Total residential mortgage	227,060		214,791		214,791		—		—		236,969		2,154

Personal	381		340		340		—		—		304		—

Total	$	413,314	$	349,061	$	275,439	$	73,622	$	13,362	$	374,317	$	2,154


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At March 31, 2018, $8.9 million of these loans were nonaccruing and $169 million were accruing based on the guarantee by U.S. government agencies.

Generally, no interest income is recognized on impaired loans until all principal balances, including amounts charged-off, are recovered.

A summary of impaired loans at December 31, 2017 follows (in thousands):



			Recorded Investment
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance
Commercial:
Energy	$	111,011	$	92,284	$	40,968	$	51,316	$	8,814
Services	5,324		2,620		2,620		—		—
Wholesale/retail	9,099		2,574		2,574		—		—
Manufacturing	6,073		5,962		5,962		—		—
Healthcare	25,140		14,765		14,765		—		—
Other commercial and industrial	27,957		19,098		19,080		18		17
Total commercial	184,604		137,303		85,969		51,334		8,831

Commercial real estate:
Residential construction and land development	3,285		1,832		1,832		—		—
Retail	509		276		276		—		—
Office	287		275		275		—		—
Multifamily	—		—		—		—		—
Industrial	—		—		—		—		—
Other commercial real estate	670		472		472		—		—
Total commercial real estate	4,751		2,855		2,855		—		—

Residential mortgage:
Permanent mortgage	30,435		25,193		25,193		—		—
Permanent mortgage guaranteed by U.S. government agencies¹	203,814		197,506		197,506		—		—
Home equity	14,548		13,075		13,075		—		—
Total residential mortgage	248,797		235,774		235,774		—		—

Personal	307		269		269		—		—

Total	$	438,459	$	376,201	$	324,867	$	51,334	$	8,831


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At December 31, 2017, $9 million of these loans were nonaccruing and $188 million were accruing based on the guarantee by U.S. government agencies.

A summary of impaired loans at March 31, 2017 follows (in thousands):



											For the
	As of March 31, 2017										Three Months Ended
			Recorded Investment								March 31, 2017
	Unpaid Principal Balance		Total		With No Allowance		With Allowance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Commercial:
Energy	$	125,579	$	110,425	$	58,324	$	52,101	$	3,435	$	121,462	$	—
Services	11,542		7,713		7,713		—		—		7,943		—
Wholesale/retail	17,582		11,090		11,090		—		—		11,248		—
Manufacturing	6,377		5,907		5,907		—		—		5,419		—
Healthcare	1,379		909		909		—		—		867		—
Other commercial and industrial	28,876		20,781		20,764		17		17		20,950		—
Total commercial	191,335		156,825		104,707		52,118		3,452		167,889		—

Commercial real estate:
Residential construction and land development	4,126		2,616		2,616		—		—		3,024		—
Retail	523		314		314		—		—		320		—
Office	515		413		413		—		—		420		—
Multifamily	1,000		24		24		—		—		31		—
Industrial	76		76		76		—		—		76		—
Other commercial real estate	1,213		1,032		1,032		—		—		1,127		—
Total commercial real estate	7,453		4,475		4,475		—		—		4,998		—

Residential mortgage:
Permanent mortgage	29,355		24,188		24,143		45		45		23,521		291
Permanent mortgage guaranteed by U.S. government agencies¹	210,237		204,181		204,181		—		—		207,396		1,904
Home equity	13,008		11,785		11,785		—		—		11,652		—
Total residential mortgage	252,600		240,154		240,109		45		45		242,569		2,195

Personal	265		235		235		—		—		262		—

Total	$	451,653	$	401,689	$	349,526	$	52,163	$	3,497	$	415,718	$	2,195


¹	All permanent mortgage loans guaranteed by U.S. government agencies are considered impaired as we do not expect full collection of contractual principal and interest. At March 31, 2017, $10 million of these loans were nonaccruing and $194 million were accruing based on the guarantee by U.S. government agencies.

Troubled Debt Restructurings

At March 31, 2018 the Company had $149 million in troubled debt restructurings (TDRs), of which $74 million were accruing residential mortgage loans guaranteed by U.S. government agencies. Approximately $61 million of TDRs were performing in accordance with the modified terms.

At December 31, 2017, the Company had $126 million in TDRs, of which $74 million were accruing residential mortgage loans guaranteed by U.S. government agencies. Approximately $48 million of TDRs were performing in accordance with the modified terms.

At March 31, 2017, TDRs totaled $160 million, of which $84 million were accruing residential mortgage loans guaranteed by U.S. government agencies. Approximately $87 million of TDRs were performing in accordance with the modified terms.

TDRs generally consist of interest rate concessions, payment stream concessions or a combination of concessions to distressed borrowers. During the quarter ended March 31, 2018, $37 million of loans were restructured and $71 thousand of loans designated as TDRs were charged off. During the quarter ended March 31, 2017, $22 million of loans were restructured and $21 thousand of loans designated as TDRs were charged off.

Nonaccrual & Past Due Loans

Past due status for all loan classes is based on the actual number of days since the last payment was due according to the contractual terms of the loans.

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of March 31, 2018 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days		90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,870,711	$	265	$	8,700	$	—	$	89,942	$	2,969,618
Services	2,922,639		3,487		59		—		2,109		2,928,294
Wholesale/retail	1,528,343		234		435		—		2,564		1,531,576
Manufacturing	556,693		—		—		—		3,002		559,695
Healthcare	2,344,134		113		339		—		15,342		2,359,928
Other commercial and industrial	551,989		40		20		6		18,501		570,556
Total commercial	10,774,509		4,139		9,553		6		131,460		10,919,667

Commercial real estate:
Residential construction and land development	115,845		—		—		—		1,613		117,458
Retail	750,132		—		—		—		264		750,396
Office	736,869		—		—		—		275		737,144
Multifamily	1,008,903		—		—		—		—		1,008,903
Industrial	613,608		—		—		—		—		613,608
Other commercial real estate	278,955		—		—		—		318		279,273
Total commercial real estate	3,504,312		—		—		—		2,470		3,506,782

Residential mortgage:
Permanent mortgage	1,020,885		2,322		—		—		24,578		1,047,785
Permanent mortgages guaranteed by U.S. government agencies	36,272		26,137		—		106,588		8,883		177,880
Home equity	705,986		1,377		386		22		12,333		720,104
Total residential mortgage	1,763,143		29,836		386		106,610		45,794		1,945,769

Personal	964,422		794		14		62		340		965,632

Total	$	17,006,386	$	34,769	$	9,953	$	106,678	$	180,064	$	17,337,850

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of December 31, 2017 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days	90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,833,668	$	—	4,204	$	—	$	92,284	$	2,930,156
Services	2,983,222		514		486	107		2,620		2,986,949
Wholesale/retail	1,468,284		398		—	—		2,574		1,471,256
Manufacturing	490,739		—		73	—		5,962		496,774
Healthcare	2,284,770		15,218		—	—		14,765		2,314,753
Other commercial and industrial	514,701		85		78	125		19,098		534,087
Total commercial	10,575,384		16,215		4,841	232		137,303		10,733,975

Commercial real estate:
Residential construction and land development	115,213		200		—	—		1,832		117,245
Retail	691,256		—		—	—		276		691,532
Office	831,118		254		—	123		275		831,770
Multifamily	979,625		22		370	—		—		980,017
Industrial	573,014		—		—	—		—		573,014
Other commercial real estate	285,937		—		—	—		472		286,409
Total commercial real estate	3,476,163		476		370	123		2,855		3,479,987

Residential mortgage:
Permanent mortgage	1,014,588		3,435		219	—		25,193		1,043,435
Permanent mortgages guaranteed by U.S. government agencies	22,692		18,978		13,468	133,189		9,179		197,506
Home equity	717,007		2,206		440	17		13,075		732,745
Total residential mortgage	1,754,287		24,619		14,127	133,206		47,447		1,973,686

Personal	964,374		681		191	261		269		965,776

Total	$	16,770,208	$	41,991	19,529	$	133,822	$	187,874	$	17,153,424

A summary of loans currently performing, loans past due and accruing and nonaccrual loans as of March 31, 2017 is as follows (in thousands):



			Past Due
	Current		30 to 59 Days		60 to 89 Days	90 Days or More		Nonaccrual		Total
Commercial:
Energy	$	2,426,100	$	437	150	$	—	$	110,425	$	2,537,112
Services	3,002,984		2,395		234	49		7,713		3,013,375
Wholesale/retail	1,495,023		130		—	—		11,090		1,506,243
Manufacturing	537,168		115		240	—		5,907		543,430
Healthcare	2,264,266		—		429	—		909		2,265,604
Other commercial and industrial	440,484		—		81	—		20,781		461,346
Total commercial	10,166,025		3,077		1,134	49		156,825		10,327,110

Commercial real estate:
Residential construction and land development	133,064		314		—	—		2,616		135,994
Retail	744,732		—		—	—		314		745,046
Office	860,476		—		—	—		413		860,889
Multifamily	922,952		15		—	—		24		922,991
Industrial	871,362		25		—	—		76		871,463
Other commercial real estate	333,648		—		—	—		1,032		334,680
Total commercial real estate	3,866,234		354		—	—		4,475		3,871,063

Residential mortgage:
Permanent mortgage	948,191		5,364		—	—		24,188		977,743
Permanent mortgages guaranteed by U.S. government agencies	45,643		29,853		—	118,577		10,108		204,181
Home equity	750,914		1,376		266	9		11,785		764,350
Total residential mortgage	1,744,748		36,593		266	118,586		46,081		1,946,274

Personal	846,652		430		105	37		235		847,459

Total	$	16,623,659	$	40,454	1,505	$	118,672	$	207,616	$	16,991,906