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Loans and the Allowance for Loan Losses
3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans and the Allowance for Loan Losses Loans and the Allowance for Loan Losses
Loans receivable at March 31, 2024 and December 31, 2023 are summarized as follows:
 March 31,
2024
December 31,
2023
 (Dollars in thousands)
Real Estate Loans:  
Commercial$2,215,889 $2,217,928 
Construction662,013 669,798 
Residential717,007 682,394 
Total Real Estate Loans3,594,909 3,570,120 
Commercial1,426,957 1,358,838 
Consumer and Other66,973 63,827 
Total Loans Held for Investment5,088,839 4,992,785 
   
Less:  
Allowance for Loan Losses(41,165)(40,414)
Net Loans$5,047,674 $4,952,371 
The performing 1-4 family residential, multi-family residential, commercial real estate, and commercial loans, are pledged, under a blanket lien, as collateral securing advances from the FHLB at March 31, 2024 and December 31, 2023. Commercial and agricultural loans are pledged against the Federal Reserve Banks’ (“FRB”) discount window as of March 31, 2024, and December 31, 2023.
Net deferred loan origination fees were $12.8 million and $12.6 million at March 31, 2024 and December 31, 2023, respectively, and are netted in their respective loan categories above. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies overdrafts as loans in its consolidated balance sheets. At March 31, 2024 and December 31, 2023, overdrafts of $4.5 million and $2.2 million, respectively, have been reclassified to loans.
The Bank is the lead lender on participations sold, without recourse, to other financial institutions which amounts are not included in the consolidated balance sheets. The unpaid principal balances of mortgages and other loans serviced for others were approximately $693.0 million and $723.5 million at March 31, 2024 and December 31, 2023, respectively. The Company had servicing rights of $928,000 and $1.1 million recorded as of March 31, 2024, and December 31, 2023, respectively, and is recorded within other assets.
The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located in its general market areas throughout Louisiana and Texas. Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Bank develops and documents a systematic method for determining its allowance for credit losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.
Portfolio Segments and Risk Factors
The loan portfolio is disaggregated into portfolio segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally a disaggregation of a portfolio segment. The Company's loan portfolio segments are Real Estate, Commercial, and Consumer and Other. The classes and risk characteristics of each segment are discussed in more detail below. The segmentation and disaggregation of the portfolio is part of the ongoing credit monitoring process.
Real Estate Portfolio Segment
Real Estate: Commercial loans are extensions of credit secured by owner-occupied and non-owner-occupied collateral. Repayment is generally dependent on the successful operations of the property. General economic conditions may impact the performance of these types of loans, including fluctuations in the value of real estate, vacancy rates, and unemployment trends. Real estate commercial loans also include farmland loans that can be, or are, used for agricultural purposes. These loans are usually repaid through refinancing, cash flow from the borrower’s ongoing operations, development of the property, or sale of the property.
Real Estate: Construction loans include loans to small-to-midsized businesses to construct owner-occupied properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single-family homes in the Company’s market areas. Risks associated with these loans include fluctuations in the value of real estate, project completion risk and changes in market trends. The Company is also exposed to risk based on the ability of the construction loan borrower to finance the loan or sell the property upon completion of the project, which may be affected by changes in secondary market terms and criteria for permanent financing since the time that the Company funded the loan.
Real Estate: Residential loans include first and second lien 1-4 family mortgage loans, as well as home equity lines of credit, in each case primarily on owner-occupied primary residences. The Company is exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship. Real estate residential loans also include multi-family residential loans originated to provide permanent financing for multi-family residential income producing properties. Repayment of these loans primarily relies on successful rental and management of the property.
Commercial Portfolio Segment
Commercial loans include general commercial and industrial, or C&I, loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion, and development loans, borrowing base loans, letters of credit and other loan products, primarily in the Company’s target markets that are underwritten based on the borrower’s ability to service the debt from income. Commercial loan risk is derived from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan.
Consumer and Other Portfolio Segment
Consumer and other loans include a variety of loans to individuals for personal, family and household purposes, including secured and unsecured installment and term loans. The risk is based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
The following table sets forth, as of March 31, 2024, and December 31, 2023, the balance of the allowance for credit losses by loan portfolio segment. The allowance for credit losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.
Allowance for Credit Losses and Recorded Investment in Loans Receivable
March 31, 2024
(Dollars in thousands)
Real Estate:
Commercial
Real Estate:
Construction
Real Estate:
Residential
CommercialConsumer
and Other
Total
Allowance for Loan Losses:      
Beginning Balance$17,676 $6,596 $5,485 $10,424 $233 $40,414 
Charge-offs16 (49)(71)(430)(533)
Recoveries40 93 141 
Provision (Recovery)83 (58)616 (98)600 1,143 
Ending Balance$17,780 $6,489 $6,033 $10,367 $496 $41,165 
      
Reserve for Unfunded Loan Commitments:     
Beginning Balance$206 $1,546 $177 $1,372 $23 $3,324 
Provision (Recovery)57 (213)(24)209 14 43 
Ending Balance$263 $1,333 $153 $1,581 $37 $3,367 
      
Total Allowance for Credit Losses$18,043 $7,822 $6,186 $11,948 $533 $44,532 
December 31, 2023
(Dollars in thousands)
Real Estate:
Commercial
Real Estate:
Construction
Real Estate:
Residential
CommercialConsumer
and Other
Total
Allowance for Loan Losses:
Beginning Balance$14,702 $5,768 $5,354 $11,721 $633 $38,178 
Adoption of ASU 2016-134,823 933 (365)(2,483)(248)2,660 
Beginning Balance After Adoption19,525 6,701 4,989 9,238 385 40,838 
Charge-offs(2,049)(36)(42)(2,813)(1,489)(6,429)
Recoveries26 18 672 327 1,044 
Provision (Recovery)174 (70)520 3,327 1,010 4,961 
Ending Balance$17,676 $6,596 $5,485 $10,424 $233 $40,414 
Reserve for Unfunded Loan Commitments:
Beginning Balance$220 $137 $13 $229 $$605 
Adoption of ASU 2016-13116 2,113 190 657 121 3,197 
Beginning Balance After Adoption336 2,250 203 886 127 3,802 
Provision (Recovery)(130)(704)(26)486 (104)(478)
Ending Balance$206 $1,546 $177 $1,372 $23 $3,324 
Total Allowance for Credit Losses$17,882 $8,142 $5,662 $11,796 $256 $43,738 
Included within the above allowance, in the tables above, are loans which management has individually evaluated to determine an allowance for credit losses. The following table summarizes, by segment, the loan balance and specific allowance allocation for those loans which have been individually evaluated.
 March 31, 2024December 31, 2023
 Loan BalanceSpecific AllocationsLoan BalanceSpecific Allocations
 (Dollars in thousands)
Real Estate Loans:    
Commercial$1,719 $38 $883 $
Construction5,345 569 2,334 513 
Residential1,500 1,533 
Total Real Estate Loans8,564 607 4,750 513 
Commercial
Consumer and Other
Total$8,564 $607 $4,750 $513 
Credit Quality Indicators
We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of 10 to 80. Individual loan officers review updated financial information for all pass grade loans to reassess the risk grade, generally on at least an annual basis. When a loan has a risk grade of 60, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” and subject to additional and more frequent monitoring by both the loan officer and senior credit and risk personnel. When a loan has a risk grade of 70 or higher, a special assets officer monitors the loan on an on-going basis.
The following tables set forth the credit quality indicators, disaggregated by loan segment, as of March 31, 2024, and December 31, 2023:
March 31, 2024
Criticized
Pass
(Risk Grade 10-45)
Special Mention
(Risk Grade 50)
Substandard
(Risk Grade 60)
Doubtful
(Risk Grade 70)
Loss
(Risk Grade 80)
TotalCurrent Period Charge-
offs
(Dollars in thousands)
Real Estate: Commercial       
Originated in 2024 $59,026 $$$$$59,026 $
Originated in 2023 231,816 82 231,898 
Originated in 2022 741,590 17,577 759,167 
Originated in 2021 406,928 14,704 490 422,122 
Originated in 2020131,068 3,514 189 134,771 
Originated Prior to 2020513,710 10,803 2,591 1,235 528,339 (19)
Revolving79,679 644 243 80,566 
Revolving Loans Converted to Term
Total Real Estate: Commercial$2,163,817 $47,242 $3,595 $1,235 $$2,215,889 $(16)
Real Estate: Construction      
Originated in 2024 $34,427 $$$$$34,427 $
Originated in 2023 138,845 241 419 139,505 
Originated in 2022 272,528 706 273,234 
Originated in 2021 77,592 3,594 81,186 33 
Originated in 202037,257 16 37,273 
Originated Prior to 202032,672 444 2,284 345 35,745 
Revolving60,247 396 60,643 
Revolving Loans Converted to Term
Total Real Estate: Construction$653,568 $1,081 $7,019 $345 $$662,013 $49 
Real Estate: Residential      
Originated in 2024 $19,660 $$197 $$$19,857 $
Originated in 2023 72,599 25 72,624 
Originated in 2022 196,817 338 403 13 197,571 
Originated in 2021 96,888 729 97,617 
Originated in 202067,233 386 501 52 68,172 
Originated Prior to 2020143,811 2,223 7,490 328 153,852 62 
Revolving106,580 444 107,024 
Revolving Loans Converted to Term290 290 
Total Real Estate: Residential$703,878 $2,947 $9,789 $393 $$717,007 $71 
Commercial      
Originated in 2024 $92,339 $203 $37 $$$92,579 $
Originated in 2023 284,207 1,675 49 285,931 
Originated in 2022 258,119 1,043 1,476 260,638 
Originated in 2021 124,903 2,297 4,261 16 131,477 16 
Originated in 202046,538 224 901 47,663 39 
Originated Prior to 202074,052 3,739 1,718 451 79,960 (59)
Revolving524,442 2,724 1,515 28 528,709 
Revolving Loans Converted to Term
Total Commercial$1,404,600 $11,905 $9,957 $495 $$1,426,957 $(1)
Consumer and Other      
Originated in 2024 $2,916 $$$$$2,916 $
Originated in 2023 8,931 56 8,987 
Originated in 2022 6,465 17 6,482 13 
Originated in 2021 2,852 52 2,904 
Originated in 20201,533 79 1,612 29 
Originated Prior to 202024,854 123 24,977 
Revolving18,835 260 19,095 383 
Revolving Loans Converted to Term
Total Consumer and Other$66,386 $$587 $$$66,973 $430 
Total Loans$4,992,249 $63,175 $30,947 $2,468 $$5,088,839 $533 
December 31, 2023
Criticized
Pass
(Risk Grade 10-45)
Special Mention
(Risk Grade 50)
Substandard
(Risk Grade 60)
Doubtful
(Risk Grade 70)
Loss
(Risk Grade 80)
TotalCurrent Period Charge-
offs
(Dollars in thousands)
Real Estate: Commercial
Originated in 2023 $228,902 $$84 $$$228,986 $
Originated in 2022 751,649 1,909 753,558 
Originated in 2021 427,269 6,103 492 433,864 357 
Originated in 2020151,848 3,551 155,407 
Originated in 2019149,946 5,556 372 932 156,806 1,447 
Originated Prior to 2019379,503 1,313 7,970 335 389,121 245 
Revolving99,723 226 237 100,186 
Revolving Loans Converted to Term
Total Real Estate: Commercial$2,188,840 $18,658 $9,163 $1,267 $$2,217,928 $2,049 
Real Estate: Construction
Originated in 2023 $131,617 $$$$$131,617 $
Originated in 2023 322,032 647 62 322,741 
Originated in 2021 85,438 2,601 1,229 89,268 
Originated in 202022,515 31 16 22,562 
Originated in 201919,402 1,675 21,077 
Originated Prior to 201920,180 413 588 345 21,526 35 
Revolving60,612 395 61,007 
Revolving Loans Converted to Term
Total Real Estate: Construction$661,796 $4,087 $3,570 $345 $$669,798 $36 
Real Estate: Residential
Originated in 2023 $76,662 $$$$$76,662 $
Originated in 2022 170,229 433 410 14 171,086 
Originated in 2021 98,329 708 99,037 11 
Originated in 202068,281 386 520 57 69,244 
Originated in 201954,902 1,112 1,061 119 57,194 22 
Originated Prior to 201997,716 1,230 6,000 299 105,245 
Revolving103,252 654 103,906 
Revolving Loans Converted to Term20 20 
Total Real Estate: Residential$669,391 $3,161 $9,353 $489 $$682,394 $42 
Commercial
Originated in 2023 $303,160 $1,439 $709 $$$305,308 $
Originated in 2022 267,678 698 1,196 269,572 247 
Originated in 2021 136,291 5,483 928 16 142,718 25 
Originated in 202048,990 448 921 42 50,401 49 
Originated in 201921,137 584 640 231 22,592 1,632 
Originated Prior to 201961,166 3,843 341 251 65,601 658 
Revolving499,642 2,128 573 28 502,371 202 
Revolving Loans Converted to Term275 275 
Total Commercial$1,338,339 $14,623 $5,308 $568 $$1,358,838 $2,813 
Consumer and Other
Originated in 2023 $11,245 $$$$$11,245 $
Originated in 2022 7,219 27 7,246 78 
Originated in 2021 3,372 55 3,427 29 
Originated in 20201,850 88 1,938 11 
Originated in 20192,359 40 2,399 18 
Originated Prior to 201918,280 92 18,372 61 
Revolving18,814 100 160 19,074 1,284 
Revolving Loans Converted to Term126 126 
Total Consumer and Other$63,265 $100 $462 $$$63,827 $1,489 
Total Loans$4,921,631 $40,629 $27,856 $2,669 $$4,992,785 $6,429 
The above classifications follow regulatory guidelines and can generally be described as follows:
Pass loans are of satisfactory quality.
Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values.
Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.
Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable.
As of March 31, 2024, and December 31, 2023, loan balances outstanding more than 90 days past due and still accruing interest amounted to $855,000 and $127,000, respectively. As of March 31, 2024, and December 31, 2023, loan balances outstanding on nonaccrual status amounted to $20.8 million and $16.9 million, respectively. The Bank considers all loans more than 90 days past due as nonperforming loans.
The following tables provide an analysis of the aging of loans and leases as of March 31, 2024, and December 31, 2023. All loans greater than 90 days past due are generally placed on nonaccrual status.
Aged Analysis of Past Due Loans Receivable
March 31, 2024
(Dollars in thousands)
30-59 Days
Past Due
60-89 Days
Past Due
Greater
Than 90 Days
Past Due
Total
Past Due
CurrentTotal Loans
Receivable
Recorded
Investment Over
90 Days Past Due
and Still Accruing
Real Estate Loans:       
Commercial$1,071 $10,932 $2,901 $14,904 $2,200,985 $2,215,889 $662 
Construction12 594 5,811 6,417 655,596 662,013 
Residential1,724 946 4,556 7,226 709,781 717,007 123 
Total Real Estate Loans2,807 12,472 13,268 28,547 3,566,362 3,594,909 785 
Commercial2,239 909 3,277 6,425 1,420,532 1,426,957 70 
Consumer and Other247 34 470 751 66,222 66,973 
Total$5,293 $13,415 $17,015 $35,723 $5,053,116 $5,088,839 $855 
December 31, 2023
(Dollars in thousands)
30-59 Days
Past Due
60-89 Days
Past Due
Greater
Than 90 Days
Past Due
Total
Past Due
CurrentTotal Loans
Receivable
Recorded
Investment Over
90 Days Past Due
and Still Accruing
Real Estate Loans:       
Commercial$240 $536 $2,954 $3,730 $2,214,198 $2,217,928 $44 
Construction279 1,320 3,198 4,797 665,001 669,798 
Residential1,792 1,207 4,058 7,057 675,337 682,394 20 
Total Real Estate Loans2,311 3,063 10,210 15,584 3,554,536 3,570,120 64 
Commercial1,101 71 1,622 2,794 1,356,044 1,358,838 52 
Consumer and Other280 252 188 720 63,107 63,827 11 
Total$3,692 $3,386 $12,020 $19,098 $4,973,687 $4,992,785 $127 

The following table presents non-accrual loans by segment as of March 31, 2024, and December 31, 2023, respectively.
 March 31,
2024
December 31,
2023
 (Dollars in thousands)
Real Estate Loans:  
Commercial$2,523 $3,280 
Construction6,790 3,543 
Residential7,653 7,352 
Total Real Estate Loans16,966 14,175 
Commercial3,297 2,395 
Consumer and Other515 373 
Total$20,778 $16,943 
The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Bank makes loan modifications, primarily utilizing internal renegotiation programs via direct customer contact, that manage customers’ debt exposures held only by the Bank. Additionally, the Bank makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire unsecured debt structures. During the periods ended March 31, 2024, and December 31, 2023, the concessions granted to certain borrowers included extending the payment due dates and offering below market contractual interest rates, and were not significant to the consolidated financial statement
Accrued interest receivable of $3.9 million and $4.2 million was outstanding as of March 31, 2024, and December 31, 2023, respectively, for all loan deferrals, primarily attributable to the COVID-19 pandemic and, to a much lesser extent, hurricanes which occurred in 2020 and 2021. These loans are no longer within their deferral periods. The accrued interest on the loans is due at their maturity.
At March 31, 2024 and December 31, 2023, accrued interest receivable on loans was $25.6 million and $25.2 million, respectively, and included within accrued interest receivable on the consolidated balance sheets.