Loans and Asset Quality

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Loans and Asset Quality

Loans and Asset Quality

Loans

Total loans HFI by category and loans HFS are summarized below:

	December 31,
(in thousands)	2019		2018
Real estate:
Commercial real estate	$	531,990	$	454,689
One-to-four family residential	420,020		406,963
Construction and development	132,461		102,868
Commercial and industrial	267,940		275,881
Tax-exempt	56,494		60,104
Consumer	30,019		27,933
Total loans HFI	$	1,438,924	$	1,328,438
Total loans HFS	$	5,089	$	2,904

Related Party Transactions

In the ordinary course of business, certain officers, directors, and principal shareholders, as well as their immediate family members and affiliates in which they have 10% or more beneficial ownership (“related parties”), maintain a variety of banking relationships with the Company. An analysis of loan activity to these related parties is as follows:

	Years ended December 31,
(in thousands)	2019			2018
Balance - beginning of period	$	40,311		$	41,463
New loans/changes in relationships	33,354			31,688
Repayments/changes in relationships	(43,056		)	(32,840		)
Balance - end of period	$	30,609		$	40,311

Concentrations of Credit Risk

The majority of the Bank’s lending activity occurs within Louisiana, primarily in the Central, Southeast, and Northwest market areas. The Bank maintains a diversified loan portfolio with a focus on commercial real estate, one-to-four family residential real estate, and commercial and industrial loans. Substantially all of the Bank’s real estate loans are secured by properties located within Louisiana.

Allowance for Loan Losses

The following table summarizes the activity in the allowance for loan losses by category for the year ended December 31, 2019:

(in thousands)	Beginning Balance		Provision for Loan Losses			Loans Charged-off			Recoveries		Ending Balance
Real estate:
Commercial real estate	$	3,081	$	373		$	—		$	—	$	3,454
One-to-four family residential	3,146		216			(44		)	5		3,323
Construction and development	951		172			—			88		1,211
Commercial and industrial	4,604		850			(864		)	585		5,175
Tax-exempt	372		(38		)	—			—		334
Consumer	370		237			(311		)	144		440
Total allowance for loan losses	$	12,524	$	1,810		$	(1,219	)	$	822	$	13,937

The following table summarizes the activity in the allowance for loan losses by category for the year ended December 31, 2018:

(in thousands)	Beginning Balance		Provision for Loan Losses			Loans Charged-off			Recoveries		Ending Balance
Real estate:
Commercial real estate	$	3,270	$	(189	)	$	(27	)	$	27	$	3,081
One-to-four family residential	3,099		(136		)	(4		)	187		3,146
Construction and development	852		99			—			—		951
Commercial and industrial	2,836		2,112			(353		)	9		4,604
Tax-exempt	432		(60		)	—			—		372
Consumer	406		164			(353		)	153		370
Total allowance for loan losses	$	10,895	$	1,990		$	(737	)	$	376	$	12,524

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2019, are as follows:

(in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Allowance for loan losses:
Real estate:
Commercial real estate	$	260	$	3,194	$	—	$	3,454
One-to-four family residential	31		3,292		—		3,323
Construction and development	10		1,201		—		1,211
Commercial and industrial	2,916		2,259		—		5,175
Tax-exempt	—		334		—		334
Consumer	71		369		—		440
Total allowance for loan losses	$	3,288	$	10,649	$	—	$	13,937
Loans:
Real estate:
Commercial real estate	$	2,639	$	529,351	$	—	$	531,990
One-to-four family residential	1,193		418,827		—		420,020
Construction and development	38		132,423		—		132,461
Commercial and industrial	8,797		259,143		—		267,940
Tax-exempt	—		56,494		—		56,494
Consumer	75		29,944		—		30,019
Total loans HFI	$	12,742	$	1,426,182	$	—	$	1,438,924

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2018, are as follows:

(in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deteriorated Credit Quality		Total
Allowance for loan losses:
Real estate:
Commercial real estate	$	206	$	2,875	$	—	$	3,081
One-to-four family residential	20		3,126		—		3,146
Construction and development	12		939		—		951
Commercial and industrial	2,304		2,300		—		4,604
Tax-exempt	—		372		—		372
Consumer	75		295		—		370
Total allowance for loan losses	$	2,617	$	9,907	$	—	$	12,524
Loans:
Real estate:
Commercial real estate	$	3,829	$	450,860	$	—	$	454,689
One-to-four family residential	2,348		404,615		—		406,963
Construction and development	55		102,813		—		102,868
Commercial and industrial	15,516		260,365		—		275,881
Tax-exempt	—		60,104		—		60,104
Consumer	104		27,829		—		27,933
Total loans HFI	$	21,852	$	1,306,586	$	—	$	1,328,438

Past Due and Nonaccrual Loans

A summary of current, past due, and nonaccrual loans as of December 31, 2019, is as follows:

	Accruing
(in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Loans
Real estate:
Commercial real estate	$	530,712	$	—	$	—	$	1,278	$	531,990
One-to-four family residential	419,229		184		—		607		420,020
Construction and development	132,423		—		—		38		132,461
Commercial and industrial	264,427		143		—		3,370		267,940
Tax-exempt	56,494		—		—		—		56,494
Consumer	29,973		20		—		26		30,019
Total loans HFI	$	1,433,258	$	347	$	—	$	5,319	$	1,438,924

A summary of current, past due, and nonaccrual loans as of December 31, 2018, is as follows:

	Accruing
(in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Loans
Real estate:
Commercial real estate	$	452,477	$	—	$	850	$	1,362	$	454,689
One-to-four family residential	405,961		512		66		424		406,963
Construction and development	102,776		36		1		55		102,868
Commercial and industrial	272,174		32		—		3,675		275,881
Tax-exempt	60,104		—		—		—		60,104
Consumer	27,851		16		22		44		27,933
Total loans HFI	$	1,321,343	$	596	$	939	$	5,560	$	1,328,438

Impaired Loans

Impaired loans include TDRs and performing and nonperforming loans. Information pertaining to impaired loans as of December 31, 2019, is as follows:

(in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial real estate	$	1,560	$	1,537	$	—	$	2,647	$	74
One-to-four family residential	1,040		984		—		1,194		44
Construction and development	—		—		—		76		—
Commercial and industrial	1,805		1,474		—		3,685		3
Tax-exempt	—		—		—		—		—
Consumer	2		2		—		9		—
Total with no related allowance	4,407		3,997		—		7,611		121
With allowance recorded:
Real estate:
Commercial real estate	1,263		1,102		260		1,076		—
One-to-four family residential	216		209		31		339		—
Construction and development	51		38		10		89		—
Commercial and industrial	8,544		7,323		2,916		7,746		299
Tax-exempt	—		—		—		—		—
Consumer	76		73		71		76		4
Total with related allowance	10,150		8,745		3,288		9,326		303
Total impaired loans	$	14,557	$	12,742	$	3,288	$	16,937	$	424

Information pertaining to impaired loans as of December 31, 2018, is as follows:

(in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial real estate	$	2,376	$	2,255	$	—	$	2,470	$	72
One-to-four family residential	1,912		1,855		—		2,026		149
Construction and development	18		16		—		738		—
Commercial and industrial	11,003		9,707		—		8,909		345
Tax-exempt	—		—		—		—		—
Consumer	12		12		—		10		—
Total with no related allowance	15,321		13,845		—		14,153		566
With allowance recorded:
Real estate:
Commercial real estate	1,584		1,574		206		1,715		132
One-to-four family residential	507		493		20		497		23
Construction and development	52		39		12		41		—
Commercial and industrial	5,809		5,809		2,304		5,813		210
Tax-exempt	—		—		—		—		—
Consumer	95		92		75		35		1
Total with related allowance	8,047		8,007		2,617		8,101		366
Total impaired loans	$	23,368	$	21,852	$	2,617	$	22,254	$	932

Troubled Debt Restructurings

The restructuring of a loan is considered a TDR if the borrower is experiencing financial difficulties and the bank has granted a concession. Concessions grant terms to the borrower that would not be offered for new debt with similar risk characteristics. Concessions typically include interest rate reductions or below market interest rates, revising amortization schedules to defer principal and interest payments, and other changes necessary to provide payment relief to the borrower and minimize the risk of loss. As of December 31, 2019 and 2018, the recorded investments in TDRs were $4.9 million and $5.1 million, respectively. There were no unfunded commitments to extend credit related to these loans.

A summary of current, past due, and nonaccrual TDR loans as of December 31, 2019, is as follows:

(dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total TDRs
Real estate:
Commercial real estate	$	1,361	$	—	$	—	$	1,278	$	2,639
One-to-four family residential	252		—		—		—		252
Construction and development	—		—		—		38		38
Commercial and industrial	36		—		—		1,869		1,905
Tax-exempt	—		—		—		—		—
Consumer	46		—		—		—		46
Total	$	1,695	$	—	$	—	$	3,185	$	4,880
Number of TDR loans	12		—		—		6		18

A summary of current, past due, and nonaccrual TDR loans as of December 31, 2018, is as follows:

(dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total TDRs
Real estate:
Commercial real estate	$	1,267	$	—	$	—	$	1,362	$	2,629
One-to-four family residential	208		—		—		—		208
Construction and development	—		—		—		39		39
Commercial and industrial	41		—		—		2,139		2,180
Tax-exempt	—		—		—		—		—
Consumer	56		—		—		—		56
Total	$	1,572	$	—	$	—	$	3,540	$	5,112
Number of TDR loans	10		—		—		6		16

A summary of loans modified as TDRs that occurred during the years ended December 31, 2019 and 2018, is as follows:

	2019					2018
		Recorded Investment					Recorded Investment
(dollars in thousands)	Loan Count	Pre Modification		Post Modification		Loan Count	Pre Modification		Post Modification
Real estate:
Commercial real estate	1	$	166	$	166	1	$	435	$	479
One-to-four family residential	1	60		62		1	40		40
Construction and development	—	—		—		—	—		—
Commercial and industrial	1	4		4		—	—		—
Tax-exempt	—	—		—		—	—		—
Consumer	—	—		—		1	58		58
Total	3	$	230	$	232	3	$	533	$	577

The TDRs described above increased the allowance for loan losses by $3,000 and $56,000 during the years ended December 31, 2019 and 2018, respectively. Additionally, there was a partial charge-off totaling $250,000 for both 2019 and 2018. There were no TDRs that subsequently defaulted in 2019 or 2018.

Credit Quality Indicators

Loans are categorized based on the degree of risk inherent in the credit and the ability of the borrower to service the debt. A description of the general characteristics of the Bank’s risk rating grades follows:

Pass - These ratings are assigned to loans with a risk level ranging from very low to acceptable based on the borrower’s financial condition, financial trends, management strength, and collateral quality.

Special Mention - This category includes loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan.

Substandard - Loans in this category have well defined weaknesses which jeopardize normal repayment of principal and interest.

Doubtful - Loans in this category have well defined weaknesses that make full collection improbable.

Loss - Loans classified in this category are considered uncollectible and charged-off to the allowance for loan losses.

The following table summarizes loans by risk rating as of December 31, 2019:

(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate:
Commercial real estate	$	515,926	$	14,118	$	1,946	$	—	$	—	$	531,990
One-to-four family residential	416,884		2,021		1,115		—		—		420,020
Construction and development	131,185		565		711		—		—		132,461
Commercial and industrial	247,382		11,473		9,085		—		—		267,940
Tax-exempt	56,494		—		—		—		—		56,494
Consumer	29,876		5		138		—		—		30,019
Total loans HFI	$	1,397,747	$	28,182	$	12,995	$	—	$	—	$	1,438,924

The following table summarizes loans by risk rating as of December 31, 2018:

(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate:
Commercial real estate	$	439,580	$	11,883	$	3,226	$	—	$	—	$	454,689
One-to-four family residential	402,864		1,992		2,107		—		—		406,963
Construction and development	101,754		375		739		—		—		102,868
Commercial and industrial	251,987		8,311		15,583		—		—		275,881
Tax-exempt	60,104		—		—		—		—		60,104
Consumer	27,729		44		160		—		—		27,933
Total loans HFI	$	1,284,018	$	22,605	$	21,815	$	—	$	—	$	1,328,438

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s evaluation of the customer’s ability to repay. As of December 31, 2019, unfunded loan

commitments totaled approximately $257.0 million. As of December 31, 2018, unfunded loan commitments totaled approximately $231.5 million.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. As of December 31, 2019, commitments under standby letters of credit totaled approximately $11.1 million. As of December 31, 2018, commitments under standby letters of credit totaled approximately $11.6 million. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.