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Loans Held for Investment and Allowance for Credit Losses on Loans
 6 Months Ended
Jun. 30, 2023
Receivables [Abstract]  
Loans Held for Investment and Allowance for Credit Losses on Loans

(4) LOANS HELD FOR INVESTMENT AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

Certain loan segments from 2022 have been reclassified to conform to the 2023 presentation. Each loan segment is made up of loan categories possessing similar risk characteristics. The Company’s re-alignment of the segments primarily consisted of reclassifying farmland and agriculture related loans that were previously included in consumer-related and commercial-related loans to the agriculture category. Management believes this accurately represents the risk profile of each loan segment. These reclassifications did not have a significant impact on the allowance for credit losses.

 

Loans held for investment are summarized by portfolio segment as follows:

 

June 30, 2023

 

 

December 31, 2022

 

 

(Dollars in thousands)

 

  Real estate:

 

 

 

 

 

    Commercial real estate owner occupied

 

969,914

 

 

 

908,494

 

    Commercial real estate non-owner occupied

 

1,412,476

 

 

 

1,383,150

 

    Construction and development < 60 months

 

549,068

 

 

 

475,236

 

    Construction residential real estate < 60 months

 

276,726

 

 

 

303,305

 

    Residential real estate first lien

 

1,189,944

 

 

 

1,117,899

 

    Residential real estate all other

 

219,752

 

 

 

196,198

 

    Agriculture

 

422,327

 

 

 

408,037

 

  Commercial non-real estate

 

1,349,789

 

 

 

1,241,454

 

  Consumer non-real estate

 

457,897

 

 

 

446,756

 

  Oil and gas

 

450,799

 

 

 

463,034

 

           Total (1)

$

7,298,692

 

 

$

6,943,563

 

(1) Excludes accrued interest receivable of $34.3 million at June 30, 2023 and $30.6 million at December 31, 2022, that is recorded in accrued interest receivable and other assets.

 

 

 

The Company's loans are currently 85% held by BancFirst and 15% held by Pegasus and Worthington. In addition, approximately 69% of the Company's loans are secured by real estate. Credit risk on loans is managed through limits on amounts loaned to individual and related borrowers, underwriting standards and loan monitoring procedures. The amounts and types of collateral obtained, if any, to secure loans are based upon the Company’s underwriting standards and management’s credit evaluation. Collateral varies, but may include real estate, equipment, accounts receivable, inventory, livestock and securities. The Company’s interest in collateral is secured through filing mortgages and liens, and in some cases, by possession of the collateral.

 

The Company's portfolio segment descriptions and the weighted average remaining life of portfolio segments are disclosed in Note (5) to the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Loan Modifications, Other Real Estate Owned and Repossessed Assets and Held for Sale Assets

The following is a summary of other real estate owned and repossessed assets:

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(Dollars in thousands)

 

Other real estate owned and repossessed assets

 

$

41,612

 

 

$

36,936

 

As of both June 30, 2023 and December 31, 2022, other real estate owned included a commercial real estate property recorded at approximately $32.9 million and $29.4 million, respectively. Rental income for this property is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for this property is included in net expense from other real estate owned in other noninterest expense on the consolidated statements of comprehensive income.

This property had the following rental income and operating expenses for the periods presented.

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Rental income

 

$

2,778

 

 

$

2,643

 

 

$

5,468

 

 

$

5,313

 

Operating expense

 

 

2,967

 

 

 

2,299

 

 

 

5,348

 

 

 

4,738

 

 

 

During the six months ended June 30, 2023, the Company sold property held in other real estate owned for a total gain of $266,000, compared to a total gain of $3.8 million in the six months ended June 30, 2022.

The Company charges interest on principal balances outstanding on modified loans during deferral periods. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of modified loans was approximately $9.7 million during the period ended June 30, 2023.

Nonaccrual loans

The Company did not recognize any interest income on nonaccrual loans for either of the six months ended June 30, 2023 or 2022. In addition, there were no nonaccrual loans for which there is no related allowance for credit losses at both June 30, 2023 and December 31, 2022. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $718,000 for the six months ended June 30, 2023 and approximately $653,000 for the six months ended June 30, 2022.

Nonaccrual loans guaranteed by government agencies totaled approximately $6.6 million at June 30, 2023 and approximately $4.7 million at December 31, 2022.

The following table is a summary of amounts included in nonaccrual loans, segregated by portfolio segment.

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(Dollars in thousands)

 

  Real estate:

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

4,360

 

 

$

1,795

 

Commercial real estate non-owner occupied

 

 

706

 

 

 

667

 

Construction and development < 60 months

 

 

81

 

 

 

93

 

Construction residential real estate < 60 months

 

 

376

 

 

 

430

 

Residential real estate first lien

 

 

2,717

 

 

 

1,947

 

Residential real estate all other

 

 

845

 

 

 

55

 

Agriculture

 

 

2,141

 

 

 

2,734

 

  Commercial non-real estate

 

 

6,497

 

 

 

7,066

 

  Consumer non-real estate

 

 

241

 

 

 

192

 

  Oil and gas

 

 

83

 

 

 

320

 

Total

 

$

18,047

 

 

$

15,299

 

 

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The following table presents an age analysis of the Company's loans held for investment:

 

 

Age Analysis of Past Due Loans

 

(Dollars in thousands)

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
and
Greater

 

 

Total
Past Due
Loans

 

 

Current
Loans

 

 

Total Loans

 

 

Accruing
Loans 90
Days or
More
Past Due

 

As of June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

2,439

 

 

$

1,684

 

 

$

6,844

 

 

$

10,967

 

 

$

958,947

 

 

$

969,914

 

 

$

4,152

 

Commercial real estate non-owner occupied

 

 

236

 

 

 

8,752

 

 

 

875

 

 

 

9,863

 

 

 

1,402,613

 

 

 

1,412,476

 

 

 

213

 

Construction and development < 60 months

 

 

52

 

 

 

—

 

 

 

984

 

 

 

1,036

 

 

 

548,032

 

 

 

549,068

 

 

 

903

 

Construction residential real estate < 60 months

 

 

1,342

 

 

 

103

 

 

 

543

 

 

 

1,988

 

 

 

274,738

 

 

 

276,726

 

 

 

543

 

Residential real estate first lien

 

 

2,597

 

 

 

1,328

 

 

 

2,534

 

 

 

6,459

 

 

 

1,183,485

 

 

 

1,189,944

 

 

 

879

 

Residential real estate all other

 

 

1,092

 

 

 

280

 

 

 

840

 

 

 

2,212

 

 

 

217,540

 

 

 

219,752

 

 

 

61

 

Agriculture

 

 

833

 

 

 

268

 

 

 

838

 

 

 

1,939

 

 

 

420,388

 

 

 

422,327

 

 

 

50

 

  Commercial non-real estate

 

 

3,795

 

 

 

928

 

 

 

6,055

 

 

 

10,778

 

 

 

1,339,011

 

 

 

1,349,789

 

 

 

1,567

 

  Consumer non-real estate

 

 

2,405

 

 

 

807

 

 

 

569

 

 

 

3,781

 

 

 

454,116

 

 

 

457,897

 

 

 

431

 

  Oil and gas

 

 

236

 

 

 

654

 

 

 

83

 

 

 

973

 

 

 

449,826

 

 

 

450,799

 

 

 

—

 

Total

 

$

15,027

 

 

$

14,804

 

 

$

20,165

 

 

$

49,996

 

 

$

7,248,696

 

 

$

7,298,692

 

 

$

8,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
and
Greater

 

 

Total
Past Due
Loans

 

 

Current
Loans

 

 

Total Loans

 

 

Accruing
Loans 90
Days or
More
Past Due

 

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

1,314

 

 

$

1,524

 

 

$

4,580

 

 

$

7,418

 

 

$

901,076

 

 

$

908,494

 

 

$

4,580

 

Commercial real estate non-owner occupied

 

 

6,237

 

 

 

—

 

 

 

42

 

 

 

6,279

 

 

 

1,376,871

 

 

 

1,383,150

 

 

 

43

 

Construction and development < 60 months

 

 

535

 

 

 

40

 

 

 

114

 

 

 

689

 

 

 

474,547

 

 

 

475,236

 

 

 

81

 

Construction residential real estate < 60 months

 

 

1,320

 

 

 

282

 

 

 

148

 

 

 

1,750

 

 

 

301,555

 

 

 

303,305

 

 

 

—

 

Residential real estate first lien

 

 

3,415

 

 

 

1,076

 

 

 

844

 

 

 

5,335

 

 

 

1,112,564

 

 

 

1,117,899

 

 

 

349

 

Residential real estate all other

 

 

265

 

 

 

37

 

 

 

185

 

 

 

487

 

 

 

195,711

 

 

 

196,198

 

 

 

166

 

Agriculture

 

 

2,357

 

 

 

34

 

 

 

2,265

 

 

 

4,656

 

 

 

403,381

 

 

 

408,037

 

 

 

1,054

 

  Commercial non-real estate

 

 

2,490

 

 

 

2,142

 

 

 

2,772

 

 

 

7,404

 

 

 

1,234,050

 

 

 

1,241,454

 

 

 

345

 

  Consumer non-real estate

 

 

2,591

 

 

 

648

 

 

 

585

 

 

 

3,824

 

 

 

442,932

 

 

 

446,756

 

 

 

467

 

  Oil and gas

 

 

654

 

 

 

—

 

 

 

—

 

 

 

654

 

 

 

462,380

 

 

 

463,034

 

 

 

—

 

Total

 

$

21,178

 

 

$

5,783

 

 

$

11,535

 

 

$

38,496

 

 

$

6,905,067

 

 

$

6,943,563

 

 

$

7,085

 

 

Credit Quality Indicators

The Company considers credit quality indicators to monitor the credit risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical credit loss experience and economic conditions. These indicators are reviewed and updated regularly throughout the year. An internal risk grading system is used to indicate the credit risk of loans. The loan grades used by the Company are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions. The general characteristics of the risk grades and the table summarizing the Company’s gross loans held for investment by year of origination and internally assigned credit grades as of December 31, 2022, are disclosed in Note (5) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The Company’s revolving loans that are converted to term loans are not material and therefore have not been presented.

 

The following table summarizes the Company’s gross loans held for investment by year of origination and internally assigned credit grades:

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

Revolving Loans

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Amortized Cost Basis

 

 

Total

 

As of June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

75,514

 

 

$

174,029

 

 

$

131,583

 

 

$

96,065

 

 

$

91,649

 

 

$

150,940

 

 

$

51,100

 

 

$

770,880

 

Grade 2

 

 

22,851

 

 

 

42,130

 

 

 

30,830

 

 

 

24,524

 

 

 

19,136

 

 

 

30,000

 

 

 

18,248

 

 

 

187,719

 

Grade 3

 

 

19

 

 

 

—

 

 

 

4,450

 

 

 

1,193

 

 

 

883

 

 

 

1,459

 

 

 

212

 

 

 

8,216

 

Grade 4

 

 

—

 

 

 

314

 

 

 

345

 

 

 

311

 

 

 

1,166

 

 

 

624

 

 

 

—

 

 

 

2,760

 

Grade 5

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

339

 

 

 

—

 

 

 

—

 

 

 

339

 

Total commercial real estate owner occupied

 

 

98,384

 

 

 

216,473

 

 

 

167,208

 

 

 

122,093

 

 

 

113,173

 

 

 

183,023

 

 

 

69,560

 

 

 

969,914

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

116,433

 

 

$

324,990

 

 

$

221,196

 

 

$

159,511

 

 

$

92,137

 

 

$

79,849

 

 

$

45,799

 

 

$

1,039,915

 

Grade 2

 

 

44,955

 

 

 

107,929

 

 

 

43,476

 

 

 

33,416

 

 

 

32,628

 

 

 

71,739

 

 

 

23,609

 

 

 

357,752

 

Grade 3

 

 

—

 

 

 

6,733

 

 

 

5

 

 

 

150

 

 

 

6,207

 

 

 

795

 

 

 

—

 

 

 

13,890

 

Grade 4

 

 

44

 

 

 

820

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

55

 

 

 

—

 

 

 

919

 

Total commercial real estate non-owner occupied

 

 

161,432

 

 

 

440,472

 

 

 

264,677

 

 

 

193,077

 

 

 

130,972

 

 

 

152,438

 

 

 

69,408

 

 

 

1,412,476

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

88,593

 

 

$

139,210

 

 

$

77,235

 

 

$

14,074

 

 

$

4,622

 

 

$

6,522

 

 

$

70,118

 

 

$

400,374

 

Grade 2

 

 

42,927

 

 

 

36,862

 

 

 

15,894

 

 

 

1,584

 

 

 

13,984

 

 

 

2,418

 

 

 

33,679

 

 

 

147,348

 

Grade 3

 

 

—

 

 

 

903

 

 

 

103

 

 

 

98

 

 

 

—

 

 

 

7

 

 

 

154

 

 

 

1,265

 

Grade 4

 

 

—

 

 

 

81

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

81

 

Total construction and development < 60 months

 

 

131,520

 

 

 

177,056

 

 

 

93,232

 

 

 

15,756

 

 

 

18,606

 

 

 

8,947

 

 

 

103,951

 

 

 

549,068

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

106,520

 

 

$

80,355

 

 

$

1,897

 

 

$

257

 

 

$

6

 

 

$

39

 

 

$

33,846

 

 

$

222,920

 

Grade 2

 

 

25,787

 

 

 

26,221

 

 

 

38

 

 

 

22

 

 

 

—

 

 

 

388

 

 

 

90

 

 

 

52,546

 

Grade 3

 

 

99

 

 

 

785

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

884

 

Grade 4

 

 

376

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

376

 

Total construction residential real estate < 60 months

 

 

132,782

 

 

 

107,361

 

 

 

1,935

 

 

 

279

 

 

 

6

 

 

 

427

 

 

 

33,936

 

 

 

276,726

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

160,801

 

 

$

256,377

 

 

$

189,258

 

 

$

130,017

 

 

$

78,783

 

 

$

168,639

 

 

$

3,721

 

 

$

987,596

 

Grade 2

 

 

21,024

 

 

 

46,624

 

 

 

35,716

 

 

 

24,654

 

 

 

12,691

 

 

 

44,160

 

 

 

—

 

 

 

184,869

 

Grade 3

 

 

1,236

 

 

 

1,867

 

 

 

2,959

 

 

 

1,035

 

 

 

1,664

 

 

 

3,926

 

 

 

—

 

 

 

12,687

 

Grade 4

 

 

361

 

 

 

177

 

 

 

1,181

 

 

 

292

 

 

 

646

 

 

 

2,135

 

 

 

—

 

 

 

4,792

 

Total residential real estate first lien

 

 

183,422

 

 

 

305,045

 

 

 

229,114

 

 

 

155,998

 

 

 

93,784

 

 

 

218,860

 

 

 

3,721

 

 

 

1,189,944

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

25,642

 

 

$

28,209

 

 

$

8,615

 

 

$

9,218

 

 

$

4,625

 

 

$

14,003

 

 

$

39,561

 

 

$

129,873

 

Grade 2

 

 

2,380

 

 

 

4,982

 

 

 

2,202

 

 

 

1,983

 

 

 

1,509

 

 

 

3,476

 

 

 

69,231

 

 

 

85,763

 

Grade 3

 

 

171

 

 

 

422

 

 

 

77

 

 

 

45

 

 

 

146

 

 

 

471

 

 

 

1,877

 

 

 

3,209

 

Grade 4

 

 

—

 

 

 

24

 

 

 

10

 

 

 

26

 

 

 

—

 

 

 

50

 

 

 

797

 

 

 

907

 

Total residential real estate all other

 

 

28,193

 

 

 

33,637

 

 

 

10,904

 

 

 

11,272

 

 

 

6,280

 

 

 

18,000

 

 

 

111,466

 

 

 

219,752

 

 Agriculture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

32,122

 

 

$

61,718

 

 

$

39,267

 

 

$

32,007

 

 

$

18,986

 

 

$

36,796

 

 

$

39,208

 

 

$

260,104

 

Grade 2

 

 

18,303

 

 

 

23,027

 

 

 

19,601

 

 

 

8,718

 

 

 

9,835

 

 

 

17,869

 

 

 

43,466

 

 

 

140,819

 

Grade 3

 

 

6,781

 

 

 

1,204

 

 

 

1,527

 

 

 

3,396

 

 

 

144

 

 

 

3,815

 

 

 

3,255

 

 

 

20,122

 

Grade 4

 

 

59

 

 

 

668

 

 

 

57

 

 

 

169

 

 

 

44

 

 

 

254

 

 

 

31

 

 

 

1,282

 

Total Agriculture

 

 

57,265

 

 

 

86,617

 

 

 

60,452

 

 

 

44,290

 

 

 

29,009

 

 

 

58,734

 

 

 

85,960

 

 

 

422,327

 

 Commercial non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

148,198

 

 

$

288,490

 

 

$

176,959

 

 

$

48,809

 

 

$

42,278

 

 

$

43,672

 

 

$

293,889

 

 

$

1,042,295

 

Grade 2

 

 

55,938

 

 

 

65,449

 

 

 

28,746

 

 

 

16,090

 

 

 

10,820

 

 

 

21,080

 

 

 

96,657

 

 

 

294,780

 

Grade 3

 

 

1,208

 

 

 

2,284

 

 

 

575

 

 

 

172

 

 

 

619

 

 

 

1,381

 

 

 

2,491

 

 

 

8,730

 

Grade 4

 

 

11

 

 

 

983

 

 

 

348

 

 

 

693

 

 

 

372

 

 

 

279

 

 

 

1,034

 

 

 

3,720

 

Grade 5

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

264

 

 

 

—

 

 

 

—

 

 

 

264

 

Total commercial non-real estate

 

 

205,355

 

 

 

357,206

 

 

 

206,628

 

 

 

65,764

 

 

 

54,353

 

 

 

66,412

 

 

 

394,071

 

 

 

1,349,789

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

118,847

 

 

$

146,280

 

 

$

76,246

 

 

$

27,782

 

 

$

13,664

 

 

$

4,737

 

 

$

26,330

 

 

$

413,886

 

Grade 2

 

 

7,960

 

 

 

16,721

 

 

 

8,236

 

 

 

2,766

 

 

 

971

 

 

 

1,804

 

 

 

1,642

 

 

 

40,100

 

Grade 3

 

 

155

 

 

 

984

 

 

 

1,013

 

 

 

401

 

 

 

245

 

 

 

115

 

 

 

16

 

 

 

2,929

 

Grade 4

 

 

39

 

 

 

392

 

 

 

352

 

 

 

44

 

 

 

85

 

 

 

25

 

 

 

4

 

 

 

941

 

Grade 5

 

 

—

 

 

 

41

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

41

 

Total consumer non-real estate

 

 

127,001

 

 

 

164,418

 

 

 

85,847

 

 

 

30,993

 

 

 

14,965

 

 

 

6,681

 

 

 

27,992

 

 

 

457,897

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grade 1

 

$

62,557

 

 

$

13,971

 

 

$

96,748

 

 

$

12,909

 

 

$

2,273

 

 

$

17,373

 

 

$

159,813

 

 

$

365,644

 

Grade 2

 

 

6,779

 

 

 

5,334

 

 

 

2,251

 

 

 

432

 

 

 

18,470

 

 

 

255

 

 

 

47,498

 

 

 

81,019

 

Grade 3

 

 

—

 

 

 

2,091

 

 

 

240

 

 

 

3

 

 

 

—

 

 

 

—

 

 

 

1,719

 

 

 

4,053

 

Grade 4

 

 

—

 

 

 

83

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

83

 

Total oil and gas

 

 

69,336

 

 

 

21,479

 

 

 

99,239

 

 

 

13,344

 

 

 

20,743

 

 

 

17,628

 

 

 

209,030

 

 

 

450,799

 

Total loans held for investment

 

$

1,194,690

 

 

$

1,909,764

 

 

$

1,219,236

 

 

$

652,866

 

 

$

481,891

 

 

$

731,150

 

 

$

1,109,095

 

 

$

7,298,692

 

 

 

The following tables summarize the Company’s gross charge-offs by year of origination for the periods indicated:

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

Revolving Loans

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Amortized Cost Basis

 

 

Total

 

Three months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

19

 

 

 

21

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

42

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 Agriculture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

301

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

302

 

 Commercial non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

42

 

 

 

34

 

 

 

1

 

 

 

20

 

 

 

—

 

 

 

5

 

 

 

—

 

 

 

102

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

29

 

 

 

186

 

 

 

115

 

 

 

14

 

 

 

28

 

 

 

11

 

 

 

15

 

 

 

398

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Total current-period gross charge-offs

 

$

71

 

 

$

224

 

 

$

135

 

 

$

358

 

 

$

29

 

 

$

18

 

 

$

15

 

 

$

850

 

 

 

 

Term Loans Amortized Cost Basis by Origination Year

 

 

Revolving Loans

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Amortized Cost Basis

 

 

Total

 

Six months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial real estate owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

$

—

 

 

$

7

 

 

$

1

 

 

$

22

 

 

$

18

 

 

$

—

 

 

$

—

 

 

$

48

 

 Commercial real estate non-owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3

 

 

 

—

 

 

 

3

 

 Construction and development < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

2

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 Construction residential real estate < 60 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 Residential real estate first lien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

—

 

 

 

19

 

 

 

21

 

 

 

—

 

 

 

4

 

 

 

—

 

 

 

44

 

 Residential real estate all other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

4

 

 

 

19

 

 

 

—

 

 

 

1

 

 

 

4

 

 

 

—

 

 

 

28

 

 Agriculture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

4

 

 

 

—

 

 

 

317

 

 

 

14

 

 

 

2

 

 

 

—

 

 

 

337

 

 Commercial non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

42

 

 

 

101

 

 

 

63

 

 

 

20

 

 

 

—

 

 

 

52

 

 

 

—

 

 

 

278

 

 Consumer non-real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

29

 

 

 

262

 

 

 

147

 

 

 

29

 

 

 

37

 

 

 

17

 

 

 

17

 

 

 

538

 

 Oil and gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current-period gross charge-offs

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Total current-period gross charge-offs

 

$

71

 

 

$

382

 

 

$

249

 

 

$

411

 

 

$

70

 

 

$

82

 

 

$

17

 

 

$

1,282

 

Allowance for Credit Losses Methodology

 

The Company determines its provision for credit losses and allowance for credit losses using the current expected credit loss methodology that is referred to as the CECL model. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.

The following table details activity in the allowance for credit losses on loans for the period presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,547

 

 

$

—

 

 

$

3

 

 

$

3

 

 

$

258

 

 

$

6,808

 

Commercial real estate non-owner occupied

 

 

32,120

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,312

 

 

 

33,432

 

Construction and development < 60 months

 

 

3,608

 

 

 

(2

)

 

 

3

 

 

 

1

 

 

 

(169

)

 

 

3,440

 

Construction residential real estate < 60 months

 

 

3,226

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

327

 

 

 

3,553

 

Residential real estate first lien

 

 

4,454

 

 

 

(42

)

 

 

10

 

 

 

(32

)

 

 

333

 

 

 

4,755

 

Residential real estate all other

 

 

1,444

 

 

 

(2

)

 

 

1

 

 

 

(1

)

 

 

218

 

 

 

1,661

 

Agriculture

 

 

6,268

 

 

 

(302

)

 

 

7

 

 

 

(295

)

 

 

453

 

 

 

6,426

 

  Commercial non-real estate

 

 

25,079

 

 

 

(102

)

 

 

127

 

 

 

25

 

 

 

23

 

 

 

25,127

 

  Consumer non-real estate

 

 

4,232

 

 

 

(398

)

 

 

35

 

 

 

(363

)

 

 

475

 

 

 

4,344

 

  Oil and gas

 

 

7,782

 

 

 

(2

)

 

 

—

 

 

 

(2

)

 

 

(406

)

 

 

7,374

 

Total

 

$

94,760

 

 

$

(850

)

 

$

186

 

 

$

(664

)

 

$

2,824

 

 

$

96,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Six Months Ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

6,416

 

 

$

(48

)

 

$

52

 

 

$

4

 

 

$

388

 

 

$

6,808

 

Commercial real estate non-owner occupied

 

 

30,190

 

 

 

(3

)

 

 

—

 

 

 

(3

)

 

 

3,245

 

 

 

33,432

 

Construction and development < 60 months

 

 

3,778

 

 

 

(4

)

 

 

6

 

 

 

2

 

 

 

(340

)

 

 

3,440

 

Construction residential real estate < 60 months

 

 

3,275

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

278

 

 

 

3,553

 

Residential real estate first lien

 

 

4,092

 

 

 

(44

)

 

 

13

 

 

 

(31

)

 

 

694

 

 

 

4,755

 

Residential real estate all other

 

 

1,418

 

 

 

(28

)

 

 

3

 

 

 

(25

)

 

 

268

 

 

 

1,661

 

Agriculture

 

 

6,217

 

 

 

(337

)

 

 

13

 

 

 

(324

)

 

 

533

 

 

 

6,426

 

  Commercial non-real estate

 

 

25,106

 

 

 

(278

)

 

 

149

 

 

 

(129

)

 

 

150

 

 

 

25,127

 

  Consumer non-real estate

 

 

4,132

 

 

 

(538

)

 

 

92

 

 

 

(446

)

 

 

658

 

 

 

4,344

 

  Oil and gas

 

 

8,104

 

 

 

(2

)

 

 

—

 

 

 

(2

)

 

 

(728

)

 

 

7,374

 

Total

 

$

92,728

 

 

$

(1,282

)

 

$

328

 

 

$

(954

)

 

$

5,146

 

 

$

96,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

8,262

 

 

$

(4

)

 

$

30

 

 

$

26

 

 

$

(1,360

)

 

$

6,928

 

Commercial real estate non-owner occupied

 

 

16,348

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(33

)

 

 

16,315

 

Construction and development < 60 months

 

 

3,272

 

 

 

—

 

 

 

2

 

 

 

2

 

 

 

406

 

 

 

3,680

 

Construction residential real estate < 60 months

 

 

1,103

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

80

 

 

 

1,183

 

Residential real estate first lien

 

 

3,394

 

 

 

(5

)

 

 

6

 

 

 

1

 

 

 

(40

)

 

 

3,355

 

Residential real estate all other

 

 

1,560

 

 

 

(36

)

 

 

—

 

 

 

(36

)

 

 

(44

)

 

 

1,480

 

Agriculture

 

 

8,018

 

 

 

—

 

 

 

4

 

 

 

4

 

 

 

(66

)

 

 

7,956

 

  Commercial non-real estate

 

 

25,163

 

 

 

(717

)

 

 

26

 

 

 

(691

)

 

 

898

 

 

 

25,370

 

  Consumer non-real estate

 

 

3,730

 

 

 

(153

)

 

 

42

 

 

 

(111

)

 

 

431

 

 

 

4,050

 

  Oil and gas

 

 

16,389

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

229

 

 

 

16,618

 

Total

 

$

87,239

 

 

$

(915

)

 

$

110

 

 

$

(805

)

 

$

501

 

 

$

86,935

 

 

 

Allowance for Credit Losses

 

 

 

Balance at
beginning of
period

 

 

Initial allowance on loans purchased with credit deterioration

 

 

Charge-
offs

 

 

Recoveries

 

 

Net
charge-offs

 

 

Provision for /(benefit from) credit losses on loans

 

 

Balance at
end of
period

 

 

 

(Dollars in thousands)

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

7,550

 

 

$

—

 

 

$

(20

)

 

$

78

 

 

$

58

 

 

$

(680

)

 

$

6,928

 

Commercial real estate non-owner occupied

 

 

16,807

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(492

)

 

 

16,315

 

Construction and development < 60 months

 

 

3,454

 

 

 

—

 

 

 

—

 

 

 

5

 

 

 

5

 

 

 

221

 

 

 

3,680

 

Construction residential real estate < 60 months

 

 

1,051

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

132

 

 

 

1,183

 

Residential real estate first lien

 

 

3,048

 

 

 

2

 

 

 

(49

)

 

 

13

 

 

 

(36

)

 

 

341

 

 

 

3,355

 

Residential real estate all other

 

 

1,567

 

 

 

—

 

 

 

(36

)

 

 

402

 

 

 

366

 

 

 

(453

)

 

 

1,480

 

Agriculture

 

 

8,392

 

 

 

—

 

 

 

(125

)

 

 

7

 

 

 

(118

)

 

 

(318

)

 

 

7,956

 

  Commercial non-real estate

 

 

25,565

 

 

 

48

 

 

 

(774

)

 

 

136

 

 

 

(638

)

 

 

395

 

 

 

25,370

 

  Consumer non-real estate

 

 

3,694

 

 

 

28

 

 

 

(233

)

 

 

80

 

 

 

(153

)

 

 

481

 

 

 

4,050

 

  Oil and gas

 

 

12,808

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,810

 

 

 

16,618

 

Total

 

$

83,936

 

 

$

78

 

 

$

(1,237

)

 

$

721

 

 

$

(516

)

 

$

3,437

 

 

$

86,935

 

 

Purchased Credit Deteriorated Loans

 

The Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The Company did not purchase credit-deteriorated loans during the six month period ended June 30, 2023. The credit-deteriorated loans purchased during the six months ended June 30, 2022 were as follows:

 

 

 

Loans acquired
with deteriorated
credit quality

 

 

 

(Dollars in thousands)

 

For the period ended June 30, 2022

 

 

 

Purchase price of loans at acquisition

 

$

661

 

Allowance for credit losses at acquisition

 

 

78

 

Par value of acquired loans at acquisition

 

$

739

 

 

 

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. During the six months ended June 30, 2023 and 2022, no material amount of interest income was recognized on collateral-dependent loans subsequent to their classification as collateral-dependent. The following table summarizes collateral-dependent gross loans held for investment by collateral type and the related specific allocation as follows:

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

As of June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

2,129

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

2,129

 

 

$

863

 

Commercial real estate non-owner occupied

 

 

664

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

664

 

 

 

270

 

Construction and development < 60 months

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Construction residential real estate < 60 months

 

 

376

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

376

 

 

 

45

 

Residential real estate first lien

 

 

371

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

371

 

 

 

118

 

Residential real estate all other

 

 

41

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

41

 

 

 

19

 

Agriculture

 

 

3,436

 

 

 

672

 

 

 

—

 

 

 

3,068

 

 

 

7,176

 

 

 

2,694

 

  Commercial non-real estate

 

 

—

 

 

 

4,879

 

 

 

—

 

 

 

—

 

 

 

4,879

 

 

 

1,747

 

  Consumer non-real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

93

 

 

 

93

 

 

 

56

 

  Oil and gas

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total collateral-dependent loans held for investment

 

$

7,017

 

 

$

5,551

 

 

$

—

 

 

$

3,161

 

 

$

15,729

 

 

$

5,812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral Type

 

 

 

 

 

 

 

 

 

Real Estate

 

 

Business Assets

 

 

Energy Reserves

 

 

Other Assets

 

 

Total

 

 

Specific Allocation

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

$

2,213

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

2,213

 

 

$

870

 

Commercial real estate non-owner occupied

 

 

1,263

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,263

 

 

 

333

 

Construction and development < 60 months

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Construction residential real estate < 60 months

 

 

420

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

420

 

 

 

45

 

Residential real estate first lien

 

 

481

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

481

 

 

 

207

 

Residential real estate all other

 

 

9

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9

 

 

 

9

 

Agriculture

 

 

3,447

 

 

 

701

 

 

 

—

 

 

 

3,592

 

 

 

7,740

 

 

 

3,114

 

  Commercial non-real estate

 

 

—

 

 

 

5,924

 

 

 

—

 

 

 

4

 

 

 

5,928

 

 

 

1,938

 

  Consumer non-real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

117

 

 

 

117

 

 

 

81

 

  Oil and gas

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total collateral-dependent loans held for investment

 

$

7,833

 

 

$

6,625

 

 

$

—

 

 

$

3,713

 

 

$

18,171

 

 

$

6,597

 

Non-Cash Transfers from Loans and Premises and Equipment

Transfers from loans and premises and equipment to other real estate owned and repossessed assets are non-cash transactions, and are not included in the consolidated statements of cash flow.

Transfers from loans and premises and equipment to other real estate owned and repossessed assets during the periods presented are summarized as follows:

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

(Dollars in thousands)

 

Other real estate owned

 

$

667

 

 

$

4,065

 

Repossessed assets

 

 

946

 

 

 

503

 

Total

 

$

1,613

 

 

$

4,568