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Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2025
Receivables [Abstract]  
Loans and Allowance for Loan Losses Loans and Allowance for Loan Losses
Loans in the accompanying consolidated balance sheets are classified as follows (in thousands):    
March 31, 2025December 31, 2024
Real estate loans:  
Construction$458,101 $537,827 
1-4 family residential741,432 740,396 
Commercial2,577,229 2,579,735 
Commercial loans371,643 363,167 
Municipal loans371,271 390,968 
Loans to individuals47,563 49,504 
Total loans4,567,239 4,661,597 
Less: Allowance for loan losses44,623 44,884 
Net loans$4,522,616 $4,616,713 

Construction Real Estate Loans
Our construction loans are collateralized by property located primarily in or near the market areas we serve. Some of our construction loans will be owner occupied upon completion. Construction loans for non-owner occupied projects are financed, but these typically have cash flows from leases with tenants, secondary sources of repayment, and in some cases, additional collateral. Our construction loans have both adjustable and fixed interest rates during the construction period. Construction loans to individuals are typically priced and made with the intention of granting the permanent loan on the completed property. Commercial construction loans typically have adjustable interest rates and are subject to underwriting standards similar to that of the commercial real estate loan portfolio.  Owner occupied 1-4 family residential construction loans are subject to the underwriting standards of the permanent loan.
1-4 Family Residential Real Estate Loans
Residential loan originations are generated by our mortgage loan officers, in-house origination staff, marketing efforts, present customers, walk-in customers and referrals from real estate agents and builders.  We focus our lending efforts primarily on the origination of loans secured by first mortgages on owner occupied 1-4 family residences.  Substantially all of our 1-4 family residential originations are secured by properties located in or near our market areas.  
Our 1-4 family residential loans generally have maturities ranging from 15 to 30 years.  These loans are typically fully amortizing with monthly payments sufficient to repay the total amount of the loan.  Our 1-4 family residential loans are made at both fixed and adjustable interest rates.
Underwriting for 1-4 family residential loans includes debt-to-income analysis, credit history analysis, appraised value and down payment considerations. Changes in the market value of real estate can affect the potential losses in the residential portfolio.
Commercial Real Estate Loans
Commercial real estate loans as of March 31, 2025 consisted of $1.80 billion of owner and non-owner occupied real estate, $751.2 million of loans secured by multi-family properties and $31.0 million of loans secured by farmland. Commercial real estate loans primarily include loans collateralized by retail, commercial office buildings, multi-family residential buildings, medical facilities and offices, senior living, assisted living and skilled nursing facilities, warehouse facilities, hotels and churches. In determining whether to originate commercial real estate loans, we generally consider such factors as the financial condition of the borrower and the debt service coverage of the property. Commercial real estate loans are made at both fixed and adjustable interest rates for terms generally up to 20 years.
Commercial Loans
Our commercial loans are diversified loan types including short-term working capital loans for inventory and accounts receivable and short- and medium-term loans for equipment or other business capital expansion.  In our commercial loan underwriting, we assess the creditworthiness, ability to repay and the value and liquidity of the collateral being offered.  Terms of commercial loans are generally commensurate with the useful life of the collateral offered.
Municipal Loans
We have made loans to municipalities and school districts primarily throughout the state of Texas, with a small percentage originating outside of the state.  The majority of the loans to municipalities and school districts have tax or revenue pledges and in some cases are additionally supported by collateral.  Municipal loans made without a direct pledge of taxes or revenues are usually made based on some type of collateral that represents an essential service. These loans allow us to earn a higher yield than we could if we purchased municipal securities for similar durations.
Loans to Individuals
Substantially all originations of our loans to individuals are made to consumers in our market areas.  The majority of loans to individuals are collateralized by titled equipment, which are primarily automobiles. Loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower.  The underwriting standards we employ for consumer loans include an application, a determination of the applicant’s payment history on other debts, with the greatest weight being given to payment history with us and an assessment of the borrower’s ability to meet existing obligations and payments on the proposed loan.  Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount. Most of our loans to individuals are collateralized, which management believes assists in limiting our exposure.
Credit Quality Indicators
We categorize loans into risk categories on an ongoing basis based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  We use the following definitions for risk ratings:
•Pass (Rating 1 – 4) – This rating is assigned to all satisfactory loans.  This category, by definition, consists of acceptable credit.  Credit and collateral exceptions should not be present, although their presence would not necessarily prohibit a loan from being rated Pass, if deficiencies are in the process of correction.  These loans are not included in the Watch List.
•Pass Watch (Rating 5) – These loans require some degree of special treatment, but not due to credit quality.  This category does not include loans specially mentioned or adversely classified; however, particular attention is warranted to characteristics such as:
▪A lack of, or abnormally extended payment program;
▪A heavy degree of concentration of collateral without sufficient margin;
▪A vulnerability to competition through lesser or extensive financial leverage; and
▪A dependence on a single or few customers or sources of supply and materials without suitable substitutes or alternatives.
•Special Mention (Rating 6) – A Special Mention loan has 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 or in our credit position at some future date.  Special Mention loans are not adversely classified and do not expose us to sufficient risk to warrant adverse classification.
•Substandard (Rating 7) – Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
•Doubtful (Rating 8) – Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation, in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.
The following tables set forth the amortized cost basis by class of financing receivable and credit quality indicator for the periods presented (in thousands):
March 31, 2025Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisTotal
20252024202320222021Prior
Construction real estate:
Pass$13,462 $131,608 $98,543 $32,682 $17,409 $6,933 $137,472 $438,109 
Pass watch— 198 — 511 — 1,214 17,403 19,326 
Special mention— — — — 424 65 — 489 
Substandard— — 109 — 58 10 — 177 
Doubtful— — — — — — — — 
Total construction real estate$13,462 $131,806 $98,652 $33,193 $17,891 $8,222 $154,875 $458,101 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
1-4 family residential real estate:
Pass$9,213 $43,478 $69,628 $152,425 $136,485 $323,153 $1,550 $735,932 
Pass watch— — — — — — — — 
Special mention— — — — 502 40 — 542 
Substandard— 48 225 — 221 3,948 — 4,442 
Doubtful— 357 — — — 159 — 516 
Total 1-4 family residential real estate$9,213 $43,883 $69,853 $152,425 $137,208 $327,300 $1,550 $741,432 
Current period gross charge-offs$— $— $— $— $— $13 $— $13 
Commercial real estate:
Pass$139,386 $318,388 $389,120 $558,687 $481,815 $336,838 $44,496 $2,268,730 
Pass watch— — 11,778 136,111 — 40,901 957 189,747 
Special mention— — — 59,811 172 279 — 60,262 
Substandard— — — 46,145 6,307 5,985 — 58,437 
Doubtful— — — — — 53 — 53 
Total commercial real estate$139,386 $318,388 $400,898 $800,754 $488,294 $384,056 $45,453 $2,577,229 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial loans:
Pass$24,706 $76,497 $46,818 $34,697 $11,888 $7,733 $156,552 $358,891 
Pass watch1,272 189 146 655 898 201 5,674 9,035 
Special mention— — 109 27 61 — 185 382 
Substandard164 1,422 168 325 73 20 351 2,523 
Doubtful— 36 408 135 195 38 — 812 
Total commercial loans$26,142 $78,144 $47,649 $35,839 $13,115 $7,992 $162,762 $371,643 
Current period gross charge-offs$— $74 $34 $34 $13 $1 $— $156 
Municipal loans:
Pass$— $1,876 $34,003 $56,331 $63,195 $215,866 $— $371,271 
Pass watch— — — — — — — — 
Special mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total municipal loans$— $1,876 $34,003 $56,331 $63,195 $215,866 $— $371,271 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Loans to individuals:
Pass$6,503 $14,725 $8,906 $6,584 $5,011 $3,172 $2,601 $47,502 
Pass watch— — — — — — — — 
Special mention— — — — — — — — 
Substandard10 — 2 24 — 3 1 40 
Doubtful— — 6 12 2 1 — 21 
Total loans to individuals$6,513 $14,725 $8,914 $6,620 $5,013 $3,176 $2,602 $47,563 
Current period gross charge-offs (1)
$365 $14 $7 $50 $— $8 $— $444 
Total loans$194,716 $588,822 $659,969 $1,085,162 $724,716 $946,612 $367,242 $4,567,239 
Total current period gross charge-offs (1)
$365 $88 $41 $84 $13 $22 $— $613 
(1) Includes $279,000 in charged off demand deposit overdrafts reported as 2025 originations.
December 31, 2024Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisTotal
20242023202220212020Prior
Construction real estate:
Pass$130,555 $122,724 $46,499 $17,710 $3,564 $5,923 $132,096 $459,071 
Pass watch209 — 59,700 — 574 591 16,999 78,073 
Special mention— — — 429 — 72 — 501 
Substandard— 112 — 59 — — — 171 
Doubtful— — — — — 11 — 11 
Total construction real estate$130,764 $122,836 $106,199 $18,198 $4,138 $6,597 $149,095 $537,827 
Current period gross charge-offs$— $24 $— $— $— $— $— $24 
1-4 family residential real estate:
Pass$43,040 $65,458 $153,335 $139,048 $106,116 $226,550 $1,524 $735,071 
Pass watch— — — — — — — — 
Special mention— — — 505 — — — 505 
Substandard50 225 — 225 1,326 2,833 — 4,659 
Doubtful— — — — — 161 — 161 
Total 1-4 family residential real estate$43,090 $65,683 $153,335 $139,778 $107,442 $229,544 $1,524 $740,396 
Current period gross charge-offs$— $31 $— $— $10 $220 $— $261 
Commercial real estate:
Pass$363,370 $410,213 $632,216 $509,927 $132,562 $223,551 $41,568 $2,313,407 
Pass watch— 11,953 65,206 22,440 4,090 24,599 983 129,271 
Special mention3,983 — 79,280 175 — 13,232 — 96,670 
Substandard— — 27,994 6,409 250 5,649 — 40,302 
Doubtful— — — — — 85 — 85 
Total commercial real estate$367,353 $422,166 $804,696 $538,951 $136,902 $267,116 $42,551 $2,579,735 
Current period gross charge-offs$— $— $— $— $— $78 $— $78 
Commercial loans:
Pass$83,118 $51,895 $39,449 $13,887 $5,875 $3,091 $155,671 $352,986 
Pass watch— 30 603 787 29 513 4,972 6,934 
Special mention— 327 29 83 — 101 180 720 
Substandard365 99 281 137 22 1 1,100 2,005 
Doubtful31 244 134 61 — 52 — 522 
Total commercial loans$83,514 $52,595 $40,496 $14,955 $5,926 $3,758 $161,923 $363,167 
Current period gross charge-offs$24 $462 $590 $85 $— $12 $— $1,173 
Municipal loans:
Pass$1,949 $34,398 $57,862 $64,041 $41,115 $188,309 $— $387,674 
Pass watch— — — — 892 2,402 — 3,294 
Special mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total municipal loans$1,949 $34,398 $57,862 $64,041 $42,007 $190,711 $— $390,968 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Loans to individuals:
Pass$18,765 $10,881 $7,719 $5,949 $2,900 $949 $2,215 $49,378 
Pass watch— — — — — — — — 
Special mention— — — — — — — — 
Substandard— 2 28 — — 4 1 35 
Doubtful— 8 67 2 8 6 — 91 
Total loans to individuals$18,765 $10,891 $7,814 $5,951 $2,908 $959 $2,216 $49,504 
Current period gross charge-offs$1,655 $34 $43 $26 $33 $33 $— $1,824 
Total loans$645,435 $708,569 $1,170,402 $781,874 $299,323 $698,685 $357,309 $4,661,597 
Total current period gross charge-offs (1)
$1,679 $551 $633 $111 $43 $343 $— $3,360 
(1) Includes $1.2 million in charged off demand deposit overdrafts reported as 2024 originations.
Watch List loans reported as 2025 originations as of March 31, 2025 and Watch List loans reported as 2024 originations as of December 31, 2024 were, for the majority, first originated in various years prior to 2025 and 2024, respectively, but were renewed in the respective year.
The following tables present the aging of the amortized cost basis in past due loans by class of loans (in thousands):
 March 31, 2025
 
30-59 Days
Past Due
60-89 Days
Past Due
Greater than 90 Days Past Due
Total Past
Due
CurrentTotal
Real estate loans:     
Construction$1,110 $— $— $1,110 $456,991 $458,101 
1-4 family residential3,432 384 173 3,989 737,443 741,432 
Commercial2,048 35 82 2,165 2,575,064 2,577,229 
Commercial loans2,655 2,280 798 5,733 365,910 371,643 
Municipal loans— — — — 371,271 371,271 
Loans to individuals65 — — 65 47,498 47,563 
Total$9,310 $2,699 $1,053 $13,062 $4,554,177 $4,567,239 
December 31, 2024
30-59 Days Past Due60-89 Days Past DueGreater than 90 Days
Past Due
Total Past
Due
CurrentTotal
Real estate loans:
Construction$92 $5 $— $97 $537,730 $537,827 
1-4 family residential3,217 1,328 262 4,807 735,589 740,396 
Commercial2,054 331 — 2,385 2,577,350 2,579,735 
Commercial loans2,881 649 407 3,937 359,230 363,167 
Municipal loans— — — — 390,968 390,968 
Loans to individuals108 48 20 176 49,328 49,504 
Total$8,352 $2,361 $689 $11,402 $4,650,195 $4,661,597 
The following table sets forth the amortized cost basis of nonperforming assets for the periods presented (in thousands):
 March 31, 2025December 31, 2024
Nonaccrual loans:
Real estate loans:
Construction$110 $122 
1-4 family residential2,032 1,734 
Commercial217 171 
Commercial loans1,874 1,067 
Loans to individuals21 91 
Total nonaccrual loans (1)
4,254 3,185 
Accruing loans past due more than 90 days— — 
Restructured loans27,505 2 
OREO388 388 
Repossessed assets46 14 
Total nonperforming assets$32,193 $3,589 

(1)    Includes $38,000 and $63,000 of restructured loans as of March 31, 2025 and December 31, 2024, respectively.

The increase in restructured loans was due to the extension of maturity on a $27.5 million commercial real estate loan. We reversed $14,000 of interest income on nonaccrual loans during the three months ended March 31, 2025, and $34,000 for the three months ended March 31, 2024. We had $921,000 and $650,000 of loans on nonaccrual for which there was no related allowance for credit losses as of March 31, 2025 and December 31, 2024, respectively.
Collateral-dependent loans are loans that we expect the repayment to be provided substantially through the operation or sale of the collateral of the loan and for which we have determined that the borrower is experiencing financial difficulty. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for selling costs. As of March 31, 2025 and December 31, 2024, we had $35.2 million and $6.9 million, respectively, of collateral-dependent loans, secured mainly by real estate and equipment. There have been no significant changes to the collateral that secures the collateral-dependent assets as of March 31, 2025. Foreclosed assets include OREO and repossessed assets. For 1-4 family residential real estate properties, a loan is recognized as a foreclosed property once legal title to the real estate property has been received upon completion of foreclosure or the borrower has conveyed all interest in the residential property through a deed in lieu of foreclosure. There were no loans secured by 1-4 family residential properties for which formal foreclosure proceedings were in process as of March 31, 2025. There were $40,000 of loans secured by 1-4 family residential properties for which formal foreclosure proceedings were in process as of December 31, 2024.
Restructured Loans
A loan is considered restructured if the borrower is experiencing financial difficulties and the loan has been modified. Modifications may include interest rate reductions, restructuring amortization schedules, extensions of maturity or a combination of any of these modifications intended to minimize potential losses. In most instances, interest will continue to be charged on principal balances outstanding during the extended term. Therefore, the financial effects of the recorded investment of loans restructured during the three months ended March 31, 2025 were not significant.
There were two restructured loans totaling $27.5 million with extension of maturity during the three months ended March 31, 2025. There were four restructured loans totaling $27.5 million included in nonperforming assets as of March 31, 2025. There were no loans restructured during the three months ended March 31, 2024.
On an ongoing basis, performance of restructured loans are monitored for subsequent payment default. Payment default is recognized when the borrower is 90 days or more past due. For the three months ended March 31, 2025 and 2024, there were no restructured loans in default. Payment defaults for restructured loans did not significantly impact the determination of the allowance for loan losses in the periods presented. At March 31, 2025, there were no commitments to lend additional funds to borrowers whose loans had been restructured.
Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the periods presented (in thousands):
 Three Months Ended March 31, 2025
 Real Estate    
 Construction
1-4 Family
Residential
Commercial
Commercial
Loans
Municipal
Loans
Loans to
Individuals
Total
Balance at beginning of period$3,958 $2,780 $35,526 $2,448 $16 $156 $44,884 
Loans charged-off— (13)— (156)— (444)(613)
Recoveries of loans charged-off— 8 5 102 — 195 310 
Net loans (charged-off)
recovered		— (5)5 (54)— (249)(303)
Provision for (reversal of) loan losses(71)(66)(801)734 (2)248 42 
Balance at end of period$3,887 $2,709 $34,730 $3,128 $14 $155 $44,623 


 Three Months Ended March 31, 2024
 Real Estate    
 Construction
1-4 Family
Residential
Commercial
Commercial
Loans
Municipal
Loans
Loans to
Individuals
Total
Balance at beginning of period$5,287 $2,840 $32,266 $2,086 $19 $176 $42,674 
Loans charged-off— (22)— (151)— (461)(634)
Recoveries of loans charged-off— 11 3 56 — 277 347 
Net loans (charged-off)
recovered		— (11)3 (95)— (184)(287)
Provision for (reversal of) loan losses (367)(61)624 783 — 191 1,170 
Balance at end of period$4,920 $2,768 $32,893 $2,774 $19 $183 $43,557 



The accrued interest receivable on our loan receivables is excluded from the allowance for credit loss estimate and is included in interest receivable on our consolidated balance sheets. As of March 31, 2025 and December 31, 2024, the accrued interest on our loan portfolio was $19.9 million and $20.2 million, respectively.