v3.26.3
Loans and Allowance for Loan Losses
 9 Months Ended
Sep. 30, 2026
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):    
September 30, 2026December 31, 2025
Real estate loans:
Construction$542,996 $548,570 
1-4 family residential724,897 724,354 
Commercial owner-occupied360,611 319,536 
Commercial real estate2,416,412 2,393,280 
Commercial loans510,057 444,720 
Municipal loans367,711 346,720 
Loans to individuals36,005 40,811 
Total loans4,958,689 4,817,991 
Less: Allowance for loan losses46,858 45,100 
Net loans$4,911,831 $4,772,891 

Construction Real Estate Loans
Our construction loans are collateralized by property located primarily in or near the market areas we serve and consist of owner-occupied 1-4 family residential construction loans to consumers, non-owner occupied 1-4 family residential construction loans to homebuilders, and commercial construction loans (both owner- and non-owner occupied). Our owner-occupied 1-4 family construction loans to consumers include fixed interest rates during the construction period and are typically priced and made with the intention of granting the permanent loan on the completed property. Construction loans to homebuilders and 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 Owner-Occupied and Commercial Real Estate Loans
As of September 30, 2026, commercial owner-occupied loans were $360.6 million and commercial real estate loans consisted of $1.83 billion of non-owner occupied real estate, $546.1 million of loans secured by multi-family properties and $35.7 million of loans secured by farmland. Commercial real estate loans and commercial owner-occupied 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 owner-occupied and commercial real estate loans, we generally consider such factors as macroeconomic conditions, market conditions, including future supply and rental rate forecasts, the financial condition of the borrower and the debt service coverage of the property. Generally, commercial real estate loans originated after June 2024 are priced using floating rates and include maturities of five years or less. For competitive reasons, we offer fixed rates for owner-occupied loans with terms of up to 10 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 make 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 and 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 the exception is properly mitigated and/or 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):
September 30, 2026Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisTotal
20262025202420232022Prior
Construction real estate:
Pass$141,162 $172,356 $54,141 $1,035 $8,039 $8,675 $118,618 $504,026 
Pass watch726 — — — — 8 20,575 21,309 
Special mention4,719 — 157 — — — 10,445 15,321 
Substandard— — 645 — 66 131 1,498 2,340 
Total construction real estate$146,607 $172,356 $54,943 $1,035 $8,105 $8,814 $151,136 $542,996 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
1-4 family residential real estate:
Pass$41,228 $66,002 $54,125 $56,848 $136,274 $364,800 $651 $719,928 
Pass watch— — — — — 36 — 36 
Special mention— — — — — 574 — 574 
Substandard— — 253 388 — 2,763 — 3,404 
Doubtful— 371 150 253 — 181 — 955 
Total 1-4 family residential real estate$41,228 $66,373 $54,528 $57,489 $136,274 $368,354 $651 $724,897 
Current period gross charge-offs$— $— $— $27 $— $13 $— $40 
Commercial owner-occupied:
Pass$80,994 $58,785 $27,735 $34,592 $45,218 $95,545 $1,762 $344,631 
Pass watch— — — — — 510 — 510 
Special mention— 249 — 294 — 671 — 1,214 
Substandard— 4,650 — — 1,024 3,083 5,499 14,256 
Total commercial real estate$80,994 $63,684 $27,735 $34,886 $46,242 $99,809 $7,261 $360,611 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial real estate:
Pass$483,089 $463,976 $225,227 $296,846 $318,684 $335,631 $10,270 $2,133,723 
Pass watch— 40,189 — — 7,459 19 — 47,667 
Special mention— 33,373 — 1,328 — 197 — 34,898 
Substandard35,155 72,610 3,909 41,816 35,187 11,447 — 200,124 
Total commercial real estate$518,244 $610,148 $229,136 $339,990 $361,330 $347,294 $10,270 $2,416,412 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial loans:
Pass$124,722 $82,890 $19,542 $13,817 $17,249 $6,972 $170,376 $435,568 
Pass watch— 71 134 43 — — 1 249 
Special mention386 313 11,945 31 211 80 37,237 50,203 
Substandard1,071 3,081 567 2,171 612 193 15,955 23,650 
Doubtful— — 150 25 148 64 — 387 
Total commercial loans$126,179 $86,355 $32,338 $16,087 $18,220 $7,309 $223,569 $510,057 
Current period gross charge-offs$— $528 $238 $106 $51 $34 $— $957 
Municipal loans:
Pass$60,336 $1,938 $1,639 $28,844 $51,318 $223,636 $— $367,711 
Total municipal loans$60,336 $1,938 $1,639 $28,844 $51,318 $223,636 $— $367,711 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Loans to individuals:
Pass$13,473 $8,843 $4,666 $2,646 $2,088 $2,459 $1,773 $35,948 
Special mention— — 2 — — — — 2 
Substandard— 11 14 11 — — 9 45 
Doubtful— — 10 — — — — 10 
Total loans to individuals$13,473 $8,854 $4,692 $2,657 $2,088 $2,459 $1,782 $36,005 
Current period gross charge-offs (1)
$1,015 $192 $30 $24 $— $7 $— $1,268 
Total loans$987,061 $1,009,708 $405,011 $480,988 $623,577 $1,057,675 $394,669 $4,958,689 
Total current period gross charge-offs (1)
$1,015 $720 $268 $157 $51 $54 $— $2,265 
(1) Includes $788,000 in charged off demand deposit overdrafts reported as 2026 originations.
December 31, 2025Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisTotal
20252024202320222021Prior
Construction real estate:
Pass$139,542 $96,548 $60,041 $3,649 $15,979 $5,939 $148,759 $470,457 
Pass watch9,343 1,494 — 31 — — 5,596 16,464 
Special mention47,492 — — — 407 58 13,468 61,425 
Substandard57 — — — 140 27 — 224 
Total construction real estate$196,434 $98,042 $60,041 $3,680 $16,526 $6,024 $167,823 $548,570 
Current period gross charge-offs$— $— $1 $— $— $— $— $1 
1-4 family residential real estate:
Pass$48,099 $50,197 $68,149 $143,782 $127,149 $278,702 $583 $716,661 
Special mention— — — — — 1,508 — 1,508 
Substandard2,380 — 112 — 658 2,199 269 5,618 
Doubtful— 165 265 — — 137 — 567 
Total 1-4 family residential real estate$50,479 $50,362 $68,526 $143,782 $127,807 $282,546 $852 $724,354 
Current period gross charge-offs$— $56 $— $— $— $13 $— $69 
Commercial owner-occupied:
Pass$58,592 $27,127 $38,350 $46,340 $53,831 $73,509 $2,672 $300,421 
Pass watch— — — 2,101 — 287 — 2,388 
Special mention— — — 2,285 — 6,132 — 8,417 
Substandard1,048 — — 129 6,162 971 — 8,310 
Total commercial real estate$59,640 $27,127 $38,350 $50,855 $59,993 $80,899 $2,672 $319,536 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial real estate:
Pass$687,383 $186,142 $304,848 $338,165 $328,917 $183,000 $41,299 $2,069,754 
Pass watch21,226 — 49,316 32,339 — — — 102,881 
Special mention— — 2,691 76,116 — 251 — 79,058 
Substandard28,996 — — 101,201 5,935 5,455 — 141,587 
Total commercial real estate$737,605 $186,142 $356,855 $547,821 $334,852 $188,706 $41,299 $2,393,280 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial loans:
Pass$124,358 $41,277 $27,101 $27,035 $8,388 $4,627 $189,290 $422,076 
Pass watch21 43 — — 36 — — 100 
Special mention204 202 177 469 590 3 532 2,177 
Substandard1,341 12,858 1,333 713 75 38 3,497 19,855 
Doubtful79 134 111 86 90 12 — 512 
Total commercial loans$126,003 $54,514 $28,722 $28,303 $9,179 $4,680 $193,319 $444,720 
Current period gross charge-offs$— $1,689 $409 $139 $139 $23 $— $2,399 
Municipal loans:
Pass$2,135 $1,800 $31,542 $54,168 $59,342 $197,733 $— $346,720 
Total municipal loans$2,135 $1,800 $31,542 $54,168 $59,342 $197,733 $— $346,720 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Loans to individuals:
Pass$16,861 $8,627 $4,980 $3,682 $2,524 $1,856 $2,049 $40,579 
Special mention8 — — — — — — 8 
Substandard3 1 8 2 — — — 14 
Doubtful185 20 3 1 — 1 — 210 
Total loans to individuals$17,057 $8,648 $4,991 $3,685 $2,524 $1,857 $2,049 $40,811 
Current period gross charge-offs$1,620 $34 $24 $68 $24 $18 $— $1,788 
Total loans$1,189,353 $426,635 $589,027 $832,294 $610,223 $762,445 $408,014 $4,817,991 
Total current period gross charge-offs (1)
$1,620 $1,779 $434 $207 $163 $54 $— $4,257 
(1) Includes $1.2 million in charged off demand deposit overdrafts reported as 2025 originations.
Watch List loans reported as 2026 originations as of September 30, 2026 and Watch List loans reported as 2025 originations as of December 31, 2025 were, for the majority, first originated in various years prior to 2026 and 2025, 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):
September 30, 2026
30-59 Days
Past Due
60-89 Days
Past Due
Greater than 90 Days Past Due
Total Past
Due
CurrentTotal
Real estate loans:
Construction$2,139 $233 $85 $2,457 $540,539 $542,996 
1-4 family residential1,550 440 1,464 3,454 721,443 724,897 
Commercial owner-occupied451 334 715 1,500 359,111 360,611 
Commercial real estate— 424 6,512 6,936 2,409,476 2,416,412 
Commercial loans860 1,335 1,995 4,190 505,867 510,057 
Municipal loans71 — — 71 367,640 367,711 
Loans to individuals23 — — 23 35,982 36,005 
Total$5,094 $2,766 $10,771 $18,631 $4,940,058 $4,958,689 
December 31, 2025
30-59 Days Past Due60-89 Days Past DueGreater than 90 Days
Past Due
Total Past
Due
CurrentTotal
Real estate loans:
Construction$416 $1,407 $— $1,823 $546,747 $548,570 
1-4 family residential4,324 693 1,284 6,301 718,053 724,354 
Commercial owner-occupied1,325 — — 1,325 318,211 319,536 
Commercial real estate322 5,447 — 5,769 2,387,511 2,393,280 
Commercial loans1,132 640 380 2,152 442,568 444,720 
Municipal loans— — — — 346,720 346,720 
Loans to individuals353 — — 353 40,458 40,811 
Total$7,872 $8,187 $1,664 $17,723 $4,800,268 $4,817,991 
The following table sets forth the amortized cost basis of nonperforming assets for the periods presented (in thousands):
September 30, 2026December 31, 2025
Nonaccrual loans:
Real estate loans:
Construction$101 $18 
1-4 family residential3,353 4,939 
Commercial owner-occupied1,818 1,220 
Commercial real estate1,777 — 
Commercial loans3,230 4,091 
Loans to individuals25 218 
Total nonaccrual loans (1)
10,304 10,486 
Accruing loans past due more than 90 days5,155 — 
Restructured loans45 27,509 
OREO331 248 
Repossessed assets— — 
Total nonperforming assets$15,835 $38,243 

(1)    Includes $3.7 million and $2.0 million of restructured loans as of September 30, 2026 and December 31, 2025, respectively.
The decrease in restructured loans was primarily due to the payoff of a $27.5 million restructured commercial real estate loan in the first quarter of 2026 that was originally restructured with an extension of maturity in the first quarter of 2025 to allow for an extended lease up period. There was one $5.2 million commercial real estate loan past due more than 90 days as of September 30, 2026 that subsequently paid off in full on October 1, 2026. We reversed $254,000 and $282,000 of interest income on nonaccrual loans during the three and nine months ended September 30, 2026, respectively, and $56,000 and $95,000 for the three and nine months ended September 30, 2025, respectively. We had $5.2 million and $2.7 million of loans on nonaccrual for which there was no related allowance for credit losses as of September 30, 2026 and December 31, 2025, 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 September 30, 2026 and December 31, 2025, we had $12.7 million and $38.4 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 September 30, 2026. 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 September 30, 2026 and December 31, 2025.
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 nine months ended September 30, 2026 were not significant.
The following table sets forth the recorded balance of restructured loans and type of modification by class of loans during the periods presented (dollars in thousands):
Three Months Ended September 30, 2026
Amortization
 Period Extension		Interest Rate ReductionCombination Total ModificationsNumber of LoansPercent of Total Class
Commercial loans$259 $— $— $259 3 0.05 %
Loans to individuals— — 6 6 1 0.02 %
Total$259 $— $6 $265 4
Nine Months Ended September 30, 2026
Amortization
 Period Extension		Interest Rate ReductionCombinationTotal ModificationsNumber of LoansPercent of Total Class
Real estate loans:
1-4 family residential$253 $— $— $253 1 0.03 %
Commercial owner-occupied981 — — 981 1 0.27 %
Commercial loans886 — — 886 9 0.17 %
Loans to individuals— — 6 6 1 0.02 %
Total$2,120 $— $6 $2,126 12 

Three Months Ended September 30, 2025
Amortization
 Period Extension		Interest Rate ReductionCombinationTotal ModificationsNumber of LoansPercent of Total Class
Commercial loans$618 $— $— $618 3 0.14 %
Total$618 $— $— $618 3
Nine Months Ended September 30, 2025
Amortization
 Period Extension		Interest Rate ReductionCombinationTotal ModificationsNumber of LoansPercent of Total Class
Real estate loans:
Commercial real estate$27,501 $— $— $27,501 1 1.17 %
Commercial loans936 — — 936 11 0.22 %
Loans to individuals200 — — 200 2 0.46 %
Total$28,637 $— $— $28,637 14 

There were 23 restructured loans totaling $3.7 million included in nonperforming assets as of September 30, 2026.
On an ongoing basis, the 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 nine months ended September 30, 2026, there were seven restructured loans totaling $1.5 million in default. For the nine months ended September 30, 2025, 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 September 30, 2026, 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 September 30, 2026
Real Estate
Construction
1-4 Family
Residential
Commercial Owner-OccupiedCommercial Real Estate
Commercial
Loans
Municipal
Loans
Loans to
Individuals
Total
Balance at beginning of period$6,521 $2,812 $5,867 $25,139 $5,115 $12 $129 $45,595 
Loans charged-off— (40)— — (229)— (458)(727)
Recoveries of loans charged-off— 54 3 — 817 — 170 1,044 
Net loans (charged-off)
recovered		— 14 3 — 588 — (288)317 
Provision for (reversal of) loan losses536 62 (488)(538)1,073 4 297 946 
Balance at end of period$7,057 $2,888 $5,382 $24,601 $6,776 $16 $138 $46,858 
Nine Months Ended September 30, 2026
Real Estate
Construction
1-4 Family
Residential
Commercial Owner-OccupiedCommercial Real Estate
Commercial
Loans
Municipal
Loans
Loans to
Individuals
Total
Balance at beginning of period$7,951 $2,830 $5,655 $23,750 $4,588 $13 $313 $45,100 
Loans charged-off— (40)— — (957)— (1,268)(2,265)
Recoveries of loans charged-off— 65 10 — 1,516 — 496 2,087 
Net loans (charged-off) recovered— 25 10 — 559 — (772)(178)
Provision for (reversal of) loan losses(894)33 (283)851 1,629 3 597 1,936 
Balance at end of period$7,057 $2,888 $5,382 $24,601 $6,776 $16 $138 $46,858 
Three Months Ended September 30, 2025
Real Estate
Construction
1-4 Family
Residential
Commercial Owner-OccupiedCommercial Real Estate
Commercial
Loans
Municipal
Loans
Loans to
Individuals
Total
Balance at beginning of period$6,194 $2,781 $5,417 $25,284 $4,433 $14 $298 $44,421 
Loans charged-off— — — — (833)— (502)(1,335)
Recoveries of loans charged-off— 9 4 — 255 — 223 491 
Net loans (charged-off)
recovered		— 9 4 — (578)— (279)(844)
Provision for (reversal of) loan losses 30 38 185 198 945 (1)322 1,717 
Balance at end of period$6,224 $2,828 $5,606 $25,482 $4,800 $13 $341 $45,294 
Nine Months Ended September 30, 2025
Real Estate
Construction1-4 Family
Residential		Commercial Owner-OccupiedCommercial Real EstateCommercial
Loans 		Municipal
Loans		Loans to
Individuals		Total
Balance at beginning of period$3,958 $2,780 $5,603 $29,923 $2,448 $16 $156 $44,884 
Loans charged-off (1)
— (69)— — (1,716)— (1,357)(3,142)
Recoveries of loans charged-off— 24 11 2 520 — 586 1,143 
Net loans (charged-off) recovered— (45)11 2 (1,196)— (771)(1,999)
Provision (reversal) for loan losses (2)
2,266 93 (8)(4,443)3,548 (3)956 2,409 
Balance at end of period$6,224 $2,828 $5,606 $25,482 $4,800 $13 $341 $45,294 


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 September 30, 2026 and December 31, 2025, the accrued interest on our loan portfolio was $21.2 million and $19.6 million, respectively.