UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q | | | | | | | | | | | |
(Mark One) | | |
| | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | September 30, 2022March 31, 2023 | |
| | | |
| OR | | |
| | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ____________ to __________ |
Commission file number 333-236022
BANCPLUS CORPORATION
(Exact name of registrant as specified in its charter) | | | | | | | | |
|
|
|
Mississippi |
| 64-0655312 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
1068 Highland Colony Parkway
Ridgeland, Mississippi 39157
(601) 898-8300
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
None | | N/A | | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
Large accelerated filer | ☐ | | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Shares of the registrant’s Common Stock, par value $1.00 per share, issued and outstanding as of November 4, 2022: 11,602,114May 12, 2023: 11,626,496
BANCPLUS CORPORATION
FORM 10-Q
For the Quarter Ended SEPTEMBER 30, 2022MARCH 31, 2023
INDEX
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BancPlus Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data) | | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | (unaudited) | | | | (unaudited) | | |
Assets: | Assets: | | Assets: | |
Cash and due from banks | Cash and due from banks | $ | 54,726 | | | $ | 55,603 | | Cash and due from banks | $ | 103,527 | | | $ | 107,402 | |
Interest bearing deposits with banks | Interest bearing deposits with banks | 117,559 | | | 608,562 | | Interest bearing deposits with banks | 17,693 | | | 30,493 | |
Total cash and cash equivalents | Total cash and cash equivalents | 172,285 | | | 664,165 | | Total cash and cash equivalents | 121,220 | | | 137,895 | |
Securities available for sale | Securities available for sale | 614,658 | | | 576,614 | | Securities available for sale | 659,581 | | | 623,920 | |
Securities held to maturity - fair value: $65,505 - 2022; $72,084 - 2021 | 65,889 | | | 71,648 | | |
Securities held to maturity - fair value: $61,144 - 2023; $62,068 - 2022 | | Securities held to maturity - fair value: $61,144 - 2023; $62,068 - 2022 | 61,262 | | | 62,274 | |
Loans held for sale | Loans held for sale | 4,199 | | | 10,621 | | Loans held for sale | 8,357 | | | 5,373 | |
| Loans | Loans | 5,549,768 | | | 3,619,172 | | Loans | 5,951,867 | | | 5,824,149 | |
Less: Allowance for loan losses | 42,533 | | | 45,000 | | |
Less: Allowance for credit losses | | Less: Allowance for credit losses | 64,403 | | | 42,875 | |
Net loans | Net loans | 5,507,235 | | | 3,574,172 | | Net loans | 5,887,464 | | | 5,781,274 | |
| Premises and equipment | Premises and equipment | 122,590 | | | 101,965 | | Premises and equipment | 129,166 | | | 124,707 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 34,532 | | | 34,561 | | Operating lease right-of-use assets | 34,748 | | | 35,747 | |
Accrued interest receivable | Accrued interest receivable | 20,315 | | | 14,329 | | Accrued interest receivable | 24,025 | | | 23,156 | |
Goodwill | Goodwill | 62,772 | | | 2,616 | | Goodwill | 62,772 | | | 62,772 | |
Other assets | Other assets | 176,758 | | | 145,587 | | Other assets | 184,817 | | | 177,703 | |
| | $ | 6,781,233 | | | $ | 5,196,278 | | | $ | 7,173,412 | | | $ | 7,034,821 | |
| Liabilities: | Liabilities: | | Liabilities: | |
Deposits | Deposits | $ | 5,594,217 | | | $ | 4,622,116 | | Deposits | $ | 5,966,656 | | | $ | 5,824,904 | |
Advances from Federal Home Loan Bank and other borrowings | Advances from Federal Home Loan Bank and other borrowings | 310,099 | | | 20,501 | | Advances from Federal Home Loan Bank and other borrowings | 310,068 | | | 318,084 | |
Subordinated debentures | Subordinated debentures | 133,430 | | | 111,509 | | Subordinated debentures | 133,531 | | | 133,478 | |
Operating lease liabilities | Operating lease liabilities | 36,061 | | | 35,793 | | Operating lease liabilities | 36,432 | | | 37,439 | |
Accrued interest payable | Accrued interest payable | 2,949 | | | 1,425 | | Accrued interest payable | 4,407 | | | 2,334 | |
Other liabilities | Other liabilities | 21,407 | | | 14,515 | | Other liabilities | 31,038 | | | 20,482 | |
Total liabilities | Total liabilities | 6,098,163 | | | 4,805,859 | | Total liabilities | 6,482,132 | | | 6,336,721 | |
| Redeemable common stock owned by the ESOP | Redeemable common stock owned by the ESOP | 93,352 | | | 100,487 | | Redeemable common stock owned by the ESOP | 96,984 | | | 96,984 | |
Shareholders' equity: | Shareholders' equity: | | Shareholders' equity: | |
Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP, no par value | Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP, no par value | | Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP, no par value | |
250,000 and zero authorized, issued and outstanding at September 30, 2022 and December 31, 2021; aggregate liquidation preference of $250,000 | 250,000 | | | — | | |
250,000 authorized, issued and outstanding at March 31, 2023 and December 31, 2022; aggregate liquidation preference of $250,000 | | 250,000 authorized, issued and outstanding at March 31, 2023 and December 31, 2022; aggregate liquidation preference of $250,000 | 250,000 | | | 250,000 | |
Common Stock, par value $1.00 per share. | Common Stock, par value $1.00 per share. | | Common Stock, par value $1.00 per share. | |
40,000,000 authorized at September 30, 2022 and December 31, 2021; 11,601,136 and 10,115,945 issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 11,601 | | | 10,116 | | |
Unearned Employee Stock Ownership Plan compensation | — | | | (1,401) | | |
100,000,000 and 40,000,000 authorized at March 31, 2023 and December 31, 2022, respectively; 11,599,354 and 11,599,595 issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | 100,000,000 and 40,000,000 authorized at March 31, 2023 and December 31, 2022, respectively; 11,599,354 and 11,599,595 issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 11,599 | | | 11,599 | |
Additional paid-in capital | Additional paid-in capital | 121,350 | | | 67,380 | | Additional paid-in capital | 123,878 | | | 122,890 | |
Retained earnings | Retained earnings | 345,615 | | | 314,357 | | Retained earnings | 343,591 | | | 356,685 | |
Accumulated other comprehensive loss, net | Accumulated other comprehensive loss, net | (45,496) | | | (33) | | Accumulated other comprehensive loss, net | (37,788) | | | (43,074) | |
| | 683,070 | | | 390,419 | | | 691,280 | | | 698,100 | |
Less: Redeemable common stock owned by the ESOP | Less: Redeemable common stock owned by the ESOP | (93,352) | | | (100,487) | | Less: Redeemable common stock owned by the ESOP | (96,984) | | | (96,984) | |
Total shareholders' equity | Total shareholders' equity | 589,718 | | | 289,932 | | Total shareholders' equity | 594,296 | | | 601,116 | |
| | $ | 6,781,233 | | | $ | 5,196,278 | | | $ | 7,173,412 | | | $ | 7,034,821 | |
The accompanying notes are an integral part of these consolidated financial statements.
BancPlus Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(In Thousands, Except Per Share Data)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| Interest income: | Interest income: | | Interest income: | | |
Interest and fees on loans | Interest and fees on loans | $ | 64,309 | | | $ | 43,835 | | | $ | 161,008 | | | $ | 129,066 | | Interest and fees on loans | | $ | 76,747 | | | $ | 42,987 | |
Taxable securities | Taxable securities | 2,658 | | | 2,097 | | | 7,467 | | | 6,024 | | Taxable securities | | 3,066 | | | 2,307 | |
Tax-exempt securities | Tax-exempt securities | 387 | | | 455 | | | 1,208 | | | 1,473 | | Tax-exempt securities | | 380 | | | 420 | |
Interest bearing bank balances and other | Interest bearing bank balances and other | 463 | | | 242 | | | 1,171 | | | 493 | | Interest bearing bank balances and other | | 578 | | | 231 | |
Total interest income | Total interest income | 67,817 | | | 46,629 | | | 170,854 | | | 137,056 | | Total interest income | | 80,771 | | | 45,945 | |
| Interest expense: | Interest expense: | | Interest expense: | | |
Deposits | Deposits | 3,066 | | | 1,746 | | | 7,105 | | | 5,873 | | Deposits | | 17,160 | | | 1,677 | |
Short-term borrowings | | Short-term borrowings | | 79 | | | — | |
Advances from Federal Home Loan Bank | Advances from Federal Home Loan Bank | 1,093 | | | 78 | | | 1,246 | | | 233 | | Advances from Federal Home Loan Bank | | 3,215 | | | 76 | |
Other borrowings | Other borrowings | 1,781 | | | 1,371 | | | 5,014 | | | 4,112 | | Other borrowings | | 2,164 | | | 1,425 | |
Total interest expense | Total interest expense | 5,940 | | | 3,195 | | | 13,365 | | | 10,218 | | Total interest expense | | 22,618 | | | 3,178 | |
| Net interest income | Net interest income | 61,877 | | | 43,434 | | | 157,489 | | | 126,838 | | Net interest income | | 58,153 | | | 42,767 | |
Provision for loan losses | 489 | | | 1,469 | | | 940 | | | 7,395 | | |
Net interest income after provision for loan losses | 61,388 | | | 41,965 | | | 156,549 | | | 119,443 | | |
Provision for credit losses | | Provision for credit losses | | 523 | | | 217 | |
Net interest income after provision for credit losses | | Net interest income after provision for credit losses | | 57,630 | | | 42,550 | |
| Other operating income: | Other operating income: | | Other operating income: | | |
Service charges on deposit accounts | Service charges on deposit accounts | 8,203 | | | 7,484 | | | 22,696 | | | 19,226 | | Service charges on deposit accounts | | 6,666 | | | 6,792 | |
Mortgage origination income | Mortgage origination income | 1,119 | | | 1,999 | | | 5,661 | | | 6,726 | | Mortgage origination income | | 687 | | | 2,238 | |
Debit card interchange | Debit card interchange | 2,393 | | | 2,390 | | | 7,569 | | | 7,634 | | Debit card interchange | | 2,566 | | | 2,428 | |
Other income | Other income | 5,851 | | | 7,193 | | | 18,336 | | | 24,494 | | Other income | | 5,920 | | | 6,507 | |
Total other operating income | Total other operating income | 17,566 | | | 19,066 | | | 54,262 | | | 58,080 | | Total other operating income | | 15,839 | | | 17,965 | |
| Other operating expenses: | Other operating expenses: | | Other operating expenses: | | |
Salaries and employee benefits expenses | Salaries and employee benefits expenses | 32,909 | | | 25,218 | | | 88,559 | | | 72,365 | | Salaries and employee benefits expenses | | 30,991 | | | 25,845 | |
Net occupancy expenses | Net occupancy expenses | 4,733 | | | 3,606 | | | 13,740 | | | 10,779 | | Net occupancy expenses | | 4,472 | | | 4,116 | |
Furniture, equipment and data processing expenses | Furniture, equipment and data processing expenses | 7,671 | | | 6,282 | | | 21,957 | | | 18,322 | | Furniture, equipment and data processing expenses | | 7,316 | | | 6,616 | |
Other expenses | Other expenses | 9,391 | | | 7,716 | | | 29,533 | | | 19,931 | | Other expenses | | 8,863 | | | 11,493 | |
Total other operating expenses | Total other operating expenses | 54,704 | | | 42,822 | | | 153,789 | | | 121,397 | | Total other operating expenses | | 51,642 | | | 48,070 | |
| Income before income taxes | Income before income taxes | 24,250 | | | 18,209 | | | 57,022 | | | 56,126 | | Income before income taxes | | 21,827 | | | 12,445 | |
Income tax expense | Income tax expense | 5,107 | | | 4,012 | | | 12,075 | | | 10,593 | | Income tax expense | | 4,748 | | | 2,756 | |
Net income | Net income | $ | 19,143 | | | $ | 14,197 | | | $ | 44,947 | | | $ | 45,533 | | Net income | | $ | 17,079 | | | $ | 9,689 | |
| Earnings per common share - basic | Earnings per common share - basic | $ | 1.67 | | | $ | 1.43 | | | $ | 4.04 | | | $ | 4.58 | | Earnings per common share - basic | | $ | 1.50 | | | $ | 0.93 | |
Earnings per common share - diluted | Earnings per common share - diluted | $ | 1.67 | | | $ | 1.41 | | | $ | 4.01 | | | $ | 4.53 | | Earnings per common share - diluted | | $ | 1.49 | | | $ | 0.92 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
BancPlus Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In Thousands) | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| Net income | Net income | $ | 19,143 | | | $ | 14,197 | | | $ | 44,947 | | | $ | 45,533 | | Net income | | $ | 17,079 | | | $ | 9,689 | |
Other comprehensive income (loss), net of tax: | Other comprehensive income (loss), net of tax: | | Other comprehensive income (loss), net of tax: | | |
Unrealized losses on securities available for sale | (20,975) | | | (2,340) | | | (60,537) | | | (4,698) | | |
Unrealized gains (losses) on securities available for sale | | Unrealized gains (losses) on securities available for sale | | 7,039 | | | (26,144) | |
Tax effect | Tax effect | 5,223 | | | 583 | | | 15,074 | | | 1,170 | | Tax effect | | (1,753) | | | 6,510 | |
Total other comprehensive loss, net of tax | (15,752) | | | (1,757) | | | (45,463) | | | (3,528) | | |
Total other comprehensive income (loss), net of tax | | Total other comprehensive income (loss), net of tax | | 5,286 | | | (19,634) | |
Comprehensive income (loss) | Comprehensive income (loss) | $ | 3,391 | | | $ | 12,440 | | | $ | (516) | | | $ | 42,005 | | Comprehensive income (loss) | | $ | 22,365 | | | $ | (9,945) | |
The accompanying notes are an integral part of these consolidated financial statements.
BancPlus Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(Unaudited)
(In Thousands, Except Share and Per Share Data)
| | | Unearned ESOP Compensation | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | Less: Redeemable Common Stock Owned by the ESOP | Total Shareholders' Equity | | Unearned ESOP Compensation | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | Less: Redeemable Common Stock Owned by the ESOP | Total Shareholders' Equity |
| | Common Stock | Retained Earnings | | Preferred Stock | Common Stock | Retained Earnings |
| | Shares | Amount | | Shares | Amount | Shares | Amount |
| July 1, 2021 | 10,111,045 | | $ | 10,111 | | $ | (1,957) | | $ | 66,152 | | $ | 296,900 | | $ | 5,104 | | $ | (87,794) | | $ | 288,516 | | |
January 1, 2022 | | January 1, 2022 | — | | $ | — | | 10,115,945 | | $ | 10,116 | | $ | (1,401) | | $ | 67,380 | | $ | 314,357 | | $ | (33) | | $ | (100,487) | | $ | 289,932 | |
| Net income | Net income | — | | — | | — | | — | | 14,197 | | — | | — | | 14,197 | | Net income | — | | — | | — | | — | | — | | — | | 9,689 | | — | | — | | 9,689 | |
Other comprehensive loss, net | Other comprehensive loss, net | — | | — | | — | | — | | — | | (1,757) | | — | | (1,757) | | Other comprehensive loss, net | — | | — | | — | | — | | — | | — | | — | | (19,634) | | — | | (19,634) | |
Issuance of common stock for the Acquisition of First Trust Corporation | | Issuance of common stock for the Acquisition of First Trust Corporation | — | | — | | 1,444,732 | | 1,445 | | — | | 55,044 | | — | | — | | — | | 56,489 | |
Issuance of restricted stock | Issuance of restricted stock | 1,209 | | 1 | | — | | (1) | | — | | — | | — | | — | | Issuance of restricted stock | — | | — | | 21,367 | | 21 | | — | | (21) | | — | | — | | — | | — | |
| Shares withheld to satisfy withholding obligation in the vesting of restricted stock | | Shares withheld to satisfy withholding obligation in the vesting of restricted stock | — | | — | | (1,164) | | (1) | | — | | (78) | | — | | — | | — | | (79) | |
Stock based compensation | Stock based compensation | — | | — | | — | | 616 | | — | | — | | — | | 616 | | Stock based compensation | — | | — | | — | | — | | — | | 680 | | — | | — | | — | | 680 | |
Net change fair value of ESOP shares | Net change fair value of ESOP shares | — | | — | | — | | — | | — | | — | | (8,829) | | (8,829) | | Net change fair value of ESOP shares | — | | — | | — | | — | | — | | — | | — | | — | | (1,938) | | (1,938) | |
Common stock released by ESOP | Common stock released by ESOP | — | | — | | 348 | | — | | — | | — | | — | | 348 | | Common stock released by ESOP | — | | — | | — | | — | | 1,401 | | — | | — | | — | | — | | 1,401 | |
Dividends paid ($0.38 per share) | — | | — | | — | | — | | (3,828) | | — | | — | | (3,828) | | |
September 30, 2021 | 10,112,254 | | $ | 10,112 | | $ | (1,609) | | $ | 66,767 | | $ | 307,269 | | $ | 3,347 | | $ | (96,623) | | $ | 289,263 | | |
Dividends paid ($0.41 per share) | | Dividends paid ($0.41 per share) | — | | — | | — | | — | | — | | — | | (4,148) | | — | | — | | (4,148) | |
March 31, 2022 | | March 31, 2022 | — | | $ | — | | 11,580,880 | | $ | 11,581 | | $ | — | | $ | 123,005 | | $ | 319,898 | | $ | (19,667) | | $ | (102,425) | | $ | 332,392 | |
| January 1, 2021 | 10,079,277 | | $ | 10,079 | | $ | (2,650) | | $ | 67,742 | | $ | 273,204 | | $ | 6,875 | | $ | (74,278) | | $ | 280,972 | | |
January 1, 2023 | | January 1, 2023 | 250,000 | | $ | 250,000 | | 11,599,595 | | $ | 11,599 | | $ | — | | $ | 122,890 | | $ | 356,685 | | $ | (43,074) | | $ | (96,984) | | $ | 601,116 | |
Cumulative change in accounting principle | | Cumulative change in accounting principle | — | | — | | — | | — | | — | | — | | (24,953) | | — | | — | | (24,953) | |
Balance at January 1, 2023 (as adjusted for change in accounting principle) | | Balance at January 1, 2023 (as adjusted for change in accounting principle) | 250,000 | | 250,000 | | 11,599,595 | | 11,599 | | — | | 122,890 | | 331,732 | | (43,074) | | (96,984) | | 576,163 | |
| Net income | Net income | — | | — | | — | | — | | 45,533 | | — | | — | | 45,533 | | Net income | — | | — | | — | | — | | — | | — | | 17,079 | | — | | — | | 17,079 | |
Other comprehensive loss, net | — | | — | | — | | — | | — | | (3,528) | | — | | (3,528) | | |
Issuance of restricted stock | 83,317 | | 83 | | — | | (83) | | — | | — | | — | | — | | |
Other comprehensive income, net | | Other comprehensive income, net | — | | — | | — | | — | | — | | — | | — | | 5,286 | | — | | 5,286 | |
| Shares withheld to satisfy withholding obligation in the vesting of restricted stock | Shares withheld to satisfy withholding obligation in the vesting of restricted stock | (4,477) | | (4) | | — | | (225) | | — | | — | | — | | (229) | | Shares withheld to satisfy withholding obligation in the vesting of restricted stock | — | | — | | (241) | | — | | — | | (16) | | — | | — | | — | | (16) | |
Purchase of Company stock | (45,863) | | (46) | | — | | (2,387) | | — | | — | | — | | (2,433) | | |
Stock based compensation | Stock based compensation | — | | — | | — | | 1,720 | | — | | — | | — | | 1,720 | | Stock based compensation | — | | — | | — | | — | | — | | 1,004 | | — | | — | | — | | 1,004 | |
Net change fair value of ESOP shares | — | | — | | — | | — | | — | | — | | (22,345) | | (22,345) | | |
Common stock released by ESOP | — | | — | | 1,041 | | — | | — | | — | | — | | 1,041 | | |
Dividends paid ($1.14 per share) | — | | — | | — | | — | | (11,468) | | — | | — | | (11,468) | | |
September 30, 2021 | 10,112,254 | | $ | 10,112 | | $ | (1,609) | | $ | 66,767 | | $ | 307,269 | | $ | 3,347 | | $ | (96,623) | | $ | 289,263 | | |
| Dividends paid ($0.45 per share) | | Dividends paid ($0.45 per share) | — | | — | | — | | — | | — | | — | | (5,220) | | — | | — | | (5,220) | |
March 31, 2023 | | March 31, 2023 | 250,000 | | $ | 250,000 | | 11,599,354 | | $ | 11,599 | | $ | — | | $ | 123,878 | | $ | 343,591 | | $ | (37,788) | | $ | (96,984) | | $ | 594,296 | |
The accompanying notes are an integral part of these consolidated financial statements.
BancPlus Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Continued)
(Unaudited)
(In Thousands, Except Share and Per Share Data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Unearned ESOP Compensation | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | Less: Redeemable Common Stock Owned by the ESOP | Total Shareholders' Equity |
| Preferred Stock | | Common Stock | Retained Earnings |
| Shares | Amount | | Shares | Amount |
| | | | | | | | | | | |
July 1, 2022 | 250,000 | | $ | 250,000 | | | 11,627,071 | | $ | 11,627 | | $ | — | | $ | 122,132 | | $ | 331,239 | | $ | (29,744) | | $ | (97,799) | | $ | 587,455 | |
| | | | | | | | | | | |
Net income | — | | — | | | — | | — | | — | | — | | 19,143 | | — | | — | | 19,143 | |
| | | | | | | | | | | |
Other comprehensive loss, net | — | | — | | | — | | — | | — | | — | | — | | (15,752) | | — | | (15,752) | |
Issuance of restricted stock | — | | — | | | 2,911 | | 3 | | — | | (3) | | — | | — | | — | | — | |
| | | | | | | | | | | |
Purchase of Company stock | — | | — | | | (28,846) | | (29) | | — | | (1,824) | | — | | — | | — | | (1,853) | |
Stock based compensation | — | | — | | | — | | — | | — | | 1,045 | | — | | — | | — | | 1,045 | |
Net change fair value of ESOP shares | — | | — | | | — | | — | | — | | — | | — | | — | | 4,447 | | 4,447 | |
| | | | | | | | | | | |
Dividends paid ($0.41 per share) | — | | — | | | — | | — | | — | | — | | (4,767) | | — | | — | | (4,767) | |
September 30, 2022 | 250,000 | | $ | 250,000 | | | 11,601,136 | | $ | 11,601 | | $ | — | | $ | 121,350 | | $ | 345,615 | | $ | (45,496) | | $ | (93,352) | | $ | 589,718 | |
| | | | | | | | | | | |
January 1, 2022 | — | | $ | — | | | 10,115,945 | | $ | 10,116 | | $ | (1,401) | | $ | 67,380 | | $ | 314,357 | | $ | (33) | | $ | (100,487) | | $ | 289,932 | |
| | | | | | | | | | | |
Net income | — | | — | | | — | | — | | — | | — | | 44,947 | | — | | — | | 44,947 | |
Issuance of preferred stock | 250,000 | | 250,000 | | | — | | — | | — | | — | | — | | — | | — | | 250,000 | |
Issuance of common stock for acquisition of First Trust Corporation | — | | — | | | 1,444,732 | | 1,445 | | — | | 55,044 | | — | | — | | — | | 56,489 | |
Other comprehensive loss, net | — | | — | | | — | | — | | — | | — | | — | | (45,463) | | — | | (45,463) | |
Issuance of restricted stock | — | | — | | | 98,679 | | 99 | | — | | (99) | | — | | — | | — | | — | |
Shares withheld to satisfy withholding obligation in the vesting of restricted stock | — | | — | | | (10,438) | | (11) | | — | | (701) | | — | | — | | — | | (712) | |
Purchase of Company stock | — | | — | | | (47,782) | | (48) | | | (3,055) | | | | | (3,103) | |
Stock based compensation | — | | — | | | — | | — | | — | | 2,781 | | — | | — | | — | | 2,781 | |
Net change fair value of ESOP shares | — | | — | | | — | | — | | — | | — | | — | | — | | 7,135 | | 7,135 | |
Common stock released by ESOP | — | | — | | | — | | — | | 1,401 | | — | | — | | — | | — | | 1,401 | |
Dividends paid ($1.23 per share) | — | | — | | | — | | — | | — | | — | | (13,689) | | — | | — | | (13,689) | |
September 30, 2022 | 250,000 | | $ | 250,000 | | | 11,601,136 | | $ | 11,601 | | $ | — | | $ | 121,350 | | $ | 345,615 | | $ | (45,496) | | $ | (93,352) | | $ | 589,718 | |
BancPlus Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands) | | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income per consolidated statements of income | Net income per consolidated statements of income | $ | 44,947 | | | $ | 45,533 | | Net income per consolidated statements of income | $ | 17,079 | | | $ | 9,689 | |
Adjustments to reconcile net income to net cash from operating activities: | Adjustments to reconcile net income to net cash from operating activities: | | Adjustments to reconcile net income to net cash from operating activities: | |
Provision for loan losses | 940 | | | 7,395 | | |
Provision for credit losses | | Provision for credit losses | 523 | | | 217 | |
Depreciation and amortization | Depreciation and amortization | 7,466 | | | 5,818 | | Depreciation and amortization | 2,440 | | | 2,362 | |
Net loss on sales of premises and equipment | Net loss on sales of premises and equipment | 278 | | | 279 | | Net loss on sales of premises and equipment | 201 | | | 1 | |
Net (gain) loss on sales of other real estate owned | 74 | | | (169) | | |
Net gain on sales of other real estate owned | | Net gain on sales of other real estate owned | — | | | (19) | |
Write-downs of other real estate-owned | Write-downs of other real estate-owned | 563 | | | 186 | | Write-downs of other real estate-owned | 2 | | | 555 | |
Deferred income tax expense | 911 | | | 399 | | |
Deferred income tax benefit | | Deferred income tax benefit | (186) | | | (162) | |
Federal Home Loan Bank stock dividends | Federal Home Loan Bank stock dividends | (23) | | | (9) | | Federal Home Loan Bank stock dividends | (221) | | | (3) | |
Common stock released by ESOP | Common stock released by ESOP | 1,401 | | | 1,041 | | Common stock released by ESOP | — | | | 1,401 | |
Stock based compensation expense | Stock based compensation expense | 2,781 | | | 1,720 | | Stock based compensation expense | 1,004 | | | 680 | |
Origination of loans held for sale | Origination of loans held for sale | (228,530) | | | (300,866) | | Origination of loans held for sale | (47,764) | | | (72,280) | |
Proceeds from loans held for sale | Proceeds from loans held for sale | 241,152 | | | 315,646 | | Proceeds from loans held for sale | 44,780 | | | 77,357 | |
Earnings on bank-owned life insurance | Earnings on bank-owned life insurance | (1,913) | | | (5,858) | | Earnings on bank-owned life insurance | (656) | | | (626) | |
Net change in: | Net change in: | | Net change in: | |
Accrued interest receivable and other assets | Accrued interest receivable and other assets | (933) | | | 5,849 | | Accrued interest receivable and other assets | (1,188) | | | (3,374) | |
Accrued interest payable and other liabilities | Accrued interest payable and other liabilities | 4,848 | | | (2,163) | | Accrued interest payable and other liabilities | 1,020 | | | (2,570) | |
Net cash from operating activities | Net cash from operating activities | 73,962 | | | 74,801 | | Net cash from operating activities | 17,034 | | | 13,228 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | Cash flows from investing activities: | |
Purchases of securities available for sale | Purchases of securities available for sale | (115,927) | | | (317,600) | | Purchases of securities available for sale | (33,505) | | | (82,822) | |
Maturities and calls of securities available for sale | Maturities and calls of securities available for sale | 48,856 | | | 81,015 | | Maturities and calls of securities available for sale | 4,885 | | | 20,801 | |
Purchases of securities held to maturity | Purchases of securities held to maturity | — | | | (19,103) | | Purchases of securities held to maturity | — | | | — | |
Maturities, prepayments and calls of securities held to maturity | Maturities, prepayments and calls of securities held to maturity | 5,678 | | | 34,318 | | Maturities, prepayments and calls of securities held to maturity | 990 | | | 2,745 | |
Net increase in loans | Net increase in loans | (934,387) | | | (151,332) | | Net increase in loans | (128,754) | | | (122,286) | |
Purchases of premises and equipment | Purchases of premises and equipment | (12,162) | | | (5,188) | | Purchases of premises and equipment | (7,015) | | | (2,336) | |
Proceeds from sales of premises and equipment | — | | | 31 | | |
| Proceeds from sales of other real estate owned | Proceeds from sales of other real estate owned | 4,418 | | | 4,672 | | Proceeds from sales of other real estate owned | 976 | | | 181 | |
Investment in unconsolidated entities | Investment in unconsolidated entities | (30) | | | (96) | | Investment in unconsolidated entities | (77) | | | 1,709 | |
Distributions from unconsolidated entities | Distributions from unconsolidated entities | 2,490 | | | — | | Distributions from unconsolidated entities | 483 | | | — | |
Purchase of bank-owned life insurance | — | | | (10,000) | | |
Proceeds from bank-owned life insurance | — | | | 5,987 | | |
| Purchases or redemptions of Federal Home Loan Bank stock | Purchases or redemptions of Federal Home Loan Bank stock | (12,210) | | | (163) | | Purchases or redemptions of Federal Home Loan Bank stock | (192) | | | — | |
Cash received in excess of cash paid for acquisition | Cash received in excess of cash paid for acquisition | 165,974 | | | — | | Cash received in excess of cash paid for acquisition | — | | | 165,974 | |
Net cash used in investing activities | Net cash used in investing activities | (847,300) | | | (377,459) | | Net cash used in investing activities | (162,209) | | | (16,034) | |
BancPlus Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)
(In Thousands) | | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
Net increase (decrease) in: | Net increase (decrease) in: | | Net increase (decrease) in: | |
Noninterest-bearing deposits | Noninterest-bearing deposits | $ | (18,413) | | | $ | 168,926 | | Noninterest-bearing deposits | $ | (72,106) | | | $ | 42,746 | |
Money market, negotiable order of withdrawal, and savings deposits | Money market, negotiable order of withdrawal, and savings deposits | (89,991) | | | 265,081 | | Money market, negotiable order of withdrawal, and savings deposits | 129,308 | | | 1,250 | |
Certificates of deposit | Certificates of deposit | (132,207) | | | (56,950) | | Certificates of deposit | 84,550 | | | (25,727) | |
Proceeds from Federal Home Loan Bank advances | Proceeds from Federal Home Loan Bank advances | 1,392,000 | | | — | | Proceeds from Federal Home Loan Bank advances | 2,545,000 | | | — | |
Payments on Federal Home Loan Bank advances | Payments on Federal Home Loan Bank advances | (1,102,402) | | | (120) | | Payments on Federal Home Loan Bank advances | (2,553,016) | | | (24) | |
Proceeds from issuance of preferred stock | 250,000 | | | — | | |
| Proceeds from other borrowings | Proceeds from other borrowings | 20,000 | | | — | | Proceeds from other borrowings | — | | | 20,000 | |
Payments on other borrowings | (20,000) | | | (2,625) | | |
| Payment of debt issuance costs on other borrowings | Payment of debt issuance costs on other borrowings | (25) | | | — | | Payment of debt issuance costs on other borrowings | — | | | (25) | |
Cash dividends paid on common stock | Cash dividends paid on common stock | (13,689) | | | (11,468) | | Cash dividends paid on common stock | (5,220) | | | (4,148) | |
Purchase of Company stock | (3,103) | | | (2,433) | | |
| Shares withheld to pay taxes on restricted stock vesting | Shares withheld to pay taxes on restricted stock vesting | (712) | | | (229) | | Shares withheld to pay taxes on restricted stock vesting | (16) | | | (79) | |
Net cash from financing activities | Net cash from financing activities | 281,458 | | | 360,182 | | Net cash from financing activities | 128,500 | | | 33,993 | |
| Net change in cash and cash equivalents | Net change in cash and cash equivalents | (491,880) | | | 57,524 | | Net change in cash and cash equivalents | (16,675) | | | 31,187 | |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | 664,165 | | | 637,545 | | Cash and cash equivalents at beginning of period | 137,895 | | | 664,165 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 172,285 | | | $ | 695,069 | | Cash and cash equivalents at end of period | $ | 121,220 | | | $ | 695,352 | |
| Supplemental cash flow information: | Supplemental cash flow information: | | Supplemental cash flow information: | |
Interest paid | Interest paid | $ | 11,840 | | | $ | 10,280 | | Interest paid | $ | 20,545 | | | $ | 1,658 | |
Federal and state income tax payments | Federal and state income tax payments | 5,750 | | | 9,950 | | Federal and state income tax payments | — | | | — | |
Acquisition of real estate in non-cash foreclosures | Acquisition of real estate in non-cash foreclosures | 1,374 | | | 4,924 | | Acquisition of real estate in non-cash foreclosures | 705 | | | 455 | |
Fair value of assets acquired net of liabilities assumed | Fair value of assets acquired net of liabilities assumed | 59,572 | | | — | | Fair value of assets acquired net of liabilities assumed | — | | | 58,508 | |
The accompanying notes are an integral part of these consolidated financial statements.
BancPlus Corporation and Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
Note 1: Basis of Presentation
BancPlus Corporation (the “Company”) is a bank holding company headquartered in Ridgeland, Mississippi operating in one reportable segment. BankPlus (the “Bank”), the principal operating subsidiary and sole banking subsidiary of the Company, is a commercial bank primarily engaged in the business of commercial and consumer banking. In addition to general and consumer banking, other products and services offered though the Bank’s subsidiaries include certain insurance and annuity services, asset and investment management and financial planning services. Oakhurst Development, Inc. (“Oakhurst”) is a real estate subsidiary originally formed by the Company to liquidate a real estate development that was acquired by the Bank through foreclosure in 2002. Oakhurst became active again in March 2009 and holds loans and other real estate.
The unaudited interim consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling financial interest, and reflect all adjustments (consisting of normal recurring adjustments) that are necessary in the opinion of the Company’s management to fairly present the financial position, results of operations and cash flows of the Company. They have been derived from the audited consolidated financial statements for the fiscal year ended December 31, 2021;2022; however, certain notes and information have been omitted from the interim periods. Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021.2022. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The accounting and financial reporting policies followed by the Company conform, in all material respects, to the accounting principles generally accepted in the United States (“GAAP”) and to general practices within the financial services industry. The results of operations for the interim periods are not necessarily indicative of the results to be expected for future interim periods or for the entire year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Particularly given the effects of the COVID-19 pandemic, theThe allowance/provision for loancredit losses, the fair value of financial instruments and the status of contingencies are particularly subject to change. Material estimates that are subject to significant change in the near term are the allowance for loancredit losses, provision for loancredit losses, valuation of other real estate owned and fair values of financial instruments. Actual results could differ from these estimates.
Unless otherwise indicated, references to “BancPlus” refer to BancPlus Corporation and its subsidiaries, on a consolidated basis, and reference to “BankPlus” refer to BankPlus, our wholly-owned subsidiary, as applicable.
Effect of Recently Issued But Not Yet EffectiveAdopted Accounting Standards
Accounting Standards Update
ASU 2016-13, (“ASU 2016-13”), “Financial“Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASU 2016-13 which requires earlier measurement of credit losses and enhances disclosures. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Many of the previous loss estimation techniques applied today willare still be permitted, although the inputs to those techniques will changehave changed to reflect the full amount of expected credit losses over the life of the loan. ASU 2016-13 was originally effective for the Company for annual and interim periods beginning on January 1, 2021. Subsequently, FASB approved a deferral of the effective date. ASU 2016-13 will now beis effective for the Company for annual and interim periods beginning on January 1, 2023. The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures. In addition, ASU 2016-13 made changes to the accounting for available-for-sale debt securities, which includes required presentation of credit losses to be presented as an allowance rather than as a write-down when management does not intend to sell the securities.
The Company has a cross functional team that has been working with third-party vendorsadopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to build and validate a CECL model which has been running parallelbe reported in accordance with the Company’s current model while validationthen applicable GAAP. As of January 1, 2023 the model is completed. The Company expects to recognizerecognized a one-time, after-tax cumulative effect adjustment of approximately $25.0 million to retained earnings, increasing the allowance for loancredit losses on loans held for investment by approximately $20.7 million and establishing an allowance for credit losses on off-balance sheet credit exposures of approximately $12.5 million due to the adoption of ASU 2016-13.
The Company adopted ASU 2016-13 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchase credit impaired (“PCI”) and accounted for under ASC 310-30.
In accordance with the standard, management did not reassess whether PCI assets met the criteria for PCD assets as of the date of adoption. The amortized cost basis of the PCD assets has an insignificant impact on the allowance for credit losses as of January 1, 2023. The remaining noncredit discount (based on the beginningadjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2023.
The following table illustrates the impact of ASU 2016-13:
| | | | | | | | | | | | | | | | | |
| January 1, 2023 |
(In thousands) | As Reported Under ASU 2016-13 | | Pre-ASU 2016-13 Adoption | | Impact of ASU 2016-13 Adoption |
Assets: | | | | | |
Allowance for credit losses on debt securities held-to-maturity | $ | — | | | $ | — | | | $ | — | |
Allowance for credit losses on loans: | | | | | |
Commercial real estate | 39,471 | | | 26,701 | | | 12,770 | |
Residential | 16,422 | | | 9,958 | | | 6,464 | |
Commercial and industrial | 6,916 | | | 4,750 | | | 2,166 | |
Consumer and other | 810 | | | 1,466 | | | (656) | |
Total allowance for credit losses on loans | 63,619 | | | 42,875 | | | 20,744 | |
Liabilities: | | | | | |
Allowance for credit losses on off-balance sheet exposures | 12,505 | | | — | | | 12,505 | |
Total allowance for credit losses | $ | 76,124 | | | $ | 42,875 | | | $ | 33,249 | |
Allowance for Credit Losses – Available-for-sale debt securities
For available-for-sale debt securities with fair value below amortized cost, when the Company does not intend to sell the debt security, and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, then the Company recognizes the credit component of a decline in fair value of a debt security in income and the remaining portion in other comprehensive income (loss). Decline in fair value related to a credit loss is measured using the discounted cash flow method. Credit loss recognition is limited to the amount that the fair value of the first reporting periodsecurity is less than the amortized cost. The decline in fair value is recognized by establishing an allowance for credit loss (“ACL”) through provision for credit losses. Decline in fair value related to noncredit factors is recognized in accumulated other comprehensive income, net of applicable taxes. The Company has elected to exclude accrued interest from the estimate of credit losses for available-for-sale debt securities. The Company evaluates available-for-sale security declines in fair value on a quarterly basis.
Allowance for Credit Losses – Held-to-maturity debt securities
For held-to-maturity debt securities, expected losses are evaluated and calculated on a collective basis for those securities that share risk characteristics. The Company aggregates record level securities calculations and reports the security portfolio segments based on shared risk characteristics. The only segment included in the held to maturity portfolio is states and political subdivisions, which is comprised of municipals.
The Company performs a quarterly loss reserve calculation for municipal and corporate bonds leveraging history of defaults and recoveries as well as a baseline economic forecast. A probability of default/loss-given default approach is used, with any non-rated bonds receiving a comparable rating estimate. Losses in high grade municipals, in which the Company adoptstends to invest, have been very limited over the new standard, butlast 50 years. The Company has not yet determinedelected to exclude accrued interest from the magnitudeestimate of the one-time adjustment or the overall impact on the Company’s consolidated financial statements.credit losses for held-to-maturity debt securities.
Allowance for Credit Losses – Loans
Accounting Standards Update 2020-04 (“ASU 2020-04”), “Reference Rate Reform - Topic 848.”
In March 2020,
The allowance for credit losses is a valuation account that is deducted from the FASB issued ASU 2020-04, which provides temporary optional expedients and exceptionsloans’ amortized cost basis to present the GAAP guidance on contract modifications, hedge accounting, and other transactions affected that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference ratenet amount expected to be discontinued. ASU 2020-04collected on the loans. Management's determination of the adequacy of the ACL is effective upon issuancebased on an assessment of the expected credit losses on loans over the expected life of the loan. The ACL is increased by provision expense and can be applied through Decemberdecreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged off when management believes that the collection of the principal amount owed in full is unlikely. Expected recoveries do not exceed the aggregate of amounts
31, 2022.previously charged-off and expected to be charged-off. Any interest that is accrued but not collected is reversed against interest income when a loan is placed on nonaccrual status, which typically occurs prior to charging off all, or a portion, of a loan. The Company made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses.
The Company calculates estimated credit loss on its portfolio primarily using quantitative methodologies using relevant available information from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans and whether it needs to evaluate the allowance on an individual basis. The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit. The Company’s segments for loans include commercial real estate, commercial and industrial, residential and consumer.
Expected credit losses are estimated over the contractual term of each loan taking into consideration expected prepayments. The contractual term excludes expected extensions, renewals, and modifications. Also included in the allowance for loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative method or the economic assumptions described above. For example, factors that the Company considers include the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans and current business conditions.
In addition to the ACL on loans held for investment, CECL requires a balance sheet liability for unfunded commitments, which is recognized if both of the following conditions are met: (1) the Company has a present contractual obligation to extend credit; and (2) the obligation is not unconditionally cancellable by the Company. Loan commitments may have a funded and unfunded portion, of which the liability for unfunded commitments is derived based upon the commitments to extend credit to a borrower (e.g., an estimate of expected credit losses is not established for unfunded portions of loan commitment that are unconditionally cancellable by the Company). The expected credit losses for funded portions are reported in the previously discussed ACL. The Company does not expect ASU 2020-04have any commitments that are unconditionally cancellable and therefore all commitments are in scope for an ACL calculation. The Company segments its unfunded commitment portfolio consistent with the ACL calculation. The Company incorporates the probability of funding (i.e., estimate of utilization) for each segment and then utilizes the ACL loss rates for each segment on an aggregate basis to have a material impact oncalculate the Company’s consolidated financial statements.allowance for unfunded commitments.
Accounting Standards Update 2022-02 (“ASU 2022-02”), “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” In March 2022, the FASB issued ASU 2022-02 which eliminates the TDR recognition and measurement guidance and instead requires that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. ASU 2022-02 also enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For public business entities, these amendments require that an entity disclose current period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. ASU 2022-02 is effective for the Company for annual and interim periods beginning on January 1, 2023. ImplementationThe adoption of ASU 2022-02 isin the first quarter of 2023 did not expected to materially impact the Company’s consolidated financial statements.
Effect of Recently Issued, But Not Yet Effective Accounting Standards
Accounting Standards Update 2020-04 (“ASU 2020-04”), “Reference Rate Reform - Topic 848.” In March 2020, the FASB issued ASU 2020-04 which provides temporary optional expedients and exceptions to the Generally Accepted Accounting Principles (“GAAP”) guidance on contract modifications, hedge accounting, and other transactions affected that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Company is still evaluating the impact of ASU 2020-04, but does not expect it to have a material impact on the Company’s consolidated financial statements.
Accounting Standards Update 2022-06 (“ASU 2022-06”), “Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848.” In December 2022, the FASB issued ASU 2022-06 which provides temporary relief during the transition period in complying with ASU 2020-04. The Board included a sunset provision within Topic 848 based on expectations of when LIBOR would cease being published. At the time that ASU 2020-04 was issued, the UK Financial Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set for December 31, 2022 - 12 months after the expected cessation date of all
currencies and tenors of LIBOR. In March 2021, the FCA announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.
Note 2: Earnings Per Share
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted number of common shares outstanding during the period and the number of common shares that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period.
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
(In thousands except per share data) | (In thousands except per share data) | 2022 | | 2021 | | 2022 | | 2021 | (In thousands except per share data) | | 2023 | | 2022 |
Net income | Net income | $ | 19,143 | | | $ | 14,197 | | | $ | 44,947 | | | $ | 45,533 | | Net income | | $ | 17,079 | | | $ | 9,689 | |
| Weighted average common shares outstanding | Weighted average common shares outstanding | 11,437 | | | 9,934 | | | 11,120 | | | 9,936 | | Weighted average common shares outstanding | | 11,415 | | | 10,451 | |
Diluted effect of unallocated stock | Diluted effect of unallocated stock | — | | | 75 | | | 6 | | | 44 | | Diluted effect of unallocated stock | | — | | | 18 | |
Diluted effect of stock-based awards | Diluted effect of stock-based awards | 32 | | | 41 | | | 73 | | | 61 | | Diluted effect of stock-based awards | | 73 | | | 57 | |
Diluted common shares | Diluted common shares | 11,469 | | | 10,050 | | | 11,199 | | | 10,041 | | Diluted common shares | | 11,488 | | | 10,526 | |
| Basic earnings per common share | Basic earnings per common share | $ | 1.67 | | | $ | 1.43 | | | $ | 4.04 | | | $ | 4.58 | | Basic earnings per common share | | $ | 1.50 | | | $ | 0.93 | |
Diluted earnings per common share | Diluted earnings per common share | $ | 1.67 | | | $ | 1.41 | | | $ | 4.01 | | | $ | 4.53 | | Diluted earnings per common share | | $ | 1.49 | | | $ | 0.92 | |
|
Note 3: Business Combinations
First Trust Corporation
Effective March 1, 2022, the Company completed its previously announced merger with First Trust Corporation (“FTC”), the holding company of First Bank and Trust (“FBT”). Pursuant to the terms of the Agreement and Plan of Share Exchange and Merger, dated September 28, 2021, as amended on February 9, 2022, by and among the Company, BankPlus, FTC, and FBT (the “FTC Merger Agreement”), following the Company’s acquisition of FTC by statutory share exchange, FTC was merged with and into BancPlus, with BancPlus surviving the merger (the “FTC Holding Company Merger”). Immediately thereafter FBT was merged with and into BankPlus, with BankPlus surviving the merger (together with the FTC Holding Company Merger, the “FTC Merger”). The FTC Merger expands the Company’s geographic footprint into Florida and adds additional locations in Louisiana and Mississippi, providing access to new markets and deposits.
Pursuant to the FTC Merger Agreement, holders of FTC stock received, in the aggregate, 1,444,764 shares of BancPlus common stock, with cash paid in lieu of fractional shares, and $52.7 million in cash, plus up to $10.0 million, less certain fees, costs, and expenses, that was held in escrow pursuant to the terms of a previously disclosed Indemnity and Escrow Agreement that was entered into immediately prior to the completion of the FTC Merger pending a final determination from the Internal Revenue Service as to whether FTC’s subchapter S election would be reinstated retroactively to September 23, 2020. On June 27, 2022, the Company received notice from the IRS that FTC’s subchapter S election had been reinstated. On July 7, 2022, the escrow
account balance of $10.0 million was paid to the former holders of FTC stock. The fair value of the common shares issued was determined based on a third-party appraisal at the date of the acquisition, as there is no active market for the Company’s stock. At the time of this filing, final valuations of the stock consideration, assets acquired and liabilities assumed were not complete. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the FTC Merger. Therefore, adjustments to the estimated amounts and carrying values may occur.
During the three and nine months ended September 30,March 31, 2022, the Company incurred approximately $2.9 million and $8.4$4.2 million of acquisition expenses in connection with the FTC Merger, respectively. These expenses are recorded in other expenses in the Company’s Consolidated Statement of Income for the three and nine months ended September 30,March 31, 2022.
The excess cost paid over the fair value of net assets acquired was recorded as goodwill during 2022. Goodwill, which reflects an enhanced presence in the Louisiana and Southern Mississippi market areas and expansion into the Florida panhandle market as well as synergies expected as a result of the combined operations, is not deductible for tax purposes.
The following table reflects the consideration paid and the preliminary fair value allocation of assets acquired and liabilities assumed as of the acquisition date:
| | | | | | | | | | | |
(In thousands) | | | |
Purchase price allocation: | | | |
Common stock issued | | | $ | 56,489 | |
Cash paid | | | 63,239 | |
Total purchase price | | | $ | 119,728 | |
Assets acquired: | | | |
Cash and due from banks | $ | 229,213 | | | |
Securities | 33,407 | | | |
Loans held for sale | 6,200 | | | |
Loans, net | 1,000,382 | | | |
Premises and equipment | 15,152 | | | |
Accrued interest receivable | 1,441 | | | |
Core deposit intangible | 7,825 | | | |
Other assets | 4,584 | | | |
Total assets acquired | $ | 1,298,204 | | | |
Liabilities assumed: | | | |
Deposits | $ | 1,212,712 | | | |
Subordinated debentures | 21,733 | | | |
Other liabilities | 4,187 | | | |
Total liabilities assumed | $ | 1,238,632 | | | |
Net assets acquired | | | 59,572 | |
Goodwill | | | $ | 60,156 | |
In connection with the FTC Merger, the Company recorded a $7.8 million core deposit intangible, which will be amortized over 10 years. The Company also acquired loans with a fair value of $1.000$1.00 billion. The fair value of acquired loans at the time of acquisition is recorded as a premium or discount to the unpaid balance of each acquired loan. The net premium or discount is accreted or amortized into interest income over the remaining life of the loan. The Company recorded a net discount of $6.6 million on the acquired FTC loans, which included a credit mark discount of $15.7 million. Purchase credit impaireddeteriorated loans were insignificant. In the third quarter of 2022, the Company increased the fair value of other real estate and deferred tax assets resulting in a corresponding decrease to goodwill of $1.1 million.
Revenues and earnings of the acquired company since the FTC Merger date have not been disclosed as it is not practicable as FTC was merged into BancPlus and separate financial information for FTC is not available. The following table presents unaudited pro forma information as if the FTC Merger had occurred on January 1, 2021.2022. This pro forma information combines
the historic consolidated results of operations of BancPlus and FTC after giving effect to certain adjustments, including purchase accounting fair value adjustments and amortization of intangibles, as well as the related income tax effects of those adjustments. The pro forma information does not necessarily reflect the results of operations that would have occurred had the FTC Merger occurred on January 1, 2021.2022.
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
(In thousands, except per share data) | 2022 | | 2021 | 2022 | | 2021 |
Net interest income | $ | 62,029 | | | $ | 55,280 | | $ | 165,082 | | | $ | 161,007 | |
Other operating income | 17,443 | | | 20,544 | | 55,494 | | | 63,624 | |
Net income available to common shareholders | 19,268 | | | 18,514 | | 47,576 | | | 57,363 | |
Earnings per common share: | | | | | | |
Basic | $ | 1.68 | | | $ | 1.63 | | $ | 4.16 | | | $ | 5.04 | |
Diluted | 1.68 | | | 1.61 | | 4.13 | | | 4.99 | |
| | | | | | | |
| | | Three Months Ended March 31, |
(In thousands, except per share data) | | | 2022 |
Net interest income | | | $ | 53,873 | |
Other operating income | | | 20,542 | |
Net income available to common shareholders | | | 13,924 | |
Earnings per common share: | | | |
Basic | | | $ | 1.22 | |
Diluted | | | 1.21 | |
Note 4: Investment Securities
The following is a summary of the amortized cost and fair value of securities available for sale.
| | | Amortized | | Gross Unrealized | | Fair | | Amortized | | Gross Unrealized | | Fair |
(In thousands) | (In thousands) | Cost | | Gains | | Losses | | Value | (In thousands) | Cost | | Gains | | Losses | | Value |
September 30, 2022: | | | | | | | | |
March 31, 2023: | | March 31, 2023: | | | | | | | |
U.S. Treasuries | U.S. Treasuries | $ | 35,741 | | | $ | — | | | $ | 1,390 | | | $ | 34,351 | | U.S. Treasuries | $ | 35,886 | | | $ | — | | | $ | 894 | | | $ | 34,992 | |
U.S. Government agency obligations | U.S. Government agency obligations | 405,428 | | | 140 | | | 37,885 | | | 367,683 | | U.S. Government agency obligations | 444,962 | | | 805 | | | 30,703 | | | 415,064 | |
Residential mortgage-backed securities | Residential mortgage-backed securities | 109,693 | | | 15 | | | 11,887 | | | 97,821 | | Residential mortgage-backed securities | 102,616 | | | 13 | | | 10,363 | | | 92,266 | |
Commercial mortgage-backed securities | Commercial mortgage-backed securities | 13,846 | | | — | | | 1,808 | | | 12,038 | | Commercial mortgage-backed securities | 13,778 | | | — | | | 1,540 | | | 12,238 | |
Asset-backed securities | Asset-backed securities | 11,094 | | | 137 | | | 144 | | | 11,087 | | Asset-backed securities | 9,470 | | | 58 | | | 137 | | | 9,391 | |
Corporate investments | Corporate investments | 49,000 | | | — | | | 4,091 | | | 44,909 | | Corporate investments | 52,959 | | | — | | | 5,980 | | | 46,979 | |
State and political subdivisions | State and political subdivisions | 50,437 | | | 2 | | | 3,670 | | | 46,769 | | State and political subdivisions | 50,227 | | | 154 | | | 1,730 | | | 48,651 | |
Total available for sale | Total available for sale | $ | 675,239 | | | $ | 294 | | | $ | 60,875 | | | $ | 614,658 | | Total available for sale | $ | 709,898 | | | $ | 1,030 | | | $ | 51,347 | | | $ | 659,581 | |
| December 31, 2021: | | |
December 31, 2022: | | December 31, 2022: | |
U.S. Treasuries | | U.S. Treasuries | $ | 35,814 | | | $ | — | | | $ | 1,235 | | | $ | 34,579 | |
U.S. Government agency obligations | U.S. Government agency obligations | $ | 354,774 | | | $ | 256 | | | $ | 4,780 | | | $ | 350,250 | | U.S. Government agency obligations | 414,251 | | | 246 | | | 35,761 | | | 378,736 | |
Residential mortgage-backed securities | Residential mortgage-backed securities | 107,772 | | | 2,312 | | | 297 | | | 109,787 | | Residential mortgage-backed securities | 105,580 | | | 13 | | | 11,461 | | | 94,132 | |
Commercial mortgage-backed securities | Commercial mortgage-backed securities | 14,286 | | | 41 | | | 51 | | | 14,276 | | Commercial mortgage-backed securities | 13,812 | | | — | | | 1,742 | | | 12,070 | |
Asset backed securities | Asset backed securities | 12,730 | | | 421 | | | 44 | | | 13,107 | | Asset backed securities | 10,289 | | | 54 | | | 123 | | | 10,220 | |
Corporate investments | Corporate investments | 43,500 | | | 1,138 | | | 128 | | | 44,510 | | Corporate investments | 51,000 | | | — | | | 4,967 | | | 46,033 | |
State and political subdivisions | State and political subdivisions | 43,596 | | | 1,200 | | | 112 | | | 44,684 | | State and political subdivisions | 50,530 | | | 77 | | | 2,457 | | | 48,150 | |
Total available for sale | Total available for sale | $ | 576,658 | | | $ | 5,368 | | | $ | 5,412 | | | $ | 576,614 | | Total available for sale | $ | 681,276 | | | $ | 390 | | | $ | 57,746 | | | $ | 623,920 | |
Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
The following is a summary of the amortized cost and fair value of securities held to maturity.
| | | Amortized | | Gross Unrealized | | Fair | | Amortized | | Gross Unrealized | | Fair |
(In thousands) | (In thousands) | Cost | | Gains | | Losses | | Value | (In thousands) | Cost | | Gains | | Losses | | Value |
September 30, 2022: | | | | | | | | |
March 31, 2023: | | March 31, 2023: | | | | | | | |
States and political subdivisions | States and political subdivisions | $ | 65,889 | | | $ | — | | | $ | 384 | | | $ | 65,505 | | States and political subdivisions | $ | 61,262 | | | $ | 11 | | | $ | 129 | | | $ | 61,144 | |
Total held to maturity | Total held to maturity | $ | 65,889 | | | $ | — | | | $ | 384 | | | $ | 65,505 | | Total held to maturity | $ | 61,262 | | | $ | 11 | | | $ | 129 | | | $ | 61,144 | |
| December 31, 2021: | | |
December 31, 2022: | | December 31, 2022: | |
States and political subdivisions | States and political subdivisions | $ | 71,648 | | | $ | 436 | | | $ | — | | | $ | 72,084 | | States and political subdivisions | $ | 62,274 | | | $ | — | | | $ | 206 | | | $ | 62,068 | |
Total held to maturity | Total held to maturity | $ | 71,648 | | | $ | 436 | | | $ | — | | | $ | 72,084 | | Total held to maturity | $ | 62,274 | | | $ | — | | | $ | 206 | | | $ | 62,068 | |
All mortgage-backed securities in the above tables were issued or guaranteed by U.S. government agencies or sponsored agencies.agencies, with no allowance for credit losses.
Provided below is a summary of investment securities that were in an unrealized loss position and the length of time that individual securities have been in a continuous loss position.
| | | Less Than 12 Months | | 12 Months or More | | Total | | Less Than 12 Months | | 12 Months or More | | Total |
| | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
(In thousands) | (In thousands) | | (In thousands) | |
September 30, 2022: | | | | | | | | | | | | |
March 31, 2023: | | March 31, 2023: | | | | | | | | | | | |
Available for sale: | Available for sale: | | Available for sale: | |
U.S. Treasuries | U.S. Treasuries | $ | 34,351 | | | $ | 1,390 | | | $ | — | | | $ | — | | | 34,351 | | | $ | 1,390 | | U.S. Treasuries | $ | 4,898 | | | $ | 47 | | | $ | 30,094 | | | $ | 847 | | | $ | 34,992 | | | $ | 894 | |
U.S. Government agencies | U.S. Government agencies | 149,098 | | | 13,997 | | | 214,034 | | | 23,888 | | | 363,132 | | | 37,885 | | U.S. Government agencies | 19,303 | | | 484 | | | 349,846 | | | 30,219 | | | 369,149 | | | 30,703 | |
Residential mortgage-backed securities | Residential mortgage-backed securities | 86,999 | | | 9,799 | | | 8,740 | | | 2,088 | | | 95,739 | | | 11,887 | | Residential mortgage-backed securities | 26,160 | | | 2,496 | | | 64,977 | | | 7,867 | | | 91,137 | | | 10,363 | |
Commercial mortgage-backed securities | Commercial mortgage-backed securities | 9,412 | | | 1,266 | | | 2,626 | | | 542 | | | 12,038 | | | 1,808 | | Commercial mortgage-backed securities | — | | | — | | | 12,238 | | | 1,540 | | | 12,238 | | | 1,540 | |
Asset backed securities | Asset backed securities | 1,909 | | | 75 | | | 1,831 | | | 69 | | | 3,740 | | | 144 | | Asset backed securities | 3,199 | | | 10 | | | 3,210 | | | 127 | | | 6,409 | | | 137 | |
Corporate investments | Corporate investments | 40,379 | | | 3,622 | | | 4,530 | | | 469 | | | 44,909 | | | 4,091 | | Corporate investments | 18,443 | | | 1,515 | | | 28,536 | | | 4,465 | | | 46,979 | | | 5,980 | |
States and political subdivisions | States and political subdivisions | 40,406 | | | 2,939 | | | 4,542 | | | 731 | | | 44,948 | | | 3,670 | | States and political subdivisions | 22,312 | | | 400 | | | 17,187 | | | 1,330 | | | 39,499 | | | 1,730 | |
| | $ | 362,554 | | | $ | 33,088 | | | $ | 236,303 | | | $ | 27,787 | | | 598,857 | | | $ | 60,875 | | | $ | 94,315 | | | $ | 4,952 | | | $ | 506,088 | | | $ | 46,395 | | | $ | 600,403 | | | $ | 51,347 | |
| Held to maturity: | Held to maturity: | | Held to maturity: | |
States and political subdivisions | States and political subdivisions | $ | 9,758 | | | $ | 384 | | | $ | — | | | $ | — | | | 9,758 | | | $ | 384 | | States and political subdivisions | $ | 3,984 | | | $ | 59 | | | $ | 3,690 | | | $ | 70 | | | $ | 7,674 | | | $ | 129 | |
| | $ | 9,758 | | | $ | 384 | | | $ | — | | | $ | — | | | 9,758 | | | $ | 384 | | | $ | 3,984 | | | $ | 59 | | | $ | 3,690 | | | $ | 70 | | | $ | 7,674 | | | $ | 129 | |
| December 31, 2021: | | |
December 31, 2022: | | December 31, 2022: | |
Available for sale: | Available for sale: | | Available for sale: | |
U.S. Treasuries | | U.S. Treasuries | $ | 34,579 | | | $ | 1,235 | | | $ | — | | | $ | — | | | $ | 34,579 | | | $ | 1,235 | |
U.S. Government agencies | U.S. Government agencies | $ | 314,614 | | | $ | 4,780 | | | $ | — | | | $ | — | | | 314,614 | | | $ | 4,780 | | U.S. Government agencies | 78,676 | | | 4,830 | | | 285,994 | | | 30,931 | | | 364,670 | | | 35,761 | |
Residential mortgage-backed securities | Residential mortgage-backed securities | 15,216 | | | 297 | | | — | | | — | | | 15,216 | | | 297 | | Residential mortgage-backed securities | 81,992 | | | 8,935 | | | 11,258 | | | 2,526 | | | 93,250 | | | 11,461 | |
Commercial mortgage-backed securities | Commercial mortgage-backed securities | 8,376 | | | 51 | | | — | | | — | | | 8,376 | | | 51 | | Commercial mortgage-backed securities | 4,860 | | | 594 | | | 7,210 | | | 1,148 | | | 12,070 | | | 1,742 | |
Asset backed securities | Asset backed securities | 2,272 | | | 8 | | | 2,192 | | | 36 | | | 4,464 | | | 44 | | Asset backed securities | 1,169 | | | 7 | | | 3,499 | | | 116 | | | 4,668 | | | 123 | |
Corporate investments | Corporate investments | 11,372 | | | 128 | | | — | | | — | | | 11,372 | | | 128 | | Corporate investments | 36,958 | | | 4,042 | | | 7,076 | | | 925 | | | 44,034 | | | 4,967 | |
States and political subdivisions | States and political subdivisions | 6,117 | | | 112 | | | — | | | — | | | 6,117 | | | 112 | | States and political subdivisions | 36,655 | | | 1,781 | | | 5,084 | | | 676 | | | 41,739 | | | 2,457 | |
| | $ | 357,967 | | | $ | 5,376 | | | $ | 2,192 | | | $ | 36 | | | 360,159 | | | $ | 5,412 | | | $ | 274,889 | | | $ | 21,424 | | | $ | 320,121 | | | $ | 36,322 | | | $ | 595,010 | | | $ | 57,746 | |
| Held to maturity: | | Held to maturity: | |
States and political subdivisions | | States and political subdivisions | $ | 9,259 | | | $ | 206 | | | $ | — | | | $ | — | | | $ | 9,259 | | | $ | 206 | |
| | | $ | 9,259 | | | $ | 206 | | | $ | — | | | $ | — | | | $ | 9,259 | | | $ | 206 | |
The number of debt securities in an unrealized loss position increaseddecreased from 82359 at December 31, 20212022 to 344340 at September 30, 2022.March 31, 2023. The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases, which may be
at maturity, the Company does not consider these investments to be impaired on an other-than-temporary basis at September 30, 2022.March 31, 2023.
The amortized cost and fair value of debt securities, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers have the right to call or prepay certain obligations with, or without, call or prepayment penalties.
| | | | | | | | | | | | | | | | | | | | | | | |
| Available for Sale | | Held to Maturity |
| Amortized | | Fair | | Amortized | | Fair |
(In thousands) | Cost | | Value | | Cost | | Value |
September 30, 2022: | | | | | | | |
One year or less | $ | 34,491 | | | $ | 33,739 | | | $ | 7,868 | | | $ | 7,851 | |
After one through five years | 363,116 | | | 334,048 | | | 47,439 | | | 47,155 | |
After five through ten years | 153,343 | | | 134,894 | | | 8,372 | | | 8,289 | |
After ten years | 124,289 | | | 111,977 | | | 2,210 | | | 2,210 | |
| $ | 675,239 | | | $ | 614,658 | | | $ | 65,889 | | | $ | 65,505 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Available for Sale | | Held to Maturity |
| Amortized | | Fair | | Amortized | | Fair |
(In thousands) | Cost | | Value | | Cost | | Value |
March 31, 2023: | | | | | | | |
One year or less | $ | 106,679 | | | $ | 104,245 | | | $ | 6,974 | | | $ | 6,955 | |
After one through five years | 343,910 | | | 322,010 | | | 46,198 | | | 46,110 | |
After five through ten years | 146,387 | | | 130,851 | | | 6,450 | | | 6,439 | |
After ten years | 112,922 | | | 102,475 | | | 1,640 | | | 1,640 | |
| $ | 709,898 | | | $ | 659,581 | | | $ | 61,262 | | | $ | 61,144 | |
The following is a summary of the amortized cost and fair value for investment securities which were pledged to secure public deposits and for other purposes required or permitted by law.
| | | | | | | | | | | | | | | | | | | | | | | |
| Available for Sale | | Held to Maturity |
| Amortized | | Fair | | Amortized | | Fair |
(In thousands) | Cost | | Value | | Cost | | Value |
September 30, 2022 | $ | 436,693 | | | $ | 393,434 | | | $ | 35,755 | | | $ | 35,433 | |
| | | | | | | |
December 31, 2021 | $ | 451,402 | | | $ | 450,480 | | | $ | 38,704 | | | $ | 39,102 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Available for Sale | | Held to Maturity |
| Amortized | | Fair | | Amortized | | Fair |
(In thousands) | Cost | | Value | | Cost | | Value |
March 31, 2023 | $ | 620,381 | | | $ | 576,828 | | | $ | 31,678 | | | $ | 31,569 | |
| | | | | | | |
December 31, 2022 | $ | 492,206 | | | $ | 451,638 | | | $ | 35,734 | | | $ | 35,562 | |
The Company monitors the credit quality of held-to-maturity debt securities through the use of credit ratings. The Company monitors the credit rating on a quarterly basis. The following table summarizes the amortized cost basis of held-to-maturity debt securities at March 31, 2023 by credit rating:
| | | | | | | | |
(In thousands) | | March 31, 2023 |
State and political subdivisions held-to-maturity: | | |
S&P: AA+, AA, AA- / Moody's: Aa1, Aa2, Aa3 | | $ | 5,981 | |
S&P: A+, A, A- / Moody's: A1, A2, A3 | | 1,083 | |
S&P: BBB+, BBB, BBB- / Moody's: Baa, Ba, B | | 495 | |
Not rated | | 53,703 | |
| | $ | 61,262 | |
Note 5: Loans
The following is a summary of the Company’s loan portfolio by loan class.
| (In thousands) | (In thousands) | September 30, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Secured by real estate: | Secured by real estate: | | | | Secured by real estate: | | | |
Residential properties | Residential properties | $ | 1,311,672 | | | $ | 774,699 | | Residential properties | $ | 1,429,332 | | | $ | 1,403,974 | |
Construction and land development | Construction and land development | 945,639 | | | 543,763 | | Construction and land development | 809,390 | | | 772,357 | |
Farmland | Farmland | 273,575 | | | 211,503 | | Farmland | 288,970 | | | 283,832 | |
Other commercial | Other commercial | 2,145,785 | | | 1,396,085 | | Other commercial | 2,525,887 | | | 2,467,216 | |
Total real estate | Total real estate | 4,676,671 | | | 2,926,050 | | Total real estate | 5,053,579 | | | 4,927,379 | |
Commercial and industrial loans | Commercial and industrial loans | 664,439 | | | 527,102 | | Commercial and industrial loans | 718,740 | | | 706,466 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 90,647 | | | 86,520 | | Agricultural production and other loans to farmers | 75,509 | | | 80,770 | |
Consumer and other loans | Consumer and other loans | 118,011 | | | 79,500 | | Consumer and other loans | 104,039 | | | 109,534 | |
Total loans before allowance for loan losses | $ | 5,549,768 | | | $ | 3,619,172 | | |
Total loans before allowance for credit losses | | Total loans before allowance for credit losses | $ | 5,951,867 | | | $ | 5,824,149 | |
Loans are stated at the amount of unpaid principal net of discounts and premiums on acquired loans, before allowance for loancredit losses. Interest on loans is calculated using the simple interest method on daily balances of the principal amount outstanding.
Loan Origination/Risk Management/Credit Concentration – The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. The Company’s Board of Directors reviews and approves these policies and procedures on a regular basis. Although the Company has a diversified loan portfolio, the Company has concentrations of credit risks related to the real estate market, including residential, commercial, and construction and land development lending. Most of the Company’s lending activity occurs within Mississippi, Louisiana, Alabama, and Florida.
The risk characteristics of the Company’s material portfolio segments are as follows:
Residential Real Estate Loans – The residential real estate loan portfolio consists of residential loans for single and multifamily properties. Residential loans are generally secured by owner occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers and can be impacted by economic conditions within their market area. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
Commercial Real Estate Loans – Commercial real estate loans include construction and land development loans, loans secured by farmland and other commercial real estate loans.
Construction and land development loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing.
Farmland loans are generally made for the purpose of acquiring land devoted to crop production or livestock, the propagation of timber or the operation of a similar type of business on the secured property. Sources of repayment for these loans generally include income generated from operations of a business on the property, rental income, or sales of timber. Repayment may be impacted by changes in economic conditions which affect underlying collateral values.
Commercial real estate loans typically involve larger principal amounts and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria.
Commercial and Industrial Loans – The commercial and industrial loan portfolio consists of loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchase or other expansion projects. Commercial loan underwriting standards are designed to promote relationship banking rather than transactional banking and are underwritten based on the borrower’s expected ability to profitably operate its business. The cash flows of borrowers, however, may not be as expected and collateral securing these loans may fluctuate in value. Most commercial loans are secured by assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Consumer and Other Loans – The consumer and other loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower.
Loans that are 30 days or more past due based on payments received and applied to the loan are considered delinquent. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that a borrower's financial condition is such that collection of interest, but not necessarily principal, is doubtful. A loan is typically placed on non-accrual when the contractual payment of principal or interest becomes 90 days past due unless the loan is well-secured and in the process of collection. Loans may be placed on non-accrual status regardless of whether or not such loans
are considered past due. Current year interest previously recorded, but deemed not collectible, is reversed and charged against current year income. Prior year interest previously recorded, but deemed not collectible, is charged against the allowance.
Payments subsequently received on non-accrual loans are applied to principal. Interest income is recognized to the extent that cash payments are received in excess of principal due. A loan may return to accrual status when principal and interest payments are no longer past due and collectability is reasonably assured.
The following table presents the recorded investment inamortized cost basis of nonaccrual loans, segregated by class.class as of March 31, 2023.
| (In thousands) | (In thousands) | September 30, 2022 | | December 31, 2021 | (In thousands) | Total Nonaccrual | | Nonaccrual with no Allowance for Credit Loss | | Past Due 90 days or more and Accruing |
Secured by real estate: | Secured by real estate: | | | | Secured by real estate: | | | | | |
Residential properties | Residential properties | $ | 2,902 | | | $ | 3,154 | | Residential properties | $ | 2,585 | | | $ | — | | | $ | 1,497 | |
Construction and land development | Construction and land development | 30 | | | 51 | | Construction and land development | — | | | — | | | — | |
Farmland | Farmland | 960 | | | 1,327 | | Farmland | 1,434 | | | — | | | 158 | |
Other commercial | Other commercial | 1,502 | | | 1,176 | | Other commercial | 1,795 | | | — | | | 175 | |
Total real estate | Total real estate | 5,394 | | | 5,708 | | Total real estate | 5,814 | | | — | | | 1,830 | |
Commercial and industrial loans | Commercial and industrial loans | 759 | | | 20 | | Commercial and industrial loans | 201 | | | — | | | 204 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | — | | | 3 | | Agricultural production and other loans to farmers | — | | | — | | | — | |
Consumer and other loans | Consumer and other loans | 26 | | | 166 | | Consumer and other loans | — | | | — | | | 946 | |
Total nonaccrual loans | $ | 6,179 | | | $ | 5,897 | | |
Total | | Total | $ | 6,015 | | | $ | — | | | $ | 2,980 | |
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 three months ended March 31, 2023, there were no significant changes to the collateral which secures the collateral-dependent loans, whether due to general deterioration or other reason. The following table presents the amortized cost basis of collateral-dependent loans by class and collateral type as of March 31, 2023.
| | | | | | | | | | | | | | | | | |
(In thousands) | Real Estate | | Enterprise Value | | Accounts Receivable & Inventory |
Secured by real estate: | | | | | |
Residential properties | $ | — | | | $ | — | | | $ | — | |
Construction and land development | — | | | — | | | — | |
Farmland | — | | | — | | | — | |
Other commercial | 1,433 | | | 1,554 | | | — | |
Total real estate | 1,433 | | | 1,554 | | | — | |
Commercial and industrial loans | — | | | — | | | 9,099 | |
Agricultural production and other loans to farmers | — | | | — | | | — | |
Consumer loans | — | | | — | | | — | |
Total | $ | 1,433 | | | $ | 1,554 | | | $ | 9,099 | |
An age analysis of past due loans (including both accruing and non-accruing loans) segregated by class of loans is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Past Due 30-89 Days | | Past Due 90 Days or More | | Total Past Due | | Current | | Total Loans | | Past Due 90 Days or More and Accruing |
September 30, 2022 | | | | | | | | | | | |
Secured by real estate: | | | | | | | | | | | |
Residential properties | $ | 6,833 | | | $ | 1,674 | | | $ | 8,507 | | | $ | 1,303,165 | | | $ | 1,311,672 | | | $ | 829 | |
Construction and land development | 194 | | | 66 | | | 260 | | | 945,379 | | | 945,639 | | | 66 | |
Farmland | 313 | | | 1,039 | | | 1,352 | | | 272,223 | | | 273,575 | | | 75 | |
Other commercial | 819 | | | 916 | | | 1,735 | | | 2,144,050 | | | 2,145,785 | | | 287 | |
Total real estate | 8,159 | | | 3,695 | | | 11,854 | | | 4,664,817 | | | 4,676,671 | | | 1,257 | |
Commercial and industrial loans | 1,444 | | | 174 | | | 1,618 | | | 662,821 | | | 664,439 | | | 107 | |
Agricultural production and other loans to farmers | 181 | | | 168 | | | 349 | | | 90,298 | | | 90,647 | | | 168 | |
Consumer loans | 909 | | | 52 | | | 961 | | | 117,050 | | | 118,011 | | | 26 | |
Total | $ | 10,693 | | | $ | 4,089 | | | $ | 14,782 | | | $ | 5,534,986 | | | $ | 5,549,768 | | | $ | 1,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Past Due 30-89 Days | | Past Due 90 Days or More | | Total Past Due | | Current | | Total Loans | | Past Due 90 Days or More and Accruing |
December 31, 2021 | | | | | | | | | | | |
Secured by real estate: | | | | | | | | | | | |
Residential properties | $ | 4,537 | | | $ | 2,032 | | | $ | 6,569 | | | $ | 768,130 | | | $ | 774,699 | | | $ | 865 | |
Construction and land development | 367 | | | 1,085 | | | 1,452 | | | 542,311 | | | 543,763 | | | 1,085 | |
Farmland | 600 | | | 425 | | | 1,025 | | | 210,478 | | | 211,503 | | | 30 | |
Other commercial | 1,589 | | | 1,118 | | | 2,707 | | | 1,393,378 | | | 1,396,085 | | | 212 | |
Total real estate | 7,093 | | | 4,660 | | | 11,753 | | | 2,914,297 | | | 2,926,050 | | | 2,192 | |
Commercial and industrial loans | 824 | | | 623 | | | 1,447 | | | 525,655 | | | 527,102 | | | 606 | |
Agricultural production and other loans to farmers | 311 | | | 32 | | | 343 | | | 86,177 | | | 86,520 | | | 32 | |
Consumer loans | 374 | | | 250 | | | 624 | | | 78,876 | | | 79,500 | | | 84 | |
Total | $ | 8,602 | | | $ | 5,565 | | | $ | 14,167 | | | $ | 3,605,005 | | | $ | 3,619,172 | | | $ | 2,914 | |
Impaired Loans – Impaired loans include nonperforming loans, loans modified in troubled debt restructurings (“TDRs”) where concessions have been granted to borrowers experiencing financial difficulties, and certain other loans identified by management.
Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan loss. Impaired loans, or portions thereof, are charged-off when deemed uncollectible.
Impaired loans, segregated by class were as follows:
| | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Principal | | Recorded | | Related |
(In thousands) | Balance | | Balance (1) | | Allowance |
Impaired loans with no related allowance: | | | | | |
Secured by real estate: | | | | | |
Residential properties | $ | 7,255 | | | $ | 4,752 | | | $ | — | |
Construction and land development | 2,273 | | | 908 | | | — | |
Farmland | 1,387 | | | 969 | | | — | |
Other commercial | 8,372 | | | 7,250 | | | — | |
Total real estate | 19,287 | | | 13,879 | | | — | |
Commercial and industrial | 15,173 | | | 11,710 | | | — | |
Agricultural production and other loans to farmers | 36 | | | — | | | — | |
Consumer and other loans | 276 | | | 53 | | | — | |
Total | $ | 34,772 | | | $ | 25,642 | | | $ | — | |
| | | | | |
Impaired loans with related allowance: | | | | | |
Secured by real estate: | | | | | |
Residential properties | $ | 800 | | | $ | 800 | | | $ | 7 | |
Construction and land development | — | | | — | | | — | |
Farmland | — | | | — | | | — | |
Other commercial | — | | | — | | | — | |
Total real estate | 800 | | | 800 | | | 7 | |
Commercial and industrial | — | | | — | | | — | |
Agricultural production and other loans to farmers | — | | | — | | | — | |
Consumer and other loans | — | | | — | | | — | |
Total | 800 | | | 800 | | | 7 | |
Total impaired loans | $ | 35,572 | | | $ | 26,442 | | | $ | 7 | |
(1) Recorded balance represents the carrying value – the contractual principal obligation due from the customer less charge offs and payments applied.
| | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Principal | | Recorded | | Related |
(In thousands) | Balance | | Balance (1) | | Allowance |
Impaired loans with no related allowance: | | | | | |
Secured by real estate: | | | | | |
Residential properties | $ | 7,667 | | | $ | 5,034 | | | $ | — | |
Construction and land development | 3,615 | | | 1,649 | | | — | |
Farmland | 3,413 | | | 2,859 | | | — | |
Other commercial | 2,671 | | | 1,300 | | | — | |
Total real estate | 17,366 | | | 10,842 | | | — | |
Commercial and industrial | 17,528 | | | 17,300 | | | — | |
Agricultural production and other loans to farmers | 105 | | | 15 | | | — | |
Consumer and other loans | 249 | | | 166 | | | — | |
Total | $ | 35,248 | | | $ | 28,323 | | | $ | — | |
| | | | | |
Impaired loans with related allowance: | | | | | |
Secured by real estate: | | | | | |
Residential properties | $ | 813 | | | $ | 813 | | | $ | 9 | |
Construction and land development | — | | | — | | | — | |
Farmland | — | | | — | | | — | |
Other commercial | 1,906 | | | 1,906 | | | 304 | |
Total real estate | 2,719 | | | 2,719 | | | 313 | |
Commercial and industrial | 4,542 | | | 4,542 | | | 1,701 | |
Agricultural production and other loans to farmers | — | | | — | | | — | |
Consumer and other loans | — | | | — | | | — | |
Total | 7,261 | | | 7,261 | | | 2,014 | |
Total impaired loans | $ | 42,509 | | | $ | 35,584 | | | $ | 2,014 | |
(1)Recorded balance represents the carrying value – the contractual principal obligation due from the customer less charge-offs and payments applied.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Past Due 30-89 Days | | Past Due 90 Days or More | | Total Past Due | | Current | | Total Loans |
March 31, 2023 | | | | | | | | | |
Secured by real estate: | | | | | | | | | |
Residential properties | $ | 6,188 | | | $ | 2,668 | | | $ | 8,856 | | | $ | 1,420,476 | | | $ | 1,429,332 | |
Construction and land development | 216 | | | — | | | 216 | | | 809,174 | | | 809,390 | |
Farmland | 468 | | | 1,601 | | | 2,069 | | | 286,901 | | | 288,970 | |
Other commercial | 1,393 | | | 1,061 | | | 2,454 | | | 2,523,433 | | | 2,525,887 | |
Total real estate | 8,265 | | | 5,330 | | | 13,595 | | | 5,039,984 | | | 5,053,579 | |
Commercial and industrial loans | 755 | | | 370 | | | 1,125 | | | 717,615 | | | 718,740 | |
Agricultural production and other loans to farmers | 93 | | | — | | | 93 | | | 75,416 | | | 75,509 | |
Consumer loans | 906 | | | 946 | | | 1,852 | | | 102,187 | | | 104,039 | |
Total | $ | 10,019 | | | $ | 6,646 | | | $ | 16,665 | | | $ | 5,935,202 | | | $ | 5,951,867 | |
The average recorded investment and
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Past Due 30-89 Days | | Past Due 90 Days or More | | Total Past Due | | Current | | Total Loans |
December 31, 2022 | | | | | | | | | |
Secured by real estate: | | | | | | | | | |
Residential properties | $ | 5,869 | | | $ | 2,015 | | | $ | 7,884 | | | $ | 1,396,090 | | | $ | 1,403,974 | |
Construction and land development | 526 | | | 1,578 | | | 2,104 | | | 770,253 | | | 772,357 | |
Farmland | 566 | | | 1,391 | | | 1,957 | | | 281,875 | | | 283,832 | |
Other commercial | 1,498 | | | 774 | | | 2,272 | | | 2,464,944 | | | 2,467,216 | |
Total real estate | 8,459 | | | 5,758 | | | 14,217 | | | 4,913,162 | | | 4,927,379 | |
Commercial and industrial loans | 902 | | | 677 | | | 1,579 | | | 704,887 | | | 706,466 | |
Agricultural production and other loans to farmers | 126 | | | — | | | 126 | | | 80,644 | | | 80,770 | |
Consumer loans | 1,530 | | | 697 | | | 2,227 | | | 107,307 | | | 109,534 | |
Total | $ | 11,017 | | | $ | 7,132 | | | $ | 18,149 | | | $ | 5,806,000 | | | $ | 5,824,149 | |
Modifications to Borrowers Experiencing Financial Difficulty –From time to time, the Company may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, interest recognized for impaired loans forrate reduction, term extension, other-than-significant payment delay or a combination thereof, among other things. During both of the ninethree months ended September 30,March 31, 2023 and 2022, and 2021 are presented below. | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2022 | | 2021 |
| Average | | Interest | | Average | | Interest |
(In thousands) | Investment | | Recognized | | Investment | | Recognized |
Secured by real estate: | | | | | | | |
Residential properties | $ | 5,034 | | | $ | 47 | | | $ | 6,123 | | | $ | 42 | |
Construction and land development | 881 | | | 22 | | | 1,139 | | | 23 | |
Farmland | 965 | | | — | | | 11,150 | | | 104 | |
Other commercial | 6,066 | | | 68 | | | 5,046 | | | 14 | |
Total real estate | 12,946 | | | 137 | | | 23,458 | | | 183 | |
Commercial and industrial | 12,165 | | | 282 | | | 21,728 | | | 281 | |
Agricultural production and other loans to farmers | 5 | | | 1 | | | 146 | | | 3 | |
Consumer loans | 45 | | | — | | | 210 | | | — | |
Total | $ | 25,161 | | | $ | 420 | | | $ | 45,542 | | | $ | 467 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
| Average | | Interest | | Average | | Interest |
(In thousands) | Investment | | Recognized | | Investment | | Recognized |
Secured by real estate: | | | | | | | |
Residential properties | $ | 5,274 | | | $ | 66 | | | $ | 6,489 | | | $ | 106 | |
Construction and land development | 1,221 | | | 77 | | | 2,107 | | | 80 | |
Farmland | 1,838 | | | — | | | 10,452 | | | 356 | |
Other commercial | 5,239 | | | 131 | | | 6,827 | | | 129 | |
Total real estate | 13,572 | | | 274 | | | 25,875 | | | 671 | |
Commercial and industrial | 14,936 | | | 506 | | | 20,076 | | | 753 | |
Agricultural production and other loans to farmers | 9 | | | 1 | | | 94 | | | 3 | |
Consumer loans | 64 | | | — | | | 191 | | | — | |
Total | $ | 28,581 | | | $ | 781 | | | $ | 46,236 | | | $ | 1,427 | |
Therethere were no modifications classified as TDRs for the nine months ended September 30, 2022 or 2021. Although there were additional modifications of terms on some loans, the prevailing modifications during the reported periods were related to converting the loans to interest only for a period of time, reductions in the interest rates, and/or extensions of payment dates or maturity dates. Because the majority of these loans were classified as impaired loans before restructuring, the modifications did not materially impact the Company’s determination of the allowance for loan losses. The allowance for loan losses attributable to restructured loans was $7,000 and $139,000 at September 30, 2022 and December 31, 2021, respectively.borrowers experiencing financial difficulty.
Note 6: Allowance for LoanCredit Losses
On January 1, 2023, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as CECL. See Note 1, Basis of Presentation. As a result of implementing CECL, there was a one-time adjustment to the 2023 opening allowance balance of approximately $20.7 million.
As management evaluates the allowance for loancredit losses, it is categorized as follows: (1) specific allocations; (2) allocations for classified assets with no specific allowance, based on historical loan experience for similar loans with similar characteristics, adjusted as necessary, to reflect the impact of current conditions; and (3) general allocations for each major loan category for loans not individually evaluated or deemed impairedcollateral-dependent or classified, segmented by loan class based on historical loss experience and other risk factors. In assessing general economic conditions, management monitors several factors, including regional and national economic conditions, real estate market conditions and recently enacted regulations with potential economic effects.
Credit Quality Indicators – The Company utilizes a risk grading matrix to assign a grade to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 10. A description of the general characteristics of the 10 risk ratings is as follows:
•Risk Grades 1, 2, 3, 4 and 5 – These grades include loans to borrowers of solid credit quality with no higher than normal risk of loss. Borrowers in these categories have satisfactory financial strength and adequate cash flow coverage to service debt requirements. Collateral type and quality, as well as protection, are adequate. The borrower’s management is strong and capable, financial information is timely and accurate, and guarantor support is strong.
•Risk Grade 6 – Pass and Watch – Loans in this category are currently protected, but risks are emerging that warrant more than normal attention and have above average risk of loss. These factors require a higher level of monitoring and may include emerging balance sheet weaknesses, strained liquidity, increased leverage ratio, and weakening management. Collateral support is less marketable or limited use and, although the protection is sufficient, the loan-to-value ratio may not meet policy guidelines. Guarantors may have a limited ability and willingness to provide intermediate support. Also, considerations surrounding industry deterioration, increased competition and minor policy exceptions concerning structure or amortization may affect the rating of these loans.
•Risk Grade 7 – Special Mention – The Company’s special mention rating is intended to closely align with the regulatory definition. A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of repayment prospects. These weaknesses may include deteriorating balance sheets, strained liquidity and elevated leverage ratios. Cash flow and profitability are marginally sufficient to service debt and collateral is exhibiting signs of decline in value; however, protection is currently sufficient. Limited management experience or weaknesses have emerged requiring more than normal supervision and uncertainties regarding the quality of the financials are not explained. Guarantor has very limited ability and willingness to provide short-term support. Moderate policy exceptions concerning structure or amortization may be considered in order to provide relief to the borrower. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.
•Risk Grade 8 – Substandard – A loan in this category is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. Factors affecting these loans may include balance sheet deterioration that has resulted in illiquid, highly leveraged or deficit net worth, cash flow that is not able to service debts as structured, collateral protection that may be inadequate, guarantor support that may be virtually non-existent, and management that is poor. Loans may require a major policy exception concerning structure or amortization. They are characterized by the distinct possibility that the Company will incur some loss if the deficiencies are not corrected.
•Risk Grade 9 – Doubtful – Loans classified 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.
•Risk Grade 10 – Loss – Loans are considered uncollectible and of such little value that continuing to carry them as an active asset is not warranted. It does not mean that there will be no recovery, but, rather, it is not practical or desirable to defer writing off these assets even though a partial recovery may be possible in the future.
Pass loans for the Company include loans in Risk Grades 1 - 6. Classified loans for the Company include loans in Risk Grades 8, 9 and 10. Loans may be classified but not considered impaired,individually evaluated or collateral-dependent, due to one of the following reasons: (i) the loan falls below the established minimum dollar thresholds for loan impairment testingindividual evaluation or (ii) the loan was tested for impairment,individually evaluated, but not deemed to be impaired.collateral-dependent.
The following table reflects loans by credit quality indicator and origination year at March 31, 2023. Loans acquired are shown in the table by origination year. The Company had an immaterial amount of revolving loans converted to term loans at March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
(Dollars in thousands) | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
Residential real estate: | | | | | | | | | | | | | | | |
Pass | $ | 56,509 | | | $ | 458,488 | | | $ | 343,007 | | | $ | 142,538 | | | $ | 58,061 | | | $ | 105,708 | | | $ | 250,166 | | | $ | 1,414,477 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Classified | 31 | | | 946 | | | 2,241 | | | 3,087 | | | 1,629 | | | 5,756 | | | 1,165 | | | 14,855 | |
Total residential real estate | $ | 56,540 | | | $ | 459,434 | | | $ | 345,248 | | | $ | 145,625 | | | $ | 59,690 | | | $ | 111,464 | | | $ | 251,331 | | | $ | 1,429,332 | |
Current period gross write offs | $ | — | | | $ | — | | | $ | — | | | $ | 32 | | | $ | — | | | $ | 140 | | | $ | 1 | | | $ | 173 | |
| | | | | | | | | | | | | | | |
Construction & land development: | | | | | | | | | | | | | | | 0 |
Pass | $ | 18,762 | | | $ | 73,087 | | | $ | 18,267 | | | $ | 6,838 | | | $ | 7,244 | | | $ | 6,891 | | | $ | 675,494 | | | $ | 806,583 | |
Special mention | — | | | 43 | | | — | | | — | | | — | | | — | | | 303 | | | 346 | |
Classified | — | | | 92 | | | 10 | | | 1,003 | | | 1,017 | | | 14 | | | 325 | | | 2,461 | |
Total construction & land development | $ | 18,762 | | | $ | 73,222 | | | $ | 18,277 | | | $ | 7,841 | | | $ | 8,261 | | | $ | 6,905 | | | $ | 676,122 | | | $ | 809,390 | |
Current period gross write offs | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 7 | | | $ | — | | | $ | 7 | |
| | | | | | | | | | | | | | | |
Farmland: | | | | | | | | | | | | | | | |
Pass | $ | 11,112 | | | $ | 89,609 | | | $ | 34,157 | | | $ | 30,038 | | | $ | 16,483 | | | $ | 28,177 | | | $ | 76,107 | | | $ | 285,683 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Classified | 22 | | | 314 | | | 690 | | | — | | | 65 | | | 1,944 | | | 252 | | | 3,287 | |
Total farmland | $ | 11,134 | | | $ | 89,923 | | | $ | 34,847 | | | $ | 30,038 | | | $ | 16,548 | | | $ | 30,121 | | | $ | 76,359 | | | $ | 288,970 | |
Current period gross write offs | $ | — | | | $ | — | | | $ | 2 | | $ | — | | $ | — | | | $ | — | | | $ | 3 | | | $ | 3 | | | $ | 8 | |
| | | | | | | | | | | | | | | |
Other commercial real estate: | | | | | | | | | | | | | | | |
Pass | $ | 55,882 | | | $ | 519,426 | | | $ | 425,974 | | | $ | 270,587 | | | $ | 133,264 | | | $ | 253,147 | | | $ | 856,811 | | | $ | 2,515,091 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Classified | 23 | | | 1,719 | | | 2,332 | | | 560 | | | 1,130 | | | 3,835 | | | 1,197 | | | 10,796 | |
Total other commercial real estate | $ | 55,905 | | | $ | 521,145 | | | $ | 428,306 | | | $ | 271,147 | | | $ | 134,394 | | | $ | 256,982 | | | $ | 858,008 | | | $ | 2,525,887 | |
Current period gross write offs | $ | — | | | $ | — | | | $ | 56 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 56 | |
| | | | | | | | | | | | | | | |
Commercial & industrial loans: | | | | | | | | | | | | | | | |
Pass | $ | 42,206 | | | $ | 183,885 | | | $ | 105,343 | | | $ | 50,827 | | | $ | 31,986 | | | $ | 12,928 | | | $ | 278,751 | | | $ | 705,926 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Classified | 10 | | | 866 | | | 107 | | | 639 | | | 159 | | | 10,688 | | | 345 | | | 12,814 | |
Total commercial & industrial loans | $ | 42,216 | | | $ | 184,751 | | | $ | 105,450 | | | $ | 51,466 | | | $ | 32,145 | | | $ | 23,616 | | | $ | 279,096 | | | $ | 718,740 | |
Current period gross write offs | $ | — | | | $ | 62 | | | $ | 30 | | | $ | 2 | | | $ | 15 | | | $ | 7 | | | $ | 172 | | | $ | 288 | |
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| Term Loans Amortized Cost Basis by Origination Year | | | | |
(Dollars in thousands) | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
Agricultural production & other loans to farmers: | | | | | | | | | | | | | | | |
Pass | $ | 8,449 | | | $ | 11,311 | | | $ | 5,898 | | | $ | 4,476 | | | $ | 1,793 | | | $ | 844 | | | $ | 42,652 | | | $ | 75,423 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Classified | — | | | 7 | | | — | | | 54 | | | 12 | | | 13 | | | — | | | 86 | |
Total agricultural production & other loans to farmers | $ | 8,449 | | | $ | 11,318 | | | $ | 5,898 | | | $ | 4,530 | | | $ | 1,805 | | | $ | 857 | | | $ | 42,652 | | | $ | 75,509 | |
Current period gross write offs | $ | — | | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 8 | | | $ | 13 | |
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| | | | | | | | | | | | | | | |
Consumer & other loans: | | | | | | | | | | | | | | | |
Pass | $ | 11,498 | | | $ | 32,852 | | | $ | 9,569 | | | $ | 6,439 | | | $ | 1,441 | | | $ | 4,291 | | | $ | 36,596 | | | $ | 102,686 | |
Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Classified | — | | | 1,311 | | | 14 | | | 9 | | | 1 | | | — | | | 18 | | | 1,353 | |
Total agricultural production & other loans to farmers | $ | 11,498 | | | $ | 34,163 | | | $ | 9,583 | | | $ | 6,448 | | | $ | 1,442 | | | $ | 4,291 | | | $ | 36,614 | | | $ | 104,039 | |
Current period gross write offs | $ | 810 | | | $ | 63 | | | $ | 23 | | | $ | 31 | | | $ | 7 | | | $ | — | | | $ | 9 | | | $ | 943 | |
The following table summarizes the credit quality of the Company’s loan portfolio by loan class at December 31, 2022:
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| Risk Grades | | Risk Grade | | Risk Grade | | Risk Grade | | |
(In thousands) | 1-6 | | 7 | | 8 | | 9 | | Total |
December 31, 2022 | | | | | | | | | |
Secured by real estate: | | | | | | | | | |
Residential properties | $ | 1,391,039 | | | $ | — | | | $ | 12,852 | | | $ | 83 | | | $ | 1,403,974 | |
Construction and land development | 768,699 | | | 303 | | | 3,355 | | | — | | | 772,357 | |
Farmland | 280,522 | | | — | | | 3,310 | | | — | | | 283,832 | |
Other commercial | 2,456,708 | | | — | | | 10,384 | | | 124 | | | 2,467,216 | |
Total real estate | 4,896,968 | | | 303 | | | 29,901 | | | 207 | | | 4,927,379 | |
Commercial and industrial | 693,963 | | | — | | | 12,503 | | | — | | | 706,466 | |
Agricultural production and other loans to farmers | 80,524 | | | — | | | 246 | | | — | | | 80,770 | |
Consumer and other loans | 108,279 | | | — | | | 1,255 | | | — | | | 109,534 | |
| | | | | | | | | |
Total | $ | 5,779,734 | | | $ | 303 | | | $ | 43,905 | | | $ | 207 | | | $ | 5,824,149 | |
The allowance for credit loss represents the period indicated:estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The lifetime estimate also considers economic conditions. During the first quarter of 2023, the U.S. economy continued to experience volatility and there remains uncertainty surrounding future economic conditions as a result of supply chain disruptions, labor shortages, and the conflict in Ukraine. Although management strives to
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| Risk Grades | | Risk Grade | | Risk Grade | | Risk Grade | | |
(In thousands) | 1-6 | | 7 | | 8 | | 9 | | Total |
September 30, 2022 | | | | | | | | | |
Secured by real estate: | | | | | | | | | |
Residential properties | $ | 1,298,704 | | | $ | 26 | | | $ | 12,899 | | | $ | 43 | | | $ | 1,311,672 | |
Construction and land development | 939,982 | | | 4,107 | | | 1,550 | | | — | | | 945,639 | |
Farmland | 270,512 | | | — | | | 3,063 | | | — | | | 273,575 | |
Other commercial | 2,134,357 | | | 116 | | | 11,312 | | | — | | | 2,145,785 | |
Total real estate | 4,643,555 | | | 4,249 | | | 28,824 | | | 43 | | | 4,676,671 | |
Commercial and industrial | 651,158 | | | — | | | 13,274 | | | 7 | | | 664,439 | |
Agricultural production and other loans to farmers | 90,192 | | | — | | | 368 | | | 87 | | | 90,647 | |
Consumer and other loans | 117,798 | | | — | | | 213 | | | — | | | 118,011 | |
| | | | | | | | | |
Total | $ | 5,502,703 | | | $ | 4,249 | | | $ | 42,679 | | | $ | 137 | | | $ | 5,549,768 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Risk Grades | | Risk Grade | | Risk Grade | | Risk Grade | | |
(In thousands) | 1-6 | | 7 | | 8 | | 9 | | Total |
December 31, 2021 | | | | | | | | | |
Secured by real estate: | | | | | | | | | |
Residential properties | $ | 763,116 | | | $ | — | | | $ | 11,583 | | | $ | — | | | $ | 774,699 | |
Construction and land development | 537,573 | | | 4,097 | | | 2,093 | | | — | | | 543,763 | |
Farmland | 208,318 | | | — | | | 3,185 | | | — | | | 211,503 | |
Other commercial | 1,386,240 | | | — | | | 9,845 | | | — | | | 1,396,085 | |
Total real estate | 2,895,247 | | | 4,097 | | | 26,706 | | | — | | | 2,926,050 | |
Commercial and industrial | 503,603 | | | — | | | 23,496 | | | 3 | | | 527,102 | |
Agricultural production and other loans to farmers | 86,292 | | | — | | | 228 | | | — | | | 86,520 | |
Consumer and other loans | 79,176 | | | — | | | 306 | | | 18 | | | 79,500 | |
| | | | | | | | | |
Total | $ | 3,564,318 | | | $ | 4,097 | | | $ | 50,736 | | | $ | 21 | | | $ | 3,619,172 | |
maintain an allowance it deems adequate, future economic changes, deterioration of borrowers' creditworthiness, and the impact of examinations by regulatory agencies all could cause changes to BancPlus' allowance for credit losses.Transactions in the allowance for loancredit losses and balances in the loan portfolio by loan segment are as follows:
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(In thousands) | Commercial and Industrial | | Commercial Real Estate | | Residential | | Consumer and other | | Total |
Three Months Ended September 30, 2022 | | | | | | | | |
Allowance for loan losses: | | | | | | | | | |
Beginning balance | $ | 4,126 | | | $ | 27,957 | | | $ | 9,274 | | | $ | 1,996 | | | $ | 43,353 | |
Provision for loan losses | 1,331 | | | (1,169) | | | 193 | | | 134 | | | 489 | |
Recoveries on loans | 34 | | | 272 | | | 49 | | | 486 | | | 841 | |
Loans charged off | (774) | | | (240) | | | (3) | | | (1,133) | | | (2,150) | |
Ending balance | $ | 4,717 | | | $ | 26,820 | | | $ | 9,513 | | | $ | 1,483 | | | $ | 42,533 | |
| | | | | | | | | |
Nine Months Ended September 30, 2022 | | | | | | | | |
Allowance for loan losses: | | | | | | | | | |
Beginning balance | $ | 6,556 | | | $ | 27,133 | | | $ | 9,488 | | | $ | 1,823 | | | $ | 45,000 | |
Provision for loan losses | (200) | | | (459) | | | 650 | | | 949 | | | 940 | |
Recoveries on loans | 114 | | | 826 | | | 158 | | | 2,047 | | | 3,145 | |
Loans charged off | (1,753) | | | (680) | | | (783) | | | (3,336) | | | (6,552) | |
Ending balance | $ | 4,717 | | | $ | 26,820 | | | $ | 9,513 | | | $ | 1,483 | | | $ | 42,533 | |
| | | | | | | | | |
Period End Allowance Balance Allocated To: | | | | | | | | |
Individually evaluated for impairment | $ | — | | | $ | — | | | $ | 7 | | | $ | — | | | $ | 7 | |
Collectively evaluated for impairment | 4,717 | | | 26,820 | | | 9,506 | | | 1,483 | | | 42,526 | |
Ending balance | $ | 4,717 | | | $ | 26,820 | | | $ | 9,513 | | | $ | 1,483 | | | $ | 42,533 | |
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(In thousands) | Commercial and Industrial | | Commercial Real Estate | | Residential | | Consumer and other | | Total |
Three Months Ended September 30, 2021 | | | | | | | | |
Allowance for loan losses: | | | | | | | | | |
Beginning balance | $ | 6,493 | | | $ | 23,051 | | | $ | 10,234 | | | $ | 2,226 | | | $ | 42,004 | |
Provision for loan losses | (565) | | | 616 | | | 352 | | | 1,066 | | | 1,469 | |
Recoveries on loans | 175 | | | 1,625 | | | 59 | | | 449 | | | 2,308 | |
Loans charged off | (37) | | | (349) | | | (122) | | | (1,272) | | | (1,780) | |
Balance, end of year | $ | 6,066 | | | $ | 24,943 | | | $ | 10,523 | | | $ | 2,469 | | | $ | 44,001 | |
| | | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | |
Allowance for loan losses: | | | | | | | | | |
Beginning balance | $ | 6,337 | | | $ | 20,163 | | | $ | 7,900 | | | $ | 1,600 | | | $ | 36,000 | |
Provision for loan losses | (433) | | | 3,481 | | | 2,581 | | | 1,766 | | | 7,395 | |
Recoveries on loans | 479 | | | 2,277 | | | 340 | | | 2,046 | | | 5,142 | |
Loans charged off | (317) | | | (978) | | | (298) | | | (2,943) | | | (4,536) | |
Ending balance | $ | 6,066 | | | $ | 24,943 | | | $ | 10,523 | | | $ | 2,469 | | | $ | 44,001 | |
| | | | | | | | | |
Period End Allowance Balance Allocated To: | | | | | | | | |
Individually evaluated for impairment | $ | 991 | | | $ | 276 | | | $ | 9 | | | $ | — | | | $ | 1,276 | |
Collectively evaluated for impairment | 5,075 | | | 24,667 | | | 10,514 | | | 2,469 | | | 42,725 | |
Ending balance | $ | 6,066 | | | $ | 24,943 | | | $ | 10,523 | | | $ | 2,469 | | | $ | 44,001 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Commercial and Industrial | | Commercial Real Estate | | Residential | | Consumer and other | | Total |
Three Months Ended March 31, 2023 | | | | | | | | |
Allowance for credit losses: | | | | | | | | | |
Beginning balance | $ | 4,750 | | | $ | 26,701 | | | $ | 9,958 | | | $ | 1,466 | | | $ | 42,875 | |
Impact of adopting ASU 2016-13 | 2,166 | | | 12,770 | | | 6,464 | | | (656) | | | 20,744 | |
Provision for credit losses | (312) | | | 979 | | | 113 | | | 640 | | | 1,420 | |
Recoveries on loans | 88 | | | 115 | | | 58 | | | 591 | | | 852 | |
Loans charged off | (288) | | | (71) | | | (173) | | | (956) | | | (1,488) | |
Ending balance | $ | 6,404 | | | $ | 40,494 | | | $ | 16,420 | | | $ | 1,085 | | | $ | 64,403 | |
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Period End Allowance Balance Allocated To: | | | | | | | | |
Individually evaluated | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Collectively evaluated | 6,404 | | | 40,494 | | | 16,420 | | | 1,085 | | | 64,403 | |
Ending balance | $ | 6,404 | | | $ | 40,494 | | | $ | 16,420 | | | $ | 1,085 | | | $ | 64,403 | |
The following table providesallowance for credit losses increased for the recorded investment inthree months ended March 31, 2023 primarily as a result of the adoption of ASU 2016-13. Accrued interest receivable on loans, netreported as a component of unearned income, basedaccrued interest receivable on the Company’s impairment methodology asbalance sheet, totaled approximately $20.3 million for the period ended March 31, 2023 and is excluded from the estimate of the dates presented:credit losses.
| (In thousands) | (In thousands) | Commercial and Industrial | | Commercial Real Estate | | Residential | | Consumer and other | | Total | (In thousands) | Commercial and Industrial | | Commercial Real Estate | | Residential | | Consumer and other | | Total |
September 30, 2022 | | | | | | | | | | |
| | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2022 | | | | | | | | |
Allowance for loan losses: | | Allowance for loan losses: | |
Beginning balance | | Beginning balance | $ | 6,556 | | | $ | 27,133 | | | $ | 9,488 | | | $ | 1,823 | | | $ | 45,000 | |
Provision for loan losses | | Provision for loan losses | (468) | | | 75 | | | 311 | | | 299 | | | 217 | |
Recoveries on loans | | Recoveries on loans | 22 | | | 141 | | | 54 | | | 791 | | | 1,008 | |
Loans charged off | | Loans charged off | (58) | | | (437) | | | (250) | | | (1,242) | | | (1,987) | |
Ending balance | | Ending balance | $ | 6,052 | | | $ | 26,912 | | | $ | 9,603 | | | $ | 1,671 | | | $ | 44,238 | |
| Period End Allowance Balance Allocated To: | | Period End Allowance Balance Allocated To: | |
Individually evaluated for impairment | Individually evaluated for impairment | $ | 10,952 | | | $ | 4,811 | | | $ | 1,603 | | | $ | — | | | $ | 17,366 | | Individually evaluated for impairment | $ | 1,723 | | | $ | 308 | | | $ | 7 | | | $ | — | | | $ | 2,038 | |
Collectively evaluated for impairment | Collectively evaluated for impairment | 653,487 | | | 3,360,188 | | | 1,310,069 | | | 208,658 | | | 5,532,402 | | Collectively evaluated for impairment | 4,329 | | | 26,604 | | | 9,596 | | | 1,671 | | | 42,200 | |
Ending balance | Ending balance | $ | 664,439 | | | $ | 3,364,999 | | | $ | 1,311,672 | | | $ | 208,658 | | | $ | 5,549,768 | | Ending balance | $ | 6,052 | | | $ | 26,912 | | | $ | 9,603 | | | $ | 1,671 | | | $ | 44,238 | |
| December 31, 2021 | | |
Individually evaluated for impairment | $ | 21,822 | | | $ | 3,434 | | | $ | 1,640 | | | $ | 166 | | | $ | 27,062 | | |
Collectively evaluated for impairment | 505,280 | | | 2,147,917 | | | 773,059 | | | 165,854 | | | 3,592,110 | | |
Ending balance | $ | 527,102 | | | $ | 2,151,351 | | | $ | 774,699 | | | $ | 166,020 | | | $ | 3,619,172 | | |
Note 7: Regulatory Matters
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet minimum capital requirements triggers certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
The U.S. capital rules, which in substance adopted the international Basel III Capital Rules and accordingly are referred to as the Basel III rules, became effective for both the Company and the Bank on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule and fully phased in by January 1, 2019. The Basel III rules require banking institutions to comply with three minimum risk-based capital ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital, and total capital, as well as a minimum leverage ratio based on Tier 1 capital.
Under the Basel III rules, the Company must maintain a capital conservation buffer of CET1 capital above the minimum risk-based capital ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. If, after deducting the buffer amount from its CET1 capital, Tier 1 capital, and total capital, any of these amounts results in a risk-based capital ratio below the minimum, a banking institution will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The capital conservation buffer, which is 2.50%, is included in the minimum capital requirements relative to risk-weighted assets in the following table.
In 2019, the federal bank regulatory agencies finalized a rule that simplifies capital requirements for qualifying community banks by providing an option to use a simple leverage ratio to measure capital adequacy and to not calculate risk-based capital ratios. A qualifying community bank has less than $10 billion in total consolidated assets, limited amounts of off-balance-sheet exposures and trading assets and liabilities, and a leverage ratio greater than 9.0% percent.. The community bank leverage ratio (“CBLR”)
framework was effective on January 1, 2020, and the Company and the Bank elected to adopt the optional CBLR framework in the third quarter of 2022, as an alternative to the Basel III risk-basedgenerally applicable capital framework. Management believes as of September 30, 2022 and December 31, 2021, the Company and the Bank met the minimum leverage ratio or capital requirements to which they are subject.rules.
The Bank is also subject to capital requirements under the prompt corrective action regime. As of September 30, 2022, the Bank maintained each of the capital ratios required to be categorized as well capitalized under the regulatory framework for prompt corrective action. The prompt corrective action framework applies only to insured depository institutions, such as the Bank, and not to their holding companies, such as the Company. ForAs of March 31, 2023, the period ended September 30, 2022, the CompanyBank maintained a leverage ratio of more than 9.0% and, the Bankas an institution has elected to adopt the CBLR framework, which provides for the Company and the Bank to be categorized as well capitalized based
on a single capital ratio, the CBLR. Prior to the adoption of the CBLR framework, including at December 31, 2021, the Bank was required to maintain certain ratios of CET1 capital, Tier 1 capital and total capital to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets to be categorized as well capitalized. There are no conditions or events since September 30, 2022 that management believes have changed the Bank’s category. The amounts of the Bank’s capital relative to the standards fortherefore well capitalized status are set forth inunder the following table.
At December 31, 2021, the Company’s and the Bank’s CET1 capital includes total common equity reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. In connection with the adoption of Basel III, the Company elected to opt out of the requirement to include most components of accumulated other comprehensive income (loss) in CET1 capital.
Tier 1 capital includes CET1 capital and additional Tier 1 capital. For the Company, additional Tier 1 capital at December 31, 2021 included $51.0 million of trust preferred securities issued by the trusts (net of investment in the trusts). The Bank did not have any additional Tier 1 capital beyond CET1 capital as of December 31, 2021.
Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capitalregulatory framework for both the Company and the Bank includes a permissible portion of the allowance for loan losses. In addition, Tier 2 capital at December 31, 2021 for the Company includes $58.8 million of subordinated debentures. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations.
The following table presents actual and required capital ratios for the Company and the Bank.Bank under the CBLR and prompt corrective action regulations for the relevant periods.
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| Actual | | Minimum Requirement to be Well Capitalized |
(In thousands) | Capital Amount | | Ratio | | Capital Amount | | Ratio |
March 31, 2023: | | | | | | | |
Company: | | | | | | | |
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Community Bank Leverage Ratio | $ | 727,972 | | | 10.27 | % | | $ | 637,810 | | | 9.00 | % |
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Bank: | | | | | | | |
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Community Bank Leverage Ratio | $ | 672,902 | | | 9.50 | % | | $ | 637,283 | | | 9.00 | % |
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| Actual | | Minimum Requirement to be Well Capitalized |
(In thousands) | Capital Amount | | Ratio | | Capital Amount | | Ratio |
September 30, 2022: | | | | | | | |
Company: | | | | | | | |
| | | | | | | |
| | | | | | | |
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| | | | | | | |
Community Bank Leverage Ratio | 708,028 | | | 10.69 | % | | 595,970 | | | 9.00 | % |
| | | | | | | |
Bank: | | | | | | | |
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| | | | | | | |
Community Bank Leverage Ratio | 622,789 | | | 9.41 | % | | 595,436 | | | 9.00 | % |
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| Actual | | Minimum Requirement | | Required to be Well Capitalized |
(In thousands) | Capital Amount | | Ratio | | Capital Amount | | Ratio | | Capital Amount | | Ratio |
December 31, 2021: | | | | | | | | | | | |
Company: | | | | | | | | | | | |
CET1 Capital to Risk-Weighted Assets | $ | 382,736 | | | 9.40 | % | | $ | 285,078 | | | 7.00 | % | | N/A | | N/A |
Tier 1 Capital to Risk-Weighted Assets | 433,754 | | | 10.65 | % | | 346,166 | | | 8.50 | % | | N/A | | N/A |
Total Capital to Risk-Weighted Assets | 537,541 | | | 13.20 | % | | 427,617 | | | 10.50 | % | | N/A | | N/A |
Tier 1 Capital to Average Assets | 433,754 | | | 8.46 | % | | 205,072 | | | 4.00 | % | | N/A | | N/A |
| | | | | | | | | | | |
Bank: | | | | | | | | | | | |
CET1 Capital to Risk-Weighted Assets | $ | 428,602 | | | 10.55 | % | | $ | 284,509 | | | 7.00 | % | | $ | 264,187 | | | 6.50 | % |
Tier 1 Capital to Risk-Weighted Assets | 428,602 | | | 10.55 | % | | 345,475 | | | 8.50 | % | | 325,153 | | | 8.00 | % |
Total Capital to Risk-Weighted Assets | 473,602 | | | 11.65 | % | | 426,763 | | | 10.50 | % | | 406,441 | | | 10.00 | % |
Tier 1 Capital to Average Assets | 428,602 | | | 8.37 | % | | 204,714 | | | 4.00 | % | | 255,893 | | | 5.00 | % |
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| Actual | | Minimum Requirement to be Well Capitalized | | |
(In thousands) | Capital Amount | | Ratio | | Capital Amount | | Ratio | | | | |
December 31, 2022: | | | | | | | | | | | |
Company: | | | | | | | | | | | |
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| | | | | | | | | | | |
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Community Bank Leverage Ratio | $ | 721,001 | | | 10.54 | % | | $ | 615,566 | | | 9.00 | % | | | | |
| | | | | | | | | | | |
Bank: | | | | | | | | | | | |
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Community Bank Leverage Ratio | $ | 636,007 | | | 9.31 | % | | $ | 614,973 | | | 9.00 | % | | | | |
The ability of the Company to pay future dividends, pay its expenses and retire its debt is dependent upon future dividends and income tax benefits and dividends paid to the Company by the Bank. The Bank is subject to dividend restrictions as imposed by Federalfederal and state regulatory authorities.
Note 8: Fair Value
Financial Instruments Measured at Fair Value
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Valuations within these levels are based upon:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access as of the measurement date
Level 2
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3
Unobservable inputs that are significant to the fair value of the assets or liabilities that reflect a company’s own assumptions about the assumptions that market participants would use in pricing assets or liabilities
Management monitors the availability of observable market data to assess the appropriate classification of assets and liabilities within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. There were no transfers of financial instruments between fair value levels for any period presented.
The Company used the following methods and significant assumptions to estimate fair value.
Securities – The Company utilizes an independent pricing service to advise it on the value of the securities portfolio. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value may include one, or a combination of several, observable inputs such as benchmark yields, reported trades, benchmark securities, bids, offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. For Level 3 securities, in addition to the inputs noted above, inputs used by the pricing service to determine fair value may also include estimated duration, municipal bond interest rate curve, and tax effected yield. There were no Level 3 securities as of September 30, 2022March 31, 2023 or December 31, 2021.2022. The Company’s treasury department and Asset Liability Management Committee review the aggregate fair values of the securities portfolio.
Impaired loansIndividually Evaluated Loans with Credit Losses – Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairmentto determine if any credit loss exists on a non-recurring basis. Allowable methods for determining the amount of impairmentthe credit loss include estimating fair value using the fair value of the collateral for collateral-dependent loans. Specific allowances for impairedthese loans are based on comparisons of the recorded carrying values of the loans to the present value of the estimated cash flows of these loans at each loan’s effective interest rate or the fair value of the collateral net of selling costs if the loan is collateral dependent. Impaired loanscollateral-dependent. Loans that are primarily collateral dependent loans and are assessed using a fair value approach. Fair value estimates for collateral dependentcollateral-dependent loans are derived from appraised values based on the current market value or as-is value of the property being appraised. Appraisals are based on certain assumptions, which may include construction or development status and the highest and best use of the property. The appraisals are reviewed by the Company’s appraisal department to ensure they are acceptable. Impaired loansLoans that have experienced a credit loss are classified within Level 3 of the fair value hierarchy. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Other Real Estate Owned – Other real estate owned is initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated cost to sell. Fair value estimates begin with obtaining a current independent appraisal or internal evaluation of the collateral value. Subsequent to foreclosure, valuations are performed periodically by the Company’s appraisal department and any subsequent reduction in value is recognized by a charge to income.
Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified appraisers whose qualifications and licenses have been reviewed by the Company. These appraisals are reviewed by a member of the Company’s appraisal department to ensure they are acceptable. Appraised values are adjusted down for costs associated with asset disposal. The significant unobservable inputs (Level 3) used in the fair value measurement of collateral for collateral impairedcollateral-dependent loans and other real estate owned are primarily based on appraisals, observable market conditions, and other factors which may affect collectability. The appraisals use marketability and comparability discounts, which generally range from 5% to 15%. Assessment of the significance of a specific input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. It is reasonably possible that a change in the estimated fair value for assets measured using Level 3 inputs could occur in the future.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| | | Fair | | Fair Value Measurements Using | | | Fair | | Fair Value Measurements Using |
(In thousands) | (In thousands) | Value | | Level 1 | | Level 2 | | Level 3 | (In thousands) | Value | | Level 1 | | Level 2 | | Level 3 |
September 30, 2022 | | | | | | | | |
March 31, 2023 | | March 31, 2023 | | | | | | | |
U.S. Treasuries | U.S. Treasuries | $ | 34,351 | | | $ | — | | | $ | 34,351 | | | $ | — | | U.S. Treasuries | $ | 34,992 | | | $ | — | | | $ | 34,992 | | | $ | — | |
U.S. Government agency obligations | U.S. Government agency obligations | 367,683 | | | — | | | 367,683 | | | — | | U.S. Government agency obligations | 415,064 | | | — | | | 415,064 | | | — | |
Residential mortgage-backed securities | Residential mortgage-backed securities | 97,821 | | | — | | | 97,821 | | | — | | Residential mortgage-backed securities | 92,266 | | | — | | | 92,266 | | | — | |
Commercial mortgage-backed securities | Commercial mortgage-backed securities | 12,038 | | | — | | | 12,038 | | | — | | Commercial mortgage-backed securities | 12,238 | | | — | | | 12,238 | | | — | |
Asset-backed securities | Asset-backed securities | 11,087 | | | — | | | 11,087 | | | — | | Asset-backed securities | 9,391 | | | — | | | 9,391 | | | — | |
Corporate investments | Corporate investments | 44,909 | | | — | | | 44,909 | | | — | | Corporate investments | 46,979 | | | — | | | 46,979 | | | — | |
State and political subdivisions | State and political subdivisions | 46,769 | | | — | | | 46,769 | | | — | | State and political subdivisions | 48,651 | | | — | | | 48,651 | | | — | |
Total securities available for sale | Total securities available for sale | $ | 614,658 | | | $ | — | | | $ | 614,658 | | | $ | — | | Total securities available for sale | $ | 659,581 | | | $ | — | | | $ | 659,581 | | | $ | — | |
| December 31, 2021 | | |
December 31, 2022 | | December 31, 2022 | |
U.S. Treasuries | | U.S. Treasuries | $ | 34,579 | | | $ | — | | | $ | 34,579 | | | $ | — | |
U.S. Government agency obligations | U.S. Government agency obligations | $ | 350,250 | | | $ | — | | | $ | 350,250 | | | $ | — | | U.S. Government agency obligations | 378,736 | | | — | | | 378,736 | | | — | |
Residential mortgage-backed securities | Residential mortgage-backed securities | 109,787 | | | — | | | 109,787 | | | — | | Residential mortgage-backed securities | 94,132 | | | — | | | 94,132 | | | — | |
Commercial mortgage-backed securities | Commercial mortgage-backed securities | 14,276 | | | — | | | 14,276 | | | — | | Commercial mortgage-backed securities | 12,070 | | | — | | | 12,070 | | | — | |
Asset backed securities | Asset backed securities | 13,107 | | | — | | | 13,107 | | | — | | Asset backed securities | 10,220 | | | — | | | 10,220 | | | — | |
Corporate investments | Corporate investments | 44,510 | | | — | | | 44,510 | | | — | | Corporate investments | 46,033 | | | — | | | 46,033 | | | — | |
State and political subdivisions | State and political subdivisions | 44,684 | | | — | | | 44,684 | | | — | | State and political subdivisions | 48,150 | | | — | | | 48,150 | | | — | |
Total securities available for sale | Total securities available for sale | $ | 576,614 | | | $ | — | | | $ | 576,614 | | | $ | — | | Total securities available for sale | $ | 623,920 | | | $ | — | | | $ | 623,920 | | | $ | — | |
Assets measured at fair value on a non-recurring basis are summarized below. | | | | | | | | | | | | | | | | | | | | | | | |
| Fair | | Fair Value Measurements Using | | |
(In thousands) | Value | | Level 1 | | Level 2 | | Level 3 |
Impaired loans, net of allowance for loan losses: | | | | | | | |
September 30, 2022 | $ | 26,435 | | | $ | — | | | $ | — | | | $ | 26,435 | |
December 31, 2021 | $ | 33,570 | | | $ | — | | | $ | — | | | $ | 33,570 | |
| | | | | | | |
Other real estate owned: | | | | | | | |
September 30, 2022 | $ | 4,850 | | | $ | — | | | $ | — | | | $ | 4,850 | |
December 31, 2021 | $ | 5,815 | | | $ | — | | | $ | — | | | $ | 5,815 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair | | Fair Value Measurements Using |
(In thousands) | Value | | Level 1 | | Level 2 | | Level 3 |
Individually evaluated loans with credit losses, net of allowance for credit losses: | | | | | | | |
March 31, 2023 | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | |
Impaired loans, net of allowance for loan losses: | | | | | | | |
December 31, 2022 | $ | 26,071 | | | $ | — | | | $ | — | | | $ | 26,071 | |
| | | | | | | |
Other real estate owned: | | | | | | | |
March 31, 2023 | $ | 3,958 | | | $ | — | | | $ | — | | | $ | 3,958 | |
December 31, 2022 | $ | 4,231 | | | $ | — | | | $ | — | | | $ | 4,231 | |
The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a non-recurring basis.
| | | Qualitative Information about Level 3 Fair Value Measurements | | Qualitative Information about Level 3 Fair Value Measurements |
(In thousands) | (In thousands) | Carrying Value | | Valuation Methods | | Unobservable Inputs | | Range | | Weighted Average | (In thousands) | Carrying Value | | Valuation Methods | | Unobservable Inputs | | Range | | Weighted Average |
September 30, 2022 | | | | | | | | | | |
Impaired loans, net of specific allowance | $ | 26,435 | | | Third-party appraisals | | Selling costs | | 5% - 10% | | 6% | |
March 31, 2023 | | March 31, 2023 | | | | | | | | | |
Individually evaluated loans with credit losses, net of specific allowance | | Individually evaluated loans with credit losses, net of specific allowance | $ | — | | | Third-party appraisals | | Selling costs | | 5% - 10% | | 6% |
Other real estate owned | Other real estate owned | $ | 4,850 | | | Third-party appraisals and internal evaluations | | Selling costs | | 5% - 10% | | 6% | Other real estate owned | $ | 3,958 | | | Third-party appraisals and internal evaluations | | Selling costs | | 5% - 10% | | 6% |
| | | Qualitative Information about Level 3 Fair Value Measurements | | Qualitative Information about Level 3 Fair Value Measurements |
(In thousands) | (In thousands) | Carrying Value | | Valuation Methods | | Unobservable Inputs | | Range | | Weighted Average | (In thousands) | Carrying Value | | Valuation Methods | | Unobservable Inputs | | Range | | Weighted Average |
December 31, 2021 | | | | | | | | | | |
Impaired loans, net of specific allowance | $ | 33,570 | | | Third-party appraisals | | Selling costs | | 5% - 10% | | 6% | |
December 31, 2022 | | December 31, 2022 | | | | | | | | | |
Impaired loans, net of allowance for loan losses | | Impaired loans, net of allowance for loan losses | $ | 26,071 | | | Third-party appraisals | | Selling costs | | 5% - 10% | | 6% |
Other real estate owned | Other real estate owned | $ | 5,815 | | | Third-party appraisals and internal evaluations | | Selling costs | | 5% - 10% | | 6% | Other real estate owned | $ | 4,231 | | | Third-party appraisals and internal evaluations | | Selling costs | | 5% - 10% | | 6% |
Fair Value of Financial Instruments
GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, that are not measured and reported at fair value on a recurring or non-recurring basis. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions significantly affect the estimates and, as such, the derived fair value may not be indicative of the value negotiated in an actual sale and may not be comparable to that reported by other financial institutions. In addition, the fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
The following table presents estimated fair values of the Company’s financial instruments not previously disclosed:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(In thousands) | (In thousands) | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | (In thousands) | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Financial assets: | Financial assets: | | | | | | | | Financial assets: | | | | | | | |
Level 1 inputs: | Level 1 inputs: | | Level 1 inputs: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 172,285 | | | $ | 172,285 | | | $ | 664,165 | | | $ | 664,165 | | Cash and cash equivalents | $ | 121,220 | | | $ | 121,220 | | | $ | 137,895 | | | $ | 137,895 | |
| Level 2 inputs: | Level 2 inputs: | | Level 2 inputs: | |
Securities held to maturity | Securities held to maturity | 65,889 | | | 65,505 | | | 71,648 | | | 72,084 | | Securities held to maturity | 61,262 | | | 61,144 | | | 62,274 | | | 62,068 | |
FHLB stock | FHLB stock | 16,759 | | | 16,759 | | | 2,731 | | | 2,731 | | FHLB stock | 20,103 | | | 20,103 | | | 19,690 | | | 19,690 | |
Accrued interest receivable | Accrued interest receivable | 20,315 | | | 20,315 | | | 14,329 | | | 14,329 | | Accrued interest receivable | 24,025 | | | 24,025 | | | 23,156 | | | 23,156 | |
Level 3 inputs: | Level 3 inputs: | | Level 3 inputs: | |
Loans held for sale | Loans held for sale | 4,199 | | | 4,199 | | | 10,621 | | | 10,621 | | Loans held for sale | 8,357 | | | 8,357 | | | 5,373 | | | 5,373 | |
Loans, net | Loans, net | 5,507,235 | | | 5,457,342 | | | 3,574,172 | | | 3,548,595 | | Loans, net | 5,887,464 | | | 5,674,683 | | | 5,781,274 | | | 5,601,070 | |
| Financial liabilities: | Financial liabilities: | | Financial liabilities: | |
Level 2 inputs: | Level 2 inputs: | | Level 2 inputs: | |
Deposits | Deposits | 5,594,217 | | | 5,050,544 | | | 4,622,116 | | | 4,493,657 | | Deposits | 5,966,656 | | | 5,648,644 | | | 5,824,904 | | | 5,289,138 | |
FHLB and other borrowings | FHLB and other borrowings | 310,099 | | | 310,205 | | | 20,501 | | | 21,024 | | FHLB and other borrowings | 310,068 | | | 309,927 | | | 318,084 | | | 318,079 | |
Subordinated debentures | Subordinated debentures | 133,430 | | | 139,267 | | | 111,509 | | | 111,509 | | Subordinated debentures | 133,531 | | | 138,699 | | | 133,478 | | | 138,780 | |
Accrued interest payable | Accrued interest payable | 2,949 | | | 2,949 | | | 1,425 | | | 1,425 | | Accrued interest payable | 4,407 | | | 4,407 | | | 2,334 | | | 2,334 | |
Note 9: Subordinated Debentures and Trust Preferred Securities
Subordinated Debentures
On June 4, 2020, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers and institutional accredited investors pursuant to which the Company issued and sold $60.0 million in aggregate principal amount of its 6.000% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030 (the “Notes”). The Company incurred issuance costs
of $1.4 million in conjunction with the issuance of the Notes. These issuance costs are netted with the balance of the Notes on the Company’s Consolidated Balance Sheets and will be amortized over the life of the Notes. At September 30, 2022March 31, 2023 and December 31, 2021,2022, the remaining unamortized balance of these issuance costs was $1.1$1.0 million and $1.2$1.1 million, respectively. The Notes initially bear interest at a rate of 6.000% per annum from and including June 4, 2020, to but excluding June 15, 2025 or the early redemption date, with interest during this period payable semiannually in arrears. From and including June 15, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to Three-Month Term Secured Overnight Financing Rate plus 586 basis points, with interest during this period payable quarterly in arrears. The Company used the proceeds of the private placement for general corporate purposes, including improving the Company’s liquidity and capital position.
The Notes are not redeemable by the Company, in whole or in part, prior to the fifth anniversary of the original date of issue, except that the Notes may be redeemed at any time in whole but not in part in the event of a Tier 2 Capital Event, a Tax Event, or an Investment Company Event, each as defined and described in the Notes. On or after the fifth anniversary of the original date of issue, the Notes are redeemable on any interest payment date at the option of the Company, in whole or in part in integral multiples of $1,000, at an amount equal to 100% of the outstanding principal amount redeemed plus accrued but unpaid interest thereon. Any partial redemption will be made on a pro rata basis as to the holders of the Notes. Any redemption of the Notes is subject to any applicable regulatory requirements and approvals.
Effective March 1, 2022, in conjunction with the FTC Merger, the Company assumed FTC’s obligations under its Subordinated Note Purchase Agreement, dated as of December 23, 2020, and the several purchasers of the $21.0 million aggregate principal amount of 5.50% Fixed-to-Floating Rate Subordinated Notes due 2030 issued thereunder (the “Subordinated“FTC Subordinated Notes”). The FTC Subordinated Notes will mature on December 30, 2030 and bear interest at an initial fixed rate of 5.50% per annum, payable semi-annually in arrears. From and including December 30, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to a Three-Month Term Secured Overnight Financing Rate (“SOFR”) plus 527 basis points, payable quarterly in arrears. BancPlus will be entitled to redeem the FTC Subordinated Notes, in whole or in part, on any interest payment date on or after December 30, 2025, and to redeem the FTC Subordinated Notes in whole upon certain other events. The FTC Subordinated Notes are not subject to redemption at the option of the holder. The FTC Subordinated Notes are unsecured, subordinated obligations of BancPlus only and are not obligations of, and are not guaranteed by, any subsidiary of BancPlus. The FTC Subordinated Notes rank junior in right to payment to BancPlus’ current and future senior indebtedness. The FTC Subordinated Notes have been structured to qualify as Tier 2 capital for regulatory capital purposes. The FTC Subordinated Notes vary from the amount carried on the Consolidated Balance Sheets at September 30, 2022March 31, 2023 due to the remaining purchase premium of $633,000,$536,000, which was established upon closing of the FTC Merger and is being amortized over the remaining life of the debentures.
Trust Preferred Securities
The Company also owns the outstanding common stock of business trusts that have issued preferred capital securities to third parties. Under a grandfathering provision in the Basel III capital rules that applies to bank holding companies with less than $15 billion in total consolidated assets, these preferred capital securities have qualified as Tier 1 capital for the Company, subject to regulatory rules and limits. These trusts used the proceeds from the issuance of the common stock and the preferred capital securities to purchase subordinated debentures issued by the Company. These subordinated debentures are these trusts’ only assets, and quarterly interest payments on these subordinated debentures are the sole source of cash for these trusts to pay quarterly distributions on the common stock and preferred capital securities. The Company has fully and unconditionally guaranteed the trusts’ obligations with respect to the preferred capital securities.
The Company has the right to defer the payment of interest on the subordinated debentures at any time, or from time to time, for periods not exceeding five years. If interest payments on the subordinated debentures are deferred, the distributions on the trust preferred securities are also deferred. Interest on the subordinated debentures and distributions on the trust preferred securities are cumulative.
The following is a summary of subordinated debentures payable to statutory trusts.
| (In thousands) | (In thousands) | Year of Maturity | | Interest Rate | | September 30, 2022 | | December 31, 2021 | (In thousands) | Year of Maturity | | Interest Rate | | March 31, 2023 | | December 31, 2022 |
First Bancshares of Baton Rouge Statutory Trust I | First Bancshares of Baton Rouge Statutory Trust I | 2034 | | 3 month LIBOR, plus 2.50% | | $ | 4,124 | | | $ | 4,124 | | First Bancshares of Baton Rouge Statutory Trust I | 2034 | | 3 month LIBOR, plus 2.50% | | $ | 4,124 | | | $ | 4,124 | |
State Capital Statutory Trust IV | State Capital Statutory Trust IV | 2035 | | 3 month LIBOR, plus 1.99% | | 5,155 | | | 5,155 | | State Capital Statutory Trust IV | 2035 | | 3 month LIBOR, plus 1.99% | | 5,155 | | | 5,155 | |
BancPlus Statutory Trust II | BancPlus Statutory Trust II | 2036 | | 3 month LIBOR, plus 1.50% | | 20,619 | | | 20,619 | | BancPlus Statutory Trust II | 2036 | | 3 month LIBOR, plus 1.50% | | 20,619 | | | 20,619 | |
BancPlus Statutory Trust III | BancPlus Statutory Trust III | 2037 | | 3 month LIBOR, plus 1.35% | | 20,619 | | | 20,619 | | BancPlus Statutory Trust III | 2037 | | 3 month LIBOR, plus 1.35% | | 20,619 | | | 20,619 | |
State Capital Master Trust | State Capital Master Trust | 2037 | | 3 month LIBOR, plus 1.46% | | 6,186 | | | 6,186 | | State Capital Master Trust | 2037 | | 3 month LIBOR, plus 1.46% | | 6,186 | | | 6,186 | |
| | $ | 56,703 | | | $ | 56,703 | | | $ | 56,703 | | | $ | 56,703 | |
The subordinated debentures payable to statutory trusts vary from the amount carried on the Consolidated Balance Sheets at September 30, 2022March 31, 2023 due to the remaining purchase discount of $3.8$3.7 million, which was established upon the merger with State Capital Corp. (“SCC”), in which BancPlus acquired SCC, the holding company of State Bank & Trust Company (“State Bank”) by a statutory share exchange and SCC was merged with and into BancPlus and State Bank was merged with and into BankPlus, with BancPlus and BankPlus surviving the mergers, which closed on April 1, 2020, and is being amortized over the remaining life of the debentures.
Interest rates adjust quarterly for the subordinated debentures with rates that are indexed with LIBOR. On March 15, 2022 the Adjustable Interest Rate (LIBOR) Act was signed into law as part of the Consolidated Appropriations Act, 2022. The Adjustable Interest Rate (LIBOR) Act establishes a nationwide process for replacing LIBOR in financial contracts that mature after the cessation of the overnight, one-, three-, six- and 12-month U.S. dollar LIBOR tenors on June 30, 2023 and that do not provide for an effective means to replace LIBOR upon its cessation. For contracts in which a party has the discretion to identify a replacement rate, the Act also provides a safe harbor to parties if they choose the Secured Overnight Financing Rate (“SOFR”)-basedSOFR-based benchmark replacement rate to be identified by the Board of Governors of the Federal Reserve System.We are currently monitoring these developments to determine any potential impact In January 2023, the Company was notified that the interest rate on the subordinated debentures.debentures would be replaced with SOFR.
The Company has the right to redeem the subordinated debentures prior to maturity. Upon redemption of the subordinated debentures payable to a statutory trust, the trust will also liquidate its common stock and preferred capital securities.
Note 10: Employee Benefits
The Company has an Employee Stock Ownership Plan (“ESOP”) that covers all employees of the Bank who are at least 21 years of age and work in a position requiring at least one thousand hours of service annually. The plan also has 401(k) provisions that allow for employee tax deferred contributions. Participants may make contributions to the ESOP in accordance with applicable regulations and the ESOP’s provisions. The Company makes a “safe harbor” matching contribution on the first 3% of an employee’s salary deferral contributions, plus an additional matching contribution equal to 50% of the next 2% of an employee’s salary deferral contributions in excess of 3%. Additional contributions are made to the ESOP at the discretion of the Company’s Board of Directors.
The ESOP owned 1,452,950 and 1,500,732 shares of the Company's common stock at September 30, 2022both March 31, 2023 and December 31, 2021, respectively.2022. The ESOP enteredcan enter into loans, collateralized by ESOP shares, with the Company in connection with the repurchase of shares of Company stock that were sold by participants in accordance with diversification provisions of the ESOP. A total of 176,786 shares were repurchased through 2011, an additional 77,000 shares were repurchased under this program in 2012, and 27,594 shares were repurchased under this program in 2019. These unallocated shares werewould be released to participants proportionately as the loans wereare repaid. Dividends on allocated shares wereare recorded as dividends and charged to retained earnings. Dividends on unallocated shares that wereare used to repay the loan werewould be treated as compensation expense. As of September 30, 2022,March 31, 2023, the ESOP had zero outstanding loans with the Company.
The following table presents information related to the Company’s ESOP-owned shares.
| | | | | | | | | | | |
(In thousands, except share data) | September 30, 2022 | | December 31, 2021 |
Allocated shares | 1,452,950 | | | 1,472,334 | |
Unearned shares | — | | | 28,398 | |
Total ESOP shares | 1,452,950 | | | 1,500,732 | |
| | | |
Fair value of unearned shares | $ | — | | | $ | 1,938 | |
Distributions of the ESOP may be either in cash or Company common stock. The allocated shares are subject to a put option, whereby the Company will provide a market for a specified period of time for shares distributed to participants. The put price is the appraised value of the stock. The fair value of allocated shares of common stock held by the ESOP are deducted from permanent shareholders’ equity in the Consolidated Balance Sheets and reflected in a line item below liabilities and above shareholders’ equity. This presentation is necessary in order to recognize the put option within the ESOP-owned shares, consistent with U.S. Securities and Exchange Commission guidelines, that is present as long as the Company is not publicly traded. The Company uses a valuation by an external third party to determine the maximum possible cash obligation related to these securities. Increases or decreases in the value of the cash obligation are included in a separate line item in the Consolidated Statements of Shareholders’ Equity. The fair value of allocated shares held by the ESOP at September 30, 2022March 31, 2023 was $93.4$97.0 million, based on the Company’s previously disclosed appraised value of $64.25$66.75 per share of common stock. The fair value at December 31, 20212022 was $100.5$97.0 million, based on the Company’s previously disclosed appraised value of $68.25$66.75 per share of common stock. As previously disclosed, these appraised values were determined solely for purposes of the ESOP’s administration and are therefore subject to certain limitations, qualifications and assumptions and may not reflect the fair value of the Company’s common stock and should not be relied on for any reason. Neither the Company nor the ESOP has any obligation to seek an adjusted valuation, to use these appraised values for any other purpose or, if the Company or the ESOP obtains a new appraised value, to disclose such new appraised value.
Note 11: Equity
Preferred Stock
The Company’s Articles of Incorporation authorize 10,000,000 shares of preferred stock with no par value, which may be issued from time to time and in one or more classes or series upon authorization of the Board of Directors.
On June 22, 2022, the Company entered into a Letter Agreement (including annexes thereto, collectively, the “Purchase Agreement”) with the U.S. Department of Treasury (the “Treasury”) under the Emergency Capital Investment Program (“ECIP”). Pursuant to the Purchase Agreement, the Company agreed to issue and sell 250,000 shares of the Company’s preferred stock designated as Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP (the “Preferred Stock”) for an aggregate purchase price of $250.0 million in cash. The Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
The Preferred Stock bears no dividend for the first two years following the issuance of the Preferred Stock. Thereafter, the annual dividend rate will be adjusted, not lower than 0.5% and not higher than 2.0%, based on our extensionextensions of credit for qualified lending as defined in the terms of the ECIP Interim Final Rule, the Purchase Agreement and the Certificate of Designations (the “Certificate of Designations”) and the investment amount. After the tenth anniversary of the issuance of the Preferred Stock, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10 compared to the baseline qualified lending and the average investment amount. The dividends will be payable quarterly in arrears on March 15, June 15, September 15, and December 15.
The Preferred Stock may be redeemed at the option of the Company on or after September 15, 2027 (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations. The restrictions on redemption are set forth in the Certificate of Designations filed with the Mississippi Secretary of State for the purpose of amending its Articles of Incorporation to fix the designations, preferences, limitations and relative rights of the Preferred Stock as described in Item 5.03 of our Current Report on Form 8-K filed with the SEC on June 23, 2022.
In the Purchase Agreement, the Company also agreed to, upon the future written request of the Treasury, comply with the terms of a Registration Rights Agreement included as an annex to the Purchase Agreement and incorporated by reference therein (the “Registration Rights Agreement”), providing for certain registration rights of the Treasury. As long as the Company is not eligible to file on Form S-3, upon written request of the Treasury, the Company would be required to prepare and file a shelf registration
statement covering the potential resale of the Preferred Stock as promptly as practicable. Once the Company is eligible to file on Form S-3, the Company agreed to prepare and file such shelf registration statement within 30 days. The Registration Rights Agreement also includes customary “piggyback” registration rights, suspension rights, indemnification, contribution, and assignment provisions.
Common Stock
In the first quarter of 2023, the Company’s shareholders approved an amendment to the Company’s Articles of Incorporation increasing the number of authorized shares of the Company’s common stock from 40,000,000 shares to 100,000,000 shares.
Note 12: Stock Based Compensation
Under the Company’s long-term incentive program, certain officers, employees and directors are eligible to receive equity-based awards under the 2018 Long-Term Incentive Plan (“LTIP”). Restricted stock awards (“RSAs”) granted under the LTIP generally vest over one to five years. Unvested RSAs are included in the Company’s common stock outstanding. Compensation expense for RSAs granted under the LTIP is recognized over the vesting period of the awards based on the fair value of the stock at the grant date, with forfeitures recognized as they occur.
Stock based compensation that has been charged against income was $2.8$1.0 million for the ninethree months ended September 30, 2022March 31, 2023 and $1.7$0.7 million for the same period of 2021.2022. There were zero and 1,830 shares forfeited during the ninethree months ended September 30, 2022March 31, 2023 and 2021, respectively.2022. As of September 30, 2022,March 31, 2023, there was $9.6$6.9 million of total unrecognized compensation cost related to unvested RSAs. The cost is expected to be recognized over a remaining weighted average period of 3.02.8 years.
A summary of the Company’s equity-based award activity and related information for the Company’s RSAs is as follows:
| | | Nine Months Ended | | Three Months Ended |
| | September 30, 2022 | | September 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | Number of Shares | | Weighted Average Grant Date Fair Value | | Number of Shares | | Weighted Average Grant Date Fair Value | | Number of Shares | | Weighted Average Grant Date Fair Value | | Number of Shares | | Weighted Average Grant Date Fair Value |
Beginning of period | Beginning of period | 144,572 | | | $ | 51.56 | | | 91,109 | | | $ | 50.60 | | Beginning of period | 184,284 | | | $ | 59.36 | | | 144,572 | | | $ | 51.56 | |
Granted | Granted | 98,679 | | | 68.13 | | | 85,147 | | | 51.59 | | Granted | — | | | — | | | 21,367 | | | 68.25 | |
Vested | Vested | (55,397) | | | 53.38 | | | (33,545) | | | 52.03 | | Vested | 1,396 | | | 50.00 | | | (6,077) | | | 50.00 | |
Forfeited | Forfeited | — | | | — | | | (1,830) | | | 49.46 | | Forfeited | — | | | — | | | — | | | — | |
End of period | End of period | 187,854 | | | $ | 58.73 | | | 140,881 | | | $ | 50.88 | | End of period | 185,680 | | | $ | 59.43 | | | 159,862 | | | $ | 53.85 | |
Note 13: Contingencies
On March 20, 2019, a complaint (the “Complaint”), Mills v. BankPlus, et al., Case #3:19-cv-00196-CWR-FKB, was filed in the United States District Court for the Southern District of Mississippi, Northern Division, by Alysson Mills, in her capacity as Court-appointed Receiver for Arthur Lamar Adams (“Adams”) and Madison Timber Properties, LLC (“Madison Timber”), naming the Bank, three former Bank employees, one then-current BankPlus employee and other defendants, including defendants affiliated and unaffiliated with BankPlus (“Defendants”). The Complaint seeks to recover damages from the Defendants for the benefit of the receivership estate related to certain investors who were allegedly defrauded by Adams and Madison Timber, whose actions were allegedly attributable to the actions of the Defendants that allegedly enabled negligent, illegal or fraudulent activities engaged in by Adams and Madison Timber. A brief description of the cause of action on the cover sheet filed with the Complaint includes securities, civil conspiracy, aiding and abetting, negligence, and other possible causes of action. The amount of damages (including punitive damages) requested against the Defendants in the Complaint is unspecified. On January 4, 2021, the plaintiff, Mills, filed an Amended Complaint. Answers and/or Motions to Dismiss the Amended complaint were filed by the Defendants. On July 8, 2021, the Court denied the Motion to Dismiss filed by BankPlus. A related motion for reconsideration was filed by BankPlus on August 9, 2021. The Court denied that motion. On September 30, 2021, an order was entered to consolidate for purposes of discovery this case (No. 3:19-cv-00196-CWR-FKB) with three other related cases filed by Mills, the Receiver. A Case Management Order (No.: 3:22-cv-36-CWRFKB) was entered on January 31, 2022 for the sole purpose of managing consolidated discovery in the four related cases. Phase one written discovery is still underway. Phases two and three discovery, allowing depositions, will begin at a future date pursuant to a subsequent court order.
In addition to the above, the Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, references in this report to “we”, “us”, “our company”, “the Company”, or “BancPlus” refer to BancPlus Corporation and its subsidiaries, on a consolidated basis. All references to “BankPlus” or “the Bank” refer to BankPlus, our wholly-owned subsidiary.
The following discussion and analysis of BancPlus’ financial condition and results of operations should be read in conjunction with the unaudited interim consolidated financial statements and related notes contained in Item 1 of this report.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains estimates, predictions, opinions, projections and other “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995 about BancPlus. Such statements include, without limitation, references to the Company’s predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects, and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations, and are subject to risks and uncertainties. These statements often, but not always, are preceded by, followed by or otherwise include the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “continue,” “seek,” “plan,” “can,” “should,” “could,” “would,” “will,” “to be,” “predict,” “potential,” “may,” “likely,” “will likely result,” “target,” “project” and “outlook” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry based on certain assumptions and beliefs of the Company’s management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important risk factors that could cause actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
•the effects of the novel coronavirus and variants thereof (“COVID-19”) pandemic, on our business, financial condition and results of operations and on our customers, our employees, our third-party service providers and the economy, and the efficacy of COVID-19 vaccines;
•our ability to adequately measure and limit our credit risk;
•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;
•possible additional loan losses and impairment of the collectability of loans;
•our ability to prudently manage our growth, maintain our historical rate of growth in light of associated risks, and execute our strategy;
•our ability to successfully integrate and fully realize the cost savings and other benefits of our acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition customer acceptance of the Company’s products and services and related customer disintermediation, including our recent acquisition of First Trust Corporation (“FTC”);
•the composition of our management team and our ability to attract and retain key personnel;
•changes in management personnel;
•geographic concentration of our business within Mississippi, Alabama, Louisiana, and Florida;
•our ability to attract and retain customers;
•customers, particularly in light of increased competition in the financial services industry, and particularly from regional and national institutions;
•further government restrictions on overdraft programs;
•failure of our risk management framework;
•systems failures, unauthorized access, cyber-crime and other threats to data security or interruptions involving our information technology and telecommunications systems or third-party servicers;servicers;
•difficult market conditions and unfavorable economic trends in the United States generally (including uncertainty regarding the federal government’s debt limit or a prolonged shutdown of the federal government), and particularly in the markets in which we operate and in which our loans are concentrated, including declines in housing markets, an increase in unemployment levels and inflation, and slowdowns in economic growth;
•our abilitythe impacts related to maintain our historical rate of growth;
•our abilityor resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to manage the risks associated with our growth and expansion through de novo branching;macroeconomic conditions;
•our ability to identify potential candidates for, consummate, and achieve synergies resulting from, potential future acquisitions;
•deterioration of our asset quality;
•our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms;
•any impairment of our goodwill or other intangible assets;
•changes in the value of collateral securing our loans;
•changes in the laws, rules, regulations, interpretations, policies or stimulus programs relating to financial institutions, accounting, tax, trade, monetary and fiscal matters, and the uncertainty of the short- and long-term impacts of such changes;
•further government intervention in the U.S. financial system, including in response to the COVID-19 pandemic;
•the effects of regional or national civil unrest (including any resulting branch closures or damage);
•compliance with governmental and regulatory requirements, including relating to banking, consumer protection, securities and tax matters;
•operational risks associated with our business;
•volatility and direction of market interest rates, including as a result of the COVID-19 pandemic and continuing worldwide macroeconomic uncertainty;rates;
•our ability to maintain important deposit customer relationships and our reputation or otherwise avoid liquidity risks;
•the obligations associated with being a public reporting company;
•the commencement and outcome of litigation and other legal proceedings against us or to which we may become subject;
•natural disasters, climate change, and adverse weather, public health crises, acts of terrorism, outbreaks of hostilities, civil unrest or other international or domestic calamities, and other matters beyond our control; and
•other factors that are discussed in the sections entitled “Risk“Item 1A. Risk Factors” and “Management’s“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the annual period ended December 31, 2021, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, and June 30, 3022 and in this Quarterly Report on Form 10-Q.
New factors emerge from time to time, and it is not possible for us to predict which will arise. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022 and in this Quarterly Report on Form 10-Q.2022. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or revise any forward-looking statement, whether written or oral, and whether as a result of new information, future developments or otherwise, except as specifically required by law.
Overview
BancPlus is a bank holding company headquartered in Ridgeland, Mississippi. Its wholly-owned bank subsidiary, BankPlus, offers a full suite of products and services to a broad spectrum of customers, including individuals, businesses and public entities. As of September 30, 2022,March 31, 2023, we operated 94 branch offices across Mississippi, Alabama, Louisiana, Alabama and Florida. Our franchise is built on a community banking approach focused on personalized, relationship-driven service combined with local market management and expertise. We have one reportable segment.
BancPlus’ business strategy is to provide exceptional community banking services and financial solutions within its markets, which enables us to fulfill our core purpose of enriching lives and building stronger communities. We believe our team of local, experienced and relationship-focused bankers, along with strong brand recognition in our communities, differentiate us from our competitors. As a result, we have a granular, stable deposit mix and a diversified loan portfolio. As of September 30, 2022,March 31, 2023, BancPlus held $5.594$5.967 billion of total deposits, and our deposit base consisted of 96.3%96.6% core deposits, defined as total deposits less brokered deposits and time deposits greater than $250,000, with a total deposit cost of 0.17%1.16%. Our loan portfolio was comprised of 74.2% commercial loans and 25.8% consumer loans for the same period. BancPlus currently holds meaningful market share in a number of attractive markets in Mississippi, including the number three position based on deposits in the Jackson, Mississippi metropolitan statistical area as of June 30, 2022, and we believe we are well-positioned for future growth.
September 30, 2022March 31, 2023 Highlights
•Net income for the ninethree months ended September 30, 2022March 31, 2023 was $44.9$17.1 million, compared with $45.5$9.7 million for the same period of 20212022
•Diluted earnings per share for the ninethree months ended September 30, 2022March 31, 2023 were $4.01,$1.49, compared with $4.53$0.92 for the same period of 20212022
•Net interest income was $157.5$58.2 million for the ninethree months ended September 30, 2022,March 31, 2023, compared with $126.8$42.8 million for the same period of 20212022
•Total loans held for investment were $5.550$5.952 billion at September 30, 2022,March 31, 2023, compared with $3.619$5.824 billion at December 31, 20212022
Recent Developments
Recent developments at SeptemberThe recent failures of Silicon Valley Bank, Santa Clara, California, Signature Bank, New York, New York, and First Republic Bank, San Francisco, California in March and May, 2023, may lead to regulatory changes and initiatives that could impact BancPlus. For example, the Federal Deposit Insurance Corporation (“FDIC”) has stated that it plans to impose a special deposit insurance assessment on banks in order to recover losses that the FDIC’s Deposit Insurance Fund incurred to support uninsured depositors of these institutions. In addition, President Biden has encouraged the federal banking agencies to adopt various reforms, including the completion of an incentive compensation rule for bank executives pursuant to Section 956 of the Dodd-Frank Act, in response to these bank failures.
Small Business Lending Data Collection Rule
On March 30, 2022 did not significantly change from2023, the recent developments asConsumer Financial Protection Bureau finalized a rule under section 1071 of December 31, 2021, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021,Dodd-Frank Act requiring lenders to collect and asreport data regarding small business lending activity. BancPlus is evaluating the impact of March 31, 2022 and June 30, 2022, which are disclosed in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022.new rule.
Results of Operations
The following discussion of BancPlus’ results of operations compares the three and nine months ended September 30, 2022March 31, 2023 to the three and nine months ended September 30, 2021.March 31, 2022. The results of operations for the three and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 20222023 or for any other period.
Net Income
Net income for the three months ended September 30,March 31, 2023 and 2022 and 2021 was $19.1$17.1 million and $14.2$9.7 million, respectively. BancPlus’ annualized return on average assets for the three months ended September 30,March 31, 2023 and 2022 was 0.98% and 2021 was 1.14% and 1.11%0.69%, respectively. BancPlus’ annualized return on average equity for the three months ended September 30,March 31, 2023 and 2022 was 10.15% and 2021 was 10.93% and 14.67%9.60%, respectively.
The increase in net income and return on average assets and equity for the three months ended September 30, 2022March 31, 2023 compared to the same period of 20212022 was primarily the result of increased net interest income from our previously disclosed merger with FTC, in which BancPlus acquired FTC, the holding company of First Bank and Trust (“FBT”) by a statutory share exchange and FTC was merged with and into BancPlus, with BancPlus surviving the merger (the “FTC Holding Company Merger”), and FBT was merged with and into BankPlus, with BankPlus surviving the merger, effective March 1, 2022 (together with the FTC Holding Company Merger, the “FTC Merger”), as well as organic loan growth and the rising interest rate environment seen in recent months. The decrease in return on average equity for the three months ended September 30, 2022 compared to the same period of 2021 was the result of an increase in total equity as a result of the issuance of 250,000 shares of the Company’s preferred stock on June 22, 2022 pursuant to a Letter Agreement (including annexes thereto, collectively, the “Purchase Agreement”) with the U.S. Department of Treasury (the “Treasury”) under the Emergency Capital Investment Program (“ECIP”). For more information about the preferred stock issuance refer to Footnote 11 to our Condensed Notes to Consolidated Financial Statements for the quarter ended September 30, 2022 contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Net income for the nine months ended September 30, 2022 and 2021 was $44.9 million and $45.5 million, respectively. BancPlus’ annualized return on average assets for the nine months ended September 30, 2022 and 2021 was 0.96% and 1.22%, respectively. BancPlus’ annualized return on average equity for the nine months ended September 30, 2022 and 2021 was 11.49% and 16.36%, respectively.
The decrease in net income and return metrics for the current year to date period was primarily the result of decreased life insurance income resulting from death benefits paid in the prior year period and increased professional fees resulting from our previously disclosed merger with FTC partially offset by third quarter growth in net interest income.period.
Net Interest Income
Net interest income represents interest income less interest expense. BancPlus generates interest income from interest, dividends and fees received on interest-earning assets, including loans and investment securities. BancPlus incurs interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, borrowings and other forms of indebtedness. Net interest income typically is the most significant contributor to BancPlus’ net income. To evaluate net interest income, BancPlus measures and monitors: (i) yields on its loans and other interest-earning assets; (ii) the costs of its deposits and other funding sources; (iii) its net interest spread; and (iv) its net interest margin. Net interest spread is the difference between rates earned on
interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources.
Changes in market interest rates and interest BancPlus earns on interest-earning assets or pays on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, usually have the largest impact on periodic changes in its net interest spread, net interest margin and net interest income. BancPlus measures net interest income before and after the provision for loancredit losses that BancPlus maintains.
For the three months ended September 30, 2022, netMarch 31, 2023, interest income was $61.9$80.8 million, an increase of $18.4$34.8 million, or 42.5%75.8%, compared to net interest income of $43.4$45.9 million for the three months ended September 30, 2021. For the nine months ended September 30, 2022, netMarch 31, 2022. These increase in interest income was $157.5 million, an increase of $30.7 million, or 24.2%, compared to net interest income of $126.8 million for the nine months ended September 30, 2021. These increases in net interest income were primarily the result of higher interest rates in the current year period as well as increased interest-earning assets as a result of the FTC Merger and organic loan growth.
For the three months ended March 31, 2023, interest expense was $22.6 million, an increase of $19.4 million, or 611.7%, compared to $3.2 million for the three months ended March 31, 2022. The increase in interest expense was primarily the result of higher interest rates in the current year period as well as increased interest-bearing liabilities as a result of the FTC Merger.
For the three months ended March 31, 2023, net interest income was $58.2 million, an increase of $15.4 million, or 36.0%, compared to net interest income of $42.8 million for the three months ended March 31, 2022.
Net interest margin for the three months ended September 30, 2022March 31, 2023 increased 3229 basis points to 3.98%3.51% from 3.66%3.22% for the same period of 20212022 primarily as the result of the rising interest rate environment seen in recent months. Net interest margin for the nine months ended September 30, 2022 decreased 6 basis points to 3.59% from 3.65% for the same period of 2021 as the result of higher fair value amortization and fees from loans made under the Paycheck Protection Program in 2021.current year period.
Our year to date average interest-earning assets at September 30, 2022,March 31, 2023 increased $1.22$1.32 billion, or 26.28%24.89%, to $5.86$6.64 billion from $4.64$5.31 billion at September 30, 2021.March 31, 2022. BancPlus’ year to date average interest-bearing liabilities at September 30, 2022March 31, 2023 increased $691.8 million,$1.09 billion, or 21.36%29.77%, to $3.93$4.74 billion from $3.24$3.65 billion at September 30, 2021.March 31, 2022. These increases in BancPlus’ average interest-earning assets and interest-bearing liabilities were primarily due to the FTC Merger and organic loan growth. The ratio of BancPlus’ average interest-earning assets to average interest-bearing liabilities was 149.0%140.1% and 143.2%145.5% at September 30,March 31, 2023 and 2022, and 2021, respectively.
BancPlus’ average interest-earning assets produced a tax-equivalent yield of 4.36% and 3.89%4.87% for the three and nine months ended September 30, 2022, respectively,March 31, 2023, compared to 3.93% and 3.94%3.46% for the three and nine months ended September 30, 2021, respectively.March 31, 2022. The average rate paid on interest-bearing liabilities was 0.58% and 0.45%1.91% for the three and nine months ended September 30, 2022, respectively,March 31, 2023, compared to 0.39% and 0.42%0.35% for the three and nine months ended September 30, 2021, respectively.March 31, 2022. The year-over-year changes in yields reflects the low interest rate environment seen earlier in the year combined with the rising interest rate environment seen in recent months.the current year period.
Average Balances and Yields
The following tables show, for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, the average balances of each principal category of BancPlus’ assets, liabilities and shareholders’ equity, and an analysis of net interest income. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. These tables are presented on a tax-equivalent basis, if applicable.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2022 | | 2021 |
(Dollars in thousands) | Average Balance | | Interest & Fees | | Yield / Rate (4) | | Average Balance | | Interest & Fees | | Yield / Rate (4) |
ASSETS: | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | |
Cash investments: | | | | | | | | | | | |
Interest-bearing cash deposits | $ | 101,839 | | | $ | 421 | | | 1.65 | % | | $ | 596,624 | | | $ | 231 | | | 0.15 | % |
Federal funds sold | — | | | — | | | — | % | | — | | | — | | | — | % |
| 101,839 | | | 421 | | | 1.65 | % | | 596,624 | | | 231 | | | 0.15 | % |
Investment securities: | | | | | | | | | | | |
Taxable investment securities | 629,762 | | | 2,658 | | | 1.69 | % | | 549,569 | | | 2,097 | | | 1.53 | % |
Tax-exempt investment securities | 66,681 | | | 387 | | | 2.32 | % | | 79,118 | | | 455 | | | 2.30 | % |
Total securities | 696,443 | | | 3,045 | | | 1.75 | % | | 628,687 | | | 2,552 | | | 1.62 | % |
Loans (1) | 5,412,216 | | | 64,309 | | | 4.75 | % | | 3,517,978 | | | 43,835 | | | 4.98 | % |
Federal Home Loan Bank (“FHLB”) stock | 11,504 | | | 42 | | | 1.46 | % | | 3,576 | | | 11 | | | 1.23 | % |
Total interest-earning assets | 6,222,002 | | | 67,817 | | | 4.36 | % | | 4,746,865 | | | 46,629 | | | 3.93 | % |
Noninterest-earning assets | 432,668 | | | | | | | 329,425 | | | | | |
Total assets | $ | 6,654,670 | | | | | | | $ | 5,076,290 | | | | | |
| | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | |
Interest-bearing transaction deposits | $ | 1,566,576 | | | $ | 1,645 | | | 0.42 | % | | $ | 1,468,126 | | | $ | 717 | | | 0.20 | % |
Savings and money market deposits | 1,419,280 | | | 700 | | | 0.20 | % | | 1,021,448 | | | 186 | | | 0.07 | % |
Time deposits | 799,445 | | | 721 | | | 0.36 | % | | 641,501 | | | 843 | | | 0.53 | % |
Federal funds purchased | 82 | | | — | | | — | % | | — | | | — | | | — | % |
FHLB advances | 162,344 | | | 1,093 | | | 2.69 | % | | 20,534 | | | 78 | | | 1.52 | % |
Other borrowings | 609 | | | 14 | | | 9.20 | % | | 11,223 | | | 110 | | | 3.92 | % |
Subordinated debentures | 133,387 | | | 1,767 | | | 5.30 | % | | 111,344 | | | 1,261 | | | 4.53 | % |
Total interest-bearing liabilities | 4,081,723 | | | 5,940 | | | 0.58 | % | | 3,274,176 | | | 3,195 | | | 0.39 | % |
Noninterest-bearing liabilities: | | | | | | | | | | | |
Noninterest-bearing transaction deposits | 1,819,151 | | | | | | | 1,364,915 | | | | | |
Other noninterest-bearing liabilities | 58,876 | | | | | | | 53,245 | | | | | |
Total noninterest-bearing liabilities | 1,878,027 | | | | | | | 1,418,160 | | | | | |
Shareholders’ equity (6) | 694,920 | | | | | | | 383,954 | | | | | |
Total liabilities and shareholders’ equity | $ | 6,654,670 | | | | | | | $ | 5,076,290 | | | | | |
Net interest income/net interest margin (2) | | | 61,877 | | | 3.98 | % | | | | 43,434 | | | 3.66 | % |
Net interest spread (5) | | | | | 3.78 | % | | | | | | 3.54 | % |
Taxable equivalent adjustment: | | | | | | | | | | | |
Tax-exempt investment securities (3) | | | 125 | | | | | | | 146 | | | |
Net interest income/net interest margin (2) | | | $ | 62,002 | | | 3.99 | % | | | | $ | 43,580 | | | 3.67 | % |
________________________________(1)Average loan balances include nonaccrual loans.
(2)Net interest margin during the periods presented represents: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
(3)Interest income and averages rates for tax exempt securities are presented on a tax-equivalent basis, assuming a combined federal and state income tax rate of 25% for 2022 and 2021.
(4)Yields and rates are annualized.
(5)Net interest spread is the yield on BancPlus’ total interest-earning assets less the yield on its interest-bearing liabilities.
(6)Includes Employee Stock Ownership-owned shares.
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
(Dollars in thousands) | (Dollars in thousands) | Average Balance | | Interest & Fees | | Yield / Rate (4) | | Average Balance | | Interest & Fees | | Yield / Rate (4) | (Dollars in thousands) | Average Balance | | Interest & Fees | | Yield / Rate (4) | | Average Balance | | Interest & Fees | | Yield / Rate (4) |
ASSETS: | ASSETS: | | | | | | | | | | | | ASSETS: | | | | | | | | | | | |
Interest-earning assets: | Interest-earning assets: | | Interest-earning assets: | |
Cash investments: | Cash investments: | | Cash investments: | |
Interest-bearing cash deposits | Interest-bearing cash deposits | $ | 349,369 | | | $ | 1,117 | | | 0.43 | % | | $ | 559,746 | | | $ | 465 | | | 0.11 | % | Interest-bearing cash deposits | $ | 31,635 | | | $ | 357 | | | 4.51 | % | | $ | 578,254 | | | $ | 227 | | | 0.16 | % |
Federal funds sold | Federal funds sold | — | | | — | | | — | % | | 7,070 | | | 11 | | | 0.21 | % | Federal funds sold | — | | | — | | | — | % | | — | | | — | | | — | % |
| | 349,369 | | | 1,117 | | | 0.43 | % | | 566,816 | | | 476 | | | 0.11 | % | | 31,635 | | | 357 | | | 4.51 | % | | 578,254 | | | 227 | | | 0.16 | % |
Investment securities: | Investment securities: | | Investment securities: | |
Taxable investment securities | Taxable investment securities | 628,634 | | | 7,467 | | | 1.58 | % | | 511,923 | | | 6,024 | | | 1.57 | % | Taxable investment securities | 635,344 | | | 3,066 | | | 1.93 | % | | 629,208 | | | 2,307 | | | 1.47 | % |
Tax-exempt investment securities | Tax-exempt investment securities | 69,222 | | | 1,208 | | | 2.33 | % | | 84,939 | | | 1,473 | | | 2.31 | % | Tax-exempt investment securities | 64,139 | | | 380 | | | 2.37 | % | | 72,432 | | | 420 | | | 2.32 | % |
Total securities | Total securities | 697,856 | | | 8,675 | | | 1.66 | % | | 596,862 | | | 7,497 | | | 1.67 | % | Total securities | 699,483 | | | 3,446 | | | 1.97 | % | | 701,640 | | | 2,727 | | | 1.55 | % |
Loans (1) | Loans (1) | 4,800,489 | | | 161,008 | | | 4.47 | % | | 3,469,520 | | | 129,066 | | | 4.96 | % | Loans (1) | 5,881,779 | | | 76,747 | | | 5.22 | % | | 4,029,014 | | | 42,987 | | | 4.27 | % |
Federal Home Loan Bank (“FHLB”) stock | Federal Home Loan Bank (“FHLB”) stock | 7,549 | | | 54 | | | 0.95 | % | | 3,509 | | | 17 | | | 0.65 | % | Federal Home Loan Bank (“FHLB”) stock | 22,781 | | | 221 | | | 3.88 | % | | 4,475 | | | 4 | | | 0.36 | % |
Total interest-earning assets | Total interest-earning assets | 5,855,263 | | | 170,854 | | | 3.89 | % | | 4,636,707 | | | 137,056 | | | 3.94 | % | Total interest-earning assets | 6,635,678 | | | 80,771 | | | 4.87 | % | | 5,313,383 | | | 45,945 | | | 3.46 | % |
Noninterest-earning assets | Noninterest-earning assets | 398,041 | | | 333,231 | | | Noninterest-earning assets | 448,172 | | | 345,648 | | |
Total assets | Total assets | $ | 6,253,304 | | | $ | 4,969,938 | | | Total assets | $ | 7,083,850 | | | $ | 5,659,031 | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | LIABILITIES AND SHAREHOLDERS’ EQUITY: | | LIABILITIES AND SHAREHOLDERS’ EQUITY: | |
Interest-bearing liabilities: | Interest-bearing liabilities: | | Interest-bearing liabilities: | |
Interest-bearing transaction deposits | Interest-bearing transaction deposits | $ | 1,578,415 | | | $ | 3,474 | | | 0.29 | % | | $ | 1,452,965 | | | $ | 2,278 | | | 0.21 | % | Interest-bearing transaction deposits | $ | 1,656,880 | | | $ | 3,224 | | | 0.78 | % | | $ | 1,590,153 | | | $ | 711 | | | 0.18 | % |
Savings and money market deposits | Savings and money market deposits | 1,359,333 | | | 1,589 | | | 0.16 | % | | 982,220 | | | 696 | | | 0.09 | % | Savings and money market deposits | 1,860,403 | | | 10,579 | | | 2.27 | % | | 1,199,908 | | | 312 | | | 0.10 | % |
Time deposits | Time deposits | 786,818 | | | 2,042 | | | 0.35 | % | | 659,361 | | | 2,899 | | | 0.59 | % | Time deposits | 810,804 | | | 3,357 | | | 1.66 | % | | 714,438 | | | 654 | | | 0.37 | % |
Federal funds purchased | Federal funds purchased | 27 | | | — | | | — | % | | — | | | — | | | — | % | Federal funds purchased | 6,406 | | | 79 | | | 4.93 | % | | — | | | — | | | — | % |
FHLB advances | FHLB advances | 68,352 | | | 1,246 | | | 2.43 | % | | 20,567 | | | 233 | | | 1.51 | % | FHLB advances | 269,196 | | | 3,215 | | | 4.78 | % | | 20,485 | | | 76 | | | 1.48 | % |
Other borrowings | Other borrowings | 8,620 | | | 280 | | | 4.33 | % | | 12,087 | | | 352 | | | 3.88 | % | Other borrowings | 889 | | | 10 | | | 4.50 | % | | 7,102 | | | 65 | | | 3.66 | % |
Subordinated debentures | Subordinated debentures | 128,638 | | | 4,734 | | | 4.91 | % | | 111,248 | | | 3,760 | | | 4.51 | % | Subordinated debentures | 133,485 | | | 2,154 | | | 6.45 | % | | 119,024 | | | 1,360 | | | 4.57 | % |
Total interest-bearing liabilities | Total interest-bearing liabilities | 3,930,203 | | | 13,365 | | | 0.45 | % | | 3,238,448 | | | 10,218 | | | 0.42 | % | Total interest-bearing liabilities | 4,738,063 | | | 22,618 | | | 1.91 | % | | 3,651,110 | | | 3,178 | | | 0.35 | % |
Noninterest-bearing liabilities: | Noninterest-bearing liabilities: | | Noninterest-bearing liabilities: | |
Noninterest-bearing transaction deposits | Noninterest-bearing transaction deposits | 1,745,151 | | | 1,306,105 | | | Noninterest-bearing transaction deposits | 1,585,862 | | | 1,545,452 | | |
Other noninterest-bearing liabilities | Other noninterest-bearing liabilities | 54,904 | | | 53,169 | | | Other noninterest-bearing liabilities | 77,818 | | | 53,290 | | |
Total noninterest-bearing liabilities | Total noninterest-bearing liabilities | 1,800,055 | | | 1,359,274 | | | Total noninterest-bearing liabilities | 1,663,680 | | | 1,598,742 | | |
Shareholders’ equity (6) | Shareholders’ equity (6) | 523,046 | | | 372,216 | | | Shareholders’ equity (6) | 682,107 | | | 409,179 | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 6,253,304 | | | $ | 4,969,938 | | | Total liabilities and shareholders’ equity | $ | 7,083,850 | | | $ | 5,659,031 | | |
Net interest income/net interest margin (2) | Net interest income/net interest margin (2) | | | 157,489 | | | 3.59 | % | | | | 126,838 | | | 3.65 | % | Net interest income/net interest margin (2) | | | 58,153 | | | 3.51 | % | | | | 42,767 | | | 3.22 | % |
Net interest spread (5) | Net interest spread (5) | | 3.44 | % | | | 3.52 | % | Net interest spread (5) | | 2.96 | % | | | 3.11 | % |
Taxable equivalent adjustment: | Taxable equivalent adjustment: | | | | | Taxable equivalent adjustment: | | | | |
Tax-exempt investment securities (3) | Tax-exempt investment securities (3) | | 389 | | | 474 | | | Tax-exempt investment securities (3) | | 122 | | | 135 | | |
Net interest income/net interest margin (2) | Net interest income/net interest margin (2) | | $ | 157,878 | | | 3.60 | % | | $ | 127,312 | | | 3.66 | % | Net interest income/net interest margin (2) | | $ | 58,275 | | | 3.51 | % | | $ | 42,902 | | | 3.23 | % |
________________________________(1)Average loan balances include nonaccrual loans.
(2)Net interest margin during the periods presented represents: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
(3)Interest income and averages rates for tax exempt securities are presented on a tax-equivalent basis, assuming a combined federal and state income tax rate of 25% for 20222023 and 2021.2022.
(4)Yields and rates are annualized.
(5)Net interest spread is the yield on BancPlus’ total interest-earning assets less the yield on its interest-bearing liabilities.
(6)Includes BancPlus Corporation Employee Stock Ownership-ownedOwnership Plan-owned shares.
Rate/Volume Analysis
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to the outstanding balances and those due to changes in interest rates. The change in interest attributable to rate has been determined by applying the change in rate between periods to average balances outstanding in the earlier period. The change in interest due to volume has been determined by applying the rate from the later period to the change in average balances outstanding between periods. The following table presents the changes in the volume and rate of BancPlus’ interest-bearing assets and liabilities for the dates indicated:
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 Compared with Three Months Ended September 30, 2021 |
| Change Due To: | | |
(Dollars in thousands) | Volume | | Rate | Interest Variance |
Interest-earning assets: | | | | | |
Cash investments | $ | (2,045) | | | $ | 2,235 | | | $ | 190 | |
Investment securities: | | | | | |
Taxable investment securities | 338 | | | 223 | | | 561 | |
Tax-exempt investment securities | (72) | | | 4 | | | (68) | |
Total securities | 266 | | | 227 | | | 493 | |
Loans, net | 22,508 | | | (2,034) | | | 20,474 | |
Federal Home Loan Bank stock | 29 | | | 2 | | | 31 | |
Total interest-earning assets | $ | 20,758 | | | $ | 430 | | | $ | 21,188 | |
| | | | | |
Interest-bearing liabilities: | | | | | |
Interest-bearing transaction deposits | $ | 103 | | | $ | 825 | | | $ | 928 | |
Savings and money market deposits | 196 | | | 318 | | | 514 | |
Time deposits | 142 | | | (264) | | | (122) | |
| | | | | |
FHLB advances | 955 | | | 60 | | | 1,015 | |
Other borrowings | (244) | | | 148 | | | (96) | |
Subordinated debentures | 292 | | | 214 | | | 506 | |
Total interest-bearing liabilities | $ | 1,444 | | | $ | 1,301 | | | $ | 2,745 | |
Net interest income | $ | 19,314 | | | $ | (871) | | | $ | 18,443 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022 |
| Change Due To: | | |
(Dollars in thousands) | Volume | | Rate | Interest Variance |
Interest-earning assets: | | | | | |
Cash investments | $ | (6,169) | | | $ | 6,299 | | | $ | 130 | |
Investment securities: | | | | | |
Taxable investment securities | 30 | | | 729 | | | 759 | |
Tax-exempt investment securities | (49) | | | 9 | | | (40) | |
Total securities | (19) | | | 738 | | | 719 | |
Loans, net | 24,175 | | | 9,585 | | | 33,760 | |
Federal Home Loan Bank stock | 178 | | | 39 | | | 217 | |
Total interest-earning assets | $ | 18,165 | | | $ | 16,661 | | | $ | 34,826 | |
| | | | | |
Interest-bearing liabilities: | | | | | |
Interest-bearing transaction deposits | $ | 130 | | | $ | 2,383 | | | $ | 2,513 | |
Savings and money market deposits | 3,756 | | | 6,511 | | | 10,267 | |
Time deposits | 399 | | | 2,304 | | | 2,703 | |
Federal funds purchased | 79 | | | — | | | 79 | |
FHLB advances | 2,970 | | | 169 | | | 3,139 | |
Other borrowings | (70) | | | 15 | | | (55) | |
Subordinated debentures | 233 | | | 561 | | | 794 | |
Total interest-bearing liabilities | $ | 7,497 | | | $ | 11,943 | | | $ | 19,440 | |
Net interest income | $ | 10,668 | | | $ | 4,718 | | | $ | 15,386 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021 |
| Change Due To: | | |
(Dollars in thousands) | Volume | | Rate | Interest Variance |
Interest-earning assets: | | | | | |
Cash investments | $ | (695) | | | $ | 1,336 | | | $ | 641 | |
Investment securities: | | | | | |
Taxable investment securities | 1,386 | | | 57 | | | 1,443 | |
Tax-exempt investment securities | (274) | | | 9 | | | (265) | |
Total securities | 1,112 | | | 66 | | | 1,178 | |
Loans, net | 44,641 | | | (12,699) | | | 31,942 | |
Federal Home Loan Bank stock | 29 | | | 8 | | | 37 | |
Total interest-earning assets | $ | 45,087 | | | $ | (11,289) | | | $ | 33,798 | |
| | | | | |
Interest-bearing liabilities: | | | | | |
Interest-bearing transaction deposits | $ | 276 | | | $ | 920 | | | $ | 1,196 | |
Savings and money market deposits | 441 | | | 452 | | | 893 | |
Time deposits | 331 | | | (1,188) | | | (857) | |
| | | | | |
FHLB advances | 871 | | | 142 | | | 1,013 | |
Other borrowings | (113) | | | 41 | | | (72) | |
Subordinated debentures | 640 | | | 334 | | | 974 | |
Total interest-bearing liabilities | $ | 2,446 | | | $ | 701 | | | $ | 3,147 | |
Net interest income | $ | 42,641 | | | $ | (11,990) | | | $ | 30,651 | |
Provision for LoanCredit Losses
The provision for loancredit losses is the amount of expense that, based on BancPlus’ judgment, is required to maintain the allowance for loancredit losses at an adequate level to absorb probable losses inherent in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under relevant accounting guidance. The determination of the provision for loancredit losses is complex and involves a high degree of judgment and subjectivity.
For the three months ended September 30, 2022,March 31, 2023, the provision for loancredit losses was $489,000,$523,000, compared to $1.5 million$217,000 for the same period of 2021, a decrease2022, an increase of $1.0 million,$306,000, or 66.7%. For the nine months ended September 30, 2022, the provision for loan losses was $940,000, compared to $7.4 million for the same period of 2021, a decrease of $6.5 million, or 87.3%141.0%. The decreases for these periods areincrease is primarily attributable to increased loan balances resulting from the impact of the COVID-19 pandemic on the prior year period, including the impact of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing, loan forgiveness and automatic forbearance.FTC Merger.
Noninterest Income
Noninterest income consists of, among other things:of: (i) service charges on deposit accounts; (ii) mortgage origination income; (iii) debit card interchange fees; (iv) income from fiduciary activities; (v) ATM income; (vi) brokerage and insurance fees and commissions, (vii) life insurance income, (viii) CDFI grants, and (viii) other noninterest income.
BancPlus’ income from service charges on deposit accounts and debit card interchange fees areis largely impactedaffected by the volume, growth and type of deposits BancPlus holds, which are impacted by prevailing market conditions for BancPlus’ deposit products, market interest rates, marketing efforts, and other factors.
Service charges on deposit accounts includesinclude fees and miscellaneous charges on deposit products offered by BancPlus. Mortgage origination income represents the gains recorded on the sale of mortgages originated by BancPlus. Debit card interchange represents income from the use of checkcardscheck cards by our customers. Income from fiduciary activities includes retirement and management fee income from our wealth management group. ATM income is comprised of fees from our ATM network.
Brokerage and insurance fees and commissions includes stock and mutual fund brokerage fees earned by our wealth management
group. Life insurance income includes earnings and benefits paid on bank-owned life insurance policies. Other income includes various types of income including gains on sale of other real estate, personalized check sales, and wire transfer fees.
Noninterest income decreased $1.5$2.1 million, or 7.87%11.83%, to $17.6$15.8 million for the three months ended September 30, 2022March 31, 2023 compared to $19.1$18.0 million for the same period of 2021,2022, primarily due to decreases in mortgage origination income of $880,000, or 44.0%, and life insurance income of $516,000, or 44.3%, offset by an increase in service charges on deposit accounts of $719,000, or 9.6%.other income.
The following table presents the major components of noninterest income for three months ended September 30, 2022,March 31, 2023, compared to the three months ended September 30, 2021:March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
(Dollars in thousands) | 2022 | | 2021 | | $ Change | | % Change |
Noninterest income: | | | | | | | |
Service charges on deposit accounts | $ | 8,203 | | | $ | 7,484 | | | $ | 719 | | | 9.6 | % |
Mortgage origination income | 1,119 | | | 1,999 | | | (880) | | | (44.0) | % |
Debit card interchange | 2,393 | | | 2,390 | | | 3 | | | 0.1 | % |
Income from fiduciary activities | 1,794 | | | 2,015 | | | (221) | | | (11.0) | % |
ATM income | 1,537 | | | 1,566 | | | (29) | | | (1.9) | % |
Brokerage and insurance fees and commissions | 734 | | | 648 | | | 86 | | | 13.3 | % |
Life insurance income | 648 | | | 1,164 | | | (516) | | | (44.3) | % |
CDFI grants | 272 | | | 645 | | | (373) | | | (57.8) | % |
Other income | 866 | | | 1,155 | | | (289) | | | (25.0) | % |
Total | $ | 17,566 | | | $ | 19,066 | | | $ | (1,500) | | | (7.9) | % |
Service charges on deposit accounts increased $719,000, or 9.6%, to $8.2 million for the three months ended September 30, 2022, compared to $7.5 million for the same period of 2021. The increase was primarily the result of an increase in the number of deposit accounts held and a higher volume of transactions due to the FTC Merger. | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
(Dollars in thousands) | 2023 | | 2022 | | $ Change | | % Change |
Noninterest income: | | | | | | | |
Service charges on deposit accounts | $ | 6,666 | | | $ | 6,792 | | | $ | (126) | | | (1.9) | % |
Mortgage origination income | 687 | | | 2,238 | | | (1,551) | | | (69.3) | % |
Debit card interchange | 2,566 | | | 2,428 | | | 138 | | | 5.7 | % |
Income from fiduciary activities | 1,906 | | | 2,018 | | | (112) | | | (5.6) | % |
ATM income | 1,474 | | | 1,476 | | | (2) | | | (0.1) | % |
Brokerage and insurance fees and commissions | 637 | | | 698 | | | (61) | | | (8.7) | % |
Life insurance income | 656 | | | 627 | | | 29 | | | 4.6 | % |
CDFI grants | — | | | — | | | — | | | — | % |
Other income | 1,247 | | | 1,688 | | | (441) | | | (26.1) | % |
Total | $ | 15,839 | | | $ | 17,965 | | | $ | (2,126) | | | (11.8) | % |
Mortgage origination income decreased $880,000,$1.6 million, or 44.0%69.3%, to $1.1$0.7 million for the three months ended September 30, 2022,March 31, 2023, compared to $2.0$2.2 million for the same period of 2021. The decrease was the primarily the result of decreased mortgage origination activity as refinancing activity has slowed in the current higher interest rate environment.
Life insurance income decreased $516,000, or 44.3%, to $648,000 for the three months ended September 30, 2022, compared to $1.2 million for the same period of 2021. The decrease is primarily related to death benefits paid in the prior year period on policies held by BancPlus.
Noninterest income was $54.3 million for the nine months ended September 30, 2022, compared to $58.1 million for the same period of 2021, a decrease of $3.8 million, or 6.6%, primarily due to decreases in life insurance income of $3.9 million, or 67.3%,
CDFI grants of $2.0 million, or 82.1%, and mortgage origination income of $1.1 million, or 15.8%; partially offset by an increase in service charges on deposit accounts of $3.5 million, or 18.0%.
The following table presents the major components of noninterest income for nine months ended September 30, 2022, compared to the nine months ended September 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
(Dollars in thousands) | 2022 | | 2021 | | $ Change | | % Change |
Noninterest income: | | | | | | | |
Service charges on deposit accounts | $ | 22,696 | | | $ | 19,226 | | | $ | 3,470 | | | 18.0 | % |
Mortgage origination income | 5,661 | | | 6,726 | | | (1,065) | | | (15.8) | % |
Debit card interchange | 7,569 | | | 7,634 | | | (65) | | | (0.9) | % |
Income from fiduciary activities | 5,844 | | | 5,681 | | | 163 | | | 2.9 | % |
ATM income | 4,593 | | | 4,809 | | | (216) | | | (4.5) | % |
Brokerage and insurance fees and commissions | 2,067 | | | 1,802 | | | 265 | | | 14.7 | % |
Life insurance income | 1,913 | | | 5,858 | | | (3,945) | | | (67.3) | % |
CDFI grants | 443 | | | 2,471 | | | (2,028) | | | (82.1) | % |
Other income | 3,476 | | | 3,873 | | | (397) | | | (10.3) | % |
Total | $ | 54,262 | | | $ | 58,080 | | | $ | (3,818) | | | (6.6) | % |
Service charges on deposit accounts increased $3.5 million, or 18.0%, to $22.7 million for the nine months ended September 30, 2022, compared to $19.2 million for the same period of 2021. The increase was primarily the result of an increase in the number of deposit accounts held and a higher volume of transactions due to the FTC Merger.
Mortgage origination income decreased $1.1 million, or 15.8%, to $5.7 million for the nine months ended September 30, 2022, compared to $6.7 million for the same period of 2021.2022. The decrease was primarily the result of decreased mortgage origination activity as refinancing activity has slowed in the current higher interest rate environment.
Life insuranceOther income decreased $3.9 million,$441,000, or 67.3%26.1%, to $1.9$1.2 million for the ninethree months ended September 30, 2022,March 31, 2023, compared to $5.9$1.7 million for the same period of 2021.2022. The decrease iswas primarily related to death benefits paid in the prior year period on policies held by BancPlus.
CDFI grant income decreased $2.0 million, or 82.1%, to $443,000 for the three months ended September 30, 2022, compared to $2.5 million for the same period of 2021. The decrease was the result of a grant receiveddecrease in the prior year period related to the CDFI Rapid Response Program, which was created in 2021 by the U.S. Departmentfair value of the Treasury to provide capitalmortgage loans held for CDFI designated banks to respond to the economic challenges created by the COVID-19 pandemic.sale and a reduced annual rebate for personalized check sales.
Noninterest Expense
Noninterest expense includes: (i) salaries and employee benefits expenses; (ii) net occupancy expenses; (iii) furniture, equipment, and data processing expenses; (iv) marketing and promotional expenses; (v) other real estate expenses and losses; (vi) professional fees; and (vii) other expenses.
Salaries and employee benefits expenses includesinclude compensation, employee benefits and tax expenses for BancPlus’ personnel. Net occupancy expenses include depreciation expense on BancPlus’ owned properties, lease expense on its leased properties and other occupancy-related expenses. Furniture and equipment expenses include depreciation and maintenance and other expenses related to its furniture, fixtures and equipment. Data processing expenses include costs related to maintenance and monitoring of its systems and expenses paid to its third-party data processing system providers. Marketing and promotional expenses include costs for advertising, promotions and sponsorships. Other real estate expenses and losses include taxes, insurance, maintenance and other expenses related to BancPlus’ foreclosed properties. Professional fees include accounting and auditing, consulting and legal fees. Other expenses include expenses associated with Federal Deposit Insurance Corporation (“FDIC”)FDIC assessments, Mississippi Department of Banking and Consumer Finance (“MDBCF”) assessments, communications, travel, meals, training, supplies, postage and other miscellaneous expenses. postage.
Noninterest expense generally increases as BancPlus grows its business. Noninterest expense has increased commensurate with our growth over the past few years as BancPlus has grown organically and through our previously disclosed merger with State Capital Corp. (“SCC”), in which BancPlus acquired SCC, the holding company of State Bank & Trust Company (“State Bank”) by a statutory share exchange and SCC was merged with and into
BancPlus, with BancPlus surviving the merger (the “SCC Holding Company Merger”), and State Bank was merged with and into BankPlus, with BankPlus surviving the merger (together with the SCC Holding Company Merger, the “SCC Merger”), which closed on April 1, 2020, and the FTC Merger.acquisitions. Additionally, BancPlus has built out and modernized its operational infrastructure and implemented its plan to build an efficient, technology-driven banking operation with capacity for growth. BancPlus continues to focus efforts on supporting growth through sales efforts, product development, marketing and promotion, as well as investing in technology and its branch network, while also seeking to improve productivity and maintain appropriate cost structure and customer service levels.
For the three months ended September 30, 2022,March 31, 2023, noninterest expense totaled $54.7$51.6 million, an increase of $11.9$3.6 million, or 27.7%7.4%, from $42.8$48.1 million for the three months ended September 30, 2021,March 31, 2022, primarily due to increases in salaries and employee benefits expenses of $7.7 million, or 30.5%; furniture, equipment and data processing expenses of $1.4 million, or 22.1%; other expenses, of $1.3 million, or 25.8%;partially offset by decreases in professional fees and net occupancyother real estate expenses of $1.1 million, or 31.3%.and losses.
The following table presents the major components of noninterest expense for the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021:March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
(Dollars in thousands) | 2022 | | 2021 | | $ Change | | % Change |
Noninterest expense: | | | | | | | |
Salaries and employee benefits expenses | $ | 32,909 | | | $ | 25,218 | | | $ | 7,691 | | | 30.5 | % |
Net occupancy expenses | 4,733 | | | 3,606 | | | 1,127 | | | 31.3 | % |
Furniture, equipment and data processing expenses | 7,671 | | | 6,282 | | | 1,389 | | | 22.1 | % |
Marketing and promotional expenses | 2,027 | | | 1,154 | | | 873 | | | 75.6 | % |
Other real estate expenses and losses | 111 | | | 292 | | | (181) | | | (62.0) | % |
Professional fees | 915 | | | 1,232 | | | (317) | | | (25.7) | % |
Other expenses | 6,338 | | | 5,038 | | | 1,300 | | | 25.8 | % |
Total | $ | 54,704 | | | $ | 42,822 | | | $ | 11,882 | | | 27.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
(Dollars in thousands) | 2023 | | 2022 | | $ Change | | % Change |
Noninterest expense: | | | | | | | |
Salaries and employee benefits expenses | $ | 30,991 | | | $ | 25,845 | | | $ | 5,146 | | | 19.9 | % |
Net occupancy expenses | 4,472 | | | 4,116 | | | 356 | | | 8.6 | % |
Furniture, equipment and data processing expenses | 7,316 | | | 6,616 | | | 700 | | | 10.6 | % |
Marketing and promotional expenses | 1,537 | | | 1,108 | | | 429 | | | 38.7 | % |
Other real estate expenses and losses | 56 | | | 733 | | | (677) | | | (92.4) | % |
Professional fees | 863 | | | 4,659 | | | (3,796) | | | (81.5) | % |
Other expenses | 6,407 | | | 4,993 | | | 1,414 | | | 28.3 | % |
Total | $ | 51,642 | | | $ | 48,070 | | | $ | 3,572 | | | 7.4 | % |
Salaries and employee benefits expenses iswas the largest component of noninterest expense, representing 60.2%60.0% and 58.9%53.8% of total noninterest expense for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively. During the three months ended September 30, 2022,March 31, 2023, salaries and employee benefits expense increased $7.7$5.1 million, or 30.5%19.9%, to $32.9$31.0 million, compared to $25.2$25.8 million for the three months ended September 30, 2021.March 31, 2022. The increase in salaries and employee benefits expense is primarily due the FTC Merger as well as to normal annual salary increases for employees.
Net occupancy expenses increased $1.1 million, or 31.3%, to $4.7 million for the three months ended September 30, 2022, compared to $3.6 million for the same period of 2021. The primary reason for the increase is increased depreciation and rent expense as a result of the FTC Merger.
Furniture, fixtures and data processing expenses increased $1.4 million, or 22.1%, to $7.7 million for the three months ended September 30, 2022, compared to $6.3 million for the same period of 2021. The increase is primarily due to increased data processing and equipment maintenance expenses in the current year period resulting from our recent core system upgrade as well as costs associated with conversion of FTC customers to our core system.
Other expenses increased $1.3 million, or 25.8%, to $6.3 million for the three months ended September 30, 2022, compared to $5.0 million for the same period of 2021. The increase is the primarily attributable to increases in FDIC assessments, amortization of intangible assets, and other expenses resulting from the FTC Merger.
For the nine months ended September 30, 2022, noninterest expense totaled $153.8 million, an increase of $32.4 million, or 26.7%, from $121.4 million for the nine months ended September 30, 2021, primarily due to increases in salaries and employee benefits expenses of $16.2 million, or 22.4%; professional fees of $4.2 million, or 166.9%; furniture, equipment and data processing expenses of $3.6 million, or 19.8%; other expenses of $3.1 million, or 21.9%; net occupancy expenses of $3.0 million, or 27.5%; and marketing and promotional expenses of $1.9 million, or 76.2%.
The following table presents the major components of noninterest expense for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
(Dollars in thousands) | 2022 | | 2021 | | $ Change | | % Change |
Noninterest expense: | | | | | | | |
Salaries and employee benefits expenses | $ | 88,559 | | | $ | 72,365 | | | $ | 16,194 | | | 22.4 | % |
Net occupancy expenses | 13,740 | | | 10,779 | | | 2,961 | | | 27.5 | % |
Furniture, equipment and data processing expenses | 21,957 | | | 18,322 | | | 3,635 | | | 19.8 | % |
Marketing and promotional expenses | 4,379 | | | 2,485 | | | 1,894 | | | 76.2 | % |
Other real estate expenses and losses | 1,154 | | | 744 | | | 410 | | | 55.1 | % |
Professional fees | 6,709 | | | 2,514 | | | 4,195 | | | 166.9 | % |
Other expenses | 17,291 | | | 14,188 | | | 3,103 | | | 21.9 | % |
Total | $ | 153,789 | | | $ | 121,397 | | | $ | 32,392 | | | 26.7 | % |
Salaries and employee benefits expenses is the largest component of noninterest expense, representing 57.6% and 59.6% of total noninterest expense for the nine months ended September 30, 2022 and 2021, respectively. During the nine months ended September 30, 2022, salaries and employee benefits expense increased $16.2 million, or 22.4%, to $88.6 million, compared to $72.4 million for the nine months ended September 30, 2021. The increase in salaries and employee benefits expense iswas primarily due the FTC Merger as well as to normal annual salary increases for employees and increased bonuses.
Net occupancyOther expenses increased $3.0$1.4 million, or 27.5%28.3%, to $13.7$6.4 million for the ninethree months ended September 30, 2022,March 31, 2023, compared to $10.8$5.0 million for the same period of 2021.2022. The primary reason for the increase is increased depreciationwas primarily attributable to increases in amortization of intangible assets and rent expense as a result ofLouisiana shares tax resulting from the FTC Merger.Merger, as well as increases in fees and commissions expense and loss on disposal of fixed assets in the current year period.
Furniture, fixtures and data processing expenses increased $3.6Professional fees decreased $3.8 million, or 19.8%81.5%, to $22.0 million$863,000 for the ninethree months ended September 30, 2022,March 31, 2023, compared to $18.3$4.7 million for the same period of 2021.2022. The increase is primarily due to increased data processing and equipment maintenance expenses in the current year period resulting from our recent core system upgrade as well as costs associated with conversion of FTC customers to our core system.
Market and promotional expenses increased $1.9 million, or 76.2%, to $4.4 million for the nine months ended September 30, 2022, compared to $2.5 million for the same period of 2021. The increase was primarily attributable to increased community sponsorship expense in the current year period as a result of the FTC Merger.
Professional fees increased $4.2 million, or 166.9%, to $6.7 million for the nine months ended September 30, 2022, compared to $2.5 million for the same period of 2021. The increasedecrease was primarily the result of advisory fees as well as increased legal and accounting expenses in the prior year in connection with the FTC Merger.
Other real estate expenses increased $3.1 million,and losses decreased $677,000, or 21.9%92.4%, to $17.3 million$56,000 for the ninethree months ended September 30, 2022,March 31, 2023, compared to $14.2 million$733,000 for the same period of 2021.2022. The increase is thedecrease was primarily attributablerelated to increases in FDIC assessments, amortization of intangible assets, andwritedowns on other expenses resulting fromreal estate owned in the FTC Merger.prior year period.
Income Tax Expense
The provision for income taxes includes both federal and state taxes. Fluctuations in effective tax rates reflect the effect of the differences in the inclusion or deductibility of certain income and expenses for income tax purposes, the mix of BancPlus’ taxable and tax-free investments and loans, and its overall taxable income.
BancPlus recorded income tax expense of $5.1$4.7 million for the three months ended September 30, 2022,March 31, 2023, compared to $4.0$2.8 million for the same period of 2021,2022, an increase of $1.1$2.0 million, or 27.3%72.3%. BancPlus’ effective tax rate for the three months ended September 30, 2022March 31, 2023 was 21.1%21.8%, compared to 22.0%22.1% for the same period of 2021.2022.
BancPlus recorded income tax expense of $12.1 million for the nine months ended September 30, 2022, compared to $10.6 million for the same period of 2021, an increase $1.5 million, or 14.0%. BancPlus’ effective tax rate for the nine months ended September 30, 2022 was 21.2%, compared to 18.9% for the same period of 2021.
The increasedecrease in the effective tax rate for the ninethree months ended September 30, 2022March 31, 2023 compared with the same period of 20212022 was the result of non-deductible expenses related to the Company taking advantage of tax credits offered by Mississippi and non-taxable life insurance proceedsFTC Merger in the prior year period.
The increase in income tax expense for the three and nine months ended September 30, 2022,March 31, 2023, compared to the same periods of 2021,2022, was primarily the result of higher income before taxes in the current year.
Financial Condition
The following discussion compares BancPlus’ financial condition as of September 30, 2022March 31, 2023 to December 31, 2021.2022.
Assets
Total assets increased $1.58$0.14 billion, or 30.5%2.0%, to $6.78$7.17 billion at September 30, 2022 fromMarch 31, 2023 over total assets of $5.20$7.03 billion at December 31, 2021.2022. Total cash and cash equivalents decreased $491.9$16.7 million, or 74.1%12.1%, to $172.3$121.2 million at September 30, 2022,March 31, 2023, compared to $664.2$137.9 million at December 31, 2021,2022, primarily due to an increase in cash outflow for investments and loans made during the period. Total loans held for investment increased $1.93$0.13 billion, or 53.3%2.2%, to $5.55$5.95 billion at September 30, 2022,March 31, 2023, compared to $3.62$5.82 billion at December 31, 20212022 as a result of the FTC Merger and organic loan growth. Investment securities increased $32.3$34.6 million, or 5.0%, from $648.3$686.2 million at December 31, 20212022 to $680.5$720.8 million at September 30, 2022March 31, 2023 primarily as a result of securities acquiredincreases in the FTC Merger.BancPlus’ portfolio of U.S. Government agency obligations.
Investment Securities Portfolio
BancPlus’ investment securities portfolio, which consists primarily of U.S. government agency obligations, mortgage-backed securities, municipal securities and corporate investments, is used as a source of liquidity and serves as collateral for certain types of deposits. BancPlus manages its investment securities portfolio according to a written investment policy. Balances in BancPlus’ investment securities portfolio change over time based on its funding needs and interest rate risk management objectives. BancPlus’ liquidity levels take into account anticipated future cash flows and all available sources of credit and are maintained at levels management believes ensure flexibility in meeting its anticipated funding needs.
As of September 30, 2022, 9.7%March 31, 2023, 8.5% of BancPlus’ investment securities portfolio was classified as held to maturity and 90.3%91.5% was classified as available for sale. As of December 31, 2021, 11.1%2022, 9.1% of BancPlus’ investment securities portfolio was classified as held to maturity and 88.9%90.9% was classified as available for sale. Securities available for sale increased $38.0$35.7 million, or 6.6%5.7%, from $576.6$623.9 million at December 31, 20212022 to $614.7$659.6 million at September 30, 2022.March 31, 2023 primarily as a result of increases in BancPlus’ portfolio of U.S. Government agency obligations.
At September 30,March 31, 2023, U.S. government agency obligations represented 57.6%, mortgage-backed securities represented 14.5%, municipal securities represented 15.2%, corporate investments represented 6.5%, U.S. Treasuries represented 4.9% and asset-backed securities represented 1.3% of BancPlus’ investment securities portfolio. At December 31, 2022, U.S. government agency obligations represented 54.0%55.2%, mortgage-backed securities represented 16.1%15.5%, municipal securities represented 16.6%16.1%, corporate investments represented 6.6%, U.S. Treasuries represented 5.0%6.7% and asset-backed securities represented 1.6%1.5% of the investment securities portfolio. At December 31, 2021, U.S. government agency obligations represented 54.0%, mortgage-backed securities represented 19.1%, municipal securities represented 17.9%, corporate investments represented 6.9% and asset-backed securities represented 2.0% of theBancPlus’ investment securities portfolio. Other than the U.S. government and its agencies, BancPlus’ securities portfolio did not contain securities of any single issuer, including any securities issued by a state or political subdivision, that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of shareholders’ equity.
The following table presents the carrying value of BancPlus’ investment securities portfolio as of the dates indicated:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(Dollars in thousands) | (Dollars in thousands) | | Carrying Value | | % of Total | | Carrying Value | | % of Total | (Dollars in thousands) | | Carrying Value | | % of Total | | Carrying Value | | % of Total |
Held to Maturity: | Held to Maturity: | | | | | | | | | Held to Maturity: | | | | | | | | |
(At amortized cost) | (At amortized cost) | | (At amortized cost) | |
| Issued by states and political subdivisions | Issued by states and political subdivisions | | $ | 65,889 | | | 9.68 | % | | $ | 71,648 | | | 11.05 | % | Issued by states and political subdivisions | | $ | 61,262 | | | 8.50 | % | | $ | 62,274 | | | 9.08 | % |
| Total held-to-maturity | Total held-to-maturity | | 65,889 | | | 9.68 | % | | 71,648 | | | 11.05 | % | Total held-to-maturity | | 61,262 | | | 8.50 | % | | 62,274 | | | 9.08 | % |
| Available for Sale: | Available for Sale: | | Available for Sale: | |
(At fair value) | (At fair value) | | (At fair value) | |
U.S. Treasuries | U.S. Treasuries | | 34,351 | | | 5.05 | % | | — | | | — | % | U.S. Treasuries | | 34,992 | | | 4.85 | % | | 34,579 | | | 5.04 | % |
U.S. Government agency obligations | U.S. Government agency obligations | | 367,683 | | | 54.03 | % | | 350,250 | | | 54.03 | % | U.S. Government agency obligations | | 415,064 | | | 57.58 | % | | 378,736 | | | 55.19 | % |
Issued by states and political subdivisions | Issued by states and political subdivisions | | 46,769 | | | 6.87 | % | | 44,684 | | | 6.89 | % | Issued by states and political subdivisions | | 48,651 | | | 6.75 | % | | 48,150 | | | 7.02 | % |
Mortgage-backed securities: | Mortgage-backed securities: | | Mortgage-backed securities: | |
Residential | Residential | | 97,821 | | | 14.37 | % | | 109,787 | | | 16.94 | % | Residential | | 92,266 | | | 12.80 | % | | 94,132 | | | 13.72 | % |
Commercial | Commercial | | 12,038 | | | 1.77 | % | | 14,276 | | | 2.20 | % | Commercial | | 12,238 | | | 1.70 | % | | 12,070 | | | 1.76 | % |
Asset-backed securities | Asset-backed securities | | 11,087 | | | 1.63 | % | | 13,107 | | | 2.02 | % | Asset-backed securities | | 9,391 | | | 1.30 | % | | 10,220 | | | 1.49 | % |
Corporate investments | Corporate investments | | 44,909 | | | 6.60 | % | | 44,510 | | | 6.87 | % | Corporate investments | | 46,979 | | | 6.52 | % | | 46,033 | | | 6.71 | % |
Total available for sale | Total available for sale | | 614,658 | | | 90.32 | % | | 576,614 | | | 88.95 | % | Total available for sale | | 659,581 | | | 91.50 | % | | 623,920 | | | 90.92 | % |
| Total securities | | $ | 680,547 | | | 100.00 | % | | $ | 648,262 | | | 100.00 | % | |
Total investment securities | | Total investment securities | | $ | 720,843 | | | 100.00 | % | | $ | 686,194 | | | 100.00 | % |
The following tables present the carrying value of BancPlus’ investment securities portfolio by their stated maturities and the weighted average yields for each maturity range as of the dates indicated. Weighted-average yields have been computed on a fully tax equivalent basis using a tax rate of 21%.
| | | Maturity as of September 30, 2022 | | Maturity as of March 31, 2023 |
| | Due in One Year or Less | | More Than One Year to Five Years | | More Than Five Years to Ten Years | | Due After Ten Years | | Due in One Year or Less | | More Than One Year to Five Years | | More Than Five Years to Ten Years | | Due After Ten Years |
(Dollars in thousands) | (Dollars in thousands) | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | (Dollars in thousands) | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield |
Held to maturity: | Held to maturity: | | | | | | | | | | | | | | | | Held to maturity: | | | | | | | | | | | | | | | |
| Issued by states and political subdivisions | Issued by states and political subdivisions | $ | 7,868 | | | 3.18 | % | | $ | 47,439 | | | 2.48 | % | | $ | 8,372 | | | 3.69 | % | | $ | 2,210 | | | 4.27 | % | Issued by states and political subdivisions | $ | 6,974 | | | 2.62 | % | | $ | 46,198 | | | 2.50 | % | | $ | 6,450 | | | 3.69 | % | | $ | 1,640 | | | 4.33 | % |
| Total held to maturity | Total held to maturity | 7,868 | | | 3.18 | % | | 47,439 | | | 2.48 | % | | 8,372 | | | 3.69 | % | | 2,210 | | | 4.27 | % | Total held to maturity | 6,974 | | | 2.62 | % | | 46,198 | | | 2.50 | % | | 6,450 | | | 3.69 | % | | 1,640 | | | 4.33 | % |
| Available for sale: | Available for sale: | | Available for sale: | |
U.S. Treasuries | U.S. Treasuries | 25,120 | | | 1.35 | % | | 9,231 | | | 1.24 | % | | — | | | — | % | | — | | | — | % | U.S. Treasuries | 25,591 | | | 1.35 | % | | 9,401 | | | 1.24 | % | | — | | | — | % | | — | | | — | % |
U.S. Government agency obligations | U.S. Government agency obligations | 4,869 | | | 0.80 | % | | 293,432 | | | 0.84 | % | | 66,254 | | | 1.31 | % | | 3,127 | | | 3.30 | % | U.S. Government agency obligations | 75,321 | | | 0.55 | % | | 276,804 | | | 1.35 | % | | 60,430 | | | 1.61 | % | | 2,509 | | | 6.06 | % |
Issued by states and political subdivisions | Issued by states and political subdivisions | 3,750 | | | 2.46 | % | | 21,895 | | | 2.97 | % | | 16,272 | | | 3.21 | % | | 4,852 | | | 2.73 | % | Issued by states and political subdivisions | 3,333 | | | 2.79 | % | | 23,348 | | | 2.87 | % | | 19,016 | | | 3.06 | % | | 2,954 | | | 3.71 | % |
Mortgage-backed securities: | Mortgage-backed securities: | | Mortgage-backed securities: | |
Residential | Residential | — | | | — | % | | — | | | — | % | | 6,162 | | | 2.19 | % | | 91,660 | | | 2.52 | % | Residential | — | | | — | % | | 1,843 | | | 1.63 | % | | 3,921 | | | 2.54 | % | | 86,502 | | | 2.55 | % |
Commercial | Commercial | — | | | — | % | | 9,046 | | | 1.52 | % | | 2,625 | | | 1.58 | % | | 367 | | | 2.61 | % | Commercial | — | | | — | % | | 9,214 | | | 1.51 | % | | 2,687 | | | 1.57 | % | | 337 | | | 2.53 | % |
Asset-backed securities | Asset-backed securities | — | | | — | % | | — | | | — | % | | — | | | — | % | | 11,087 | | | 4.13 | % | Asset-backed securities | — | | | — | % | | — | | | — | % | | — | | | — | % | | 9,391 | | | 5.94 | % |
Corporate investments | Corporate investments | — | | | — | % | | 444 | | | 2.75 | % | | 43,581 | | | 4.12 | % | | 884 | | | 4.50 | % | Corporate investments | — | | | — | % | | 1,400 | | | 2.75 | % | | 44,797 | | | 4.26 | % | | 782 | | | 4.50 | % |
Total available for sale | Total available for sale | 33,739 | | | 1.39 | % | | 334,048 | | | 1.01 | % | | 134,894 | | | 2.49 | % | | 111,977 | | | 2.73 | % | Total available for sale | 104,245 | | | 0.82 | % | | 322,010 | | | 1.47 | % | | 130,851 | | | 2.75 | % | | 102,475 | | | 2.99 | % |
| Total securities | $ | 41,607 | | | 1.73 | % | | $ | 381,487 | | | 1.19 | % | | $ | 143,266 | | | 2.56 | % | | $ | 114,187 | | | 2.76 | % | |
Total investment securities | | Total investment securities | $ | 111,219 | | | 0.93 | % | | $ | 368,208 | | | 1.60 | % | | $ | 137,301 | | | 2.80 | % | | $ | 104,115 | | | 3.02 | % |
| | | Maturity as of December 31, 2021 | | Maturity as of December 31, 2022 |
| | Due in One Year or Less | | More Than One Year to Five Years | | More Than Five Years to Ten Years | | Due After Ten Years | | Due in One Year or Less | | More Than One Year to Five Years | | More Than Five Years to Ten Years | | Due After Ten Years |
(Dollars in thousands) | (Dollars in thousands) | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | (Dollars in thousands) | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield | | Amount | | Weighted Average Yield |
Held to maturity: | Held to maturity: | | | | | | | | | | | | | | | | Held to maturity: | | | | | | | | | | | | | | | |
| Issued by states and political subdivisions | Issued by states and political subdivisions | $ | 9,286 | | | 3.00 | % | | $ | 44,803 | | | 2.77 | % | | $ | 15,349 | | | 2.41 | % | | $ | 2,210 | | | 4.27 | % | Issued by states and political subdivisions | $ | 6,961 | | | 2.71 | % | | $ | 47,221 | | | 2.53 | % | | $ | 6,452 | | | 3.77 | % | | $ | 1,640 | | | 4.39 | % |
| Total held to maturity | Total held to maturity | 9,286 | | | 3.00 | % | | 44,803 | | | 2.77 | % | | 15,349 | | | 2.41 | % | | 2,210 | | | 4.27 | % | Total held to maturity | 6,961 | | | 2.71 | % | | 47,221 | | | 2.53 | % | | 6,452 | | | 3.77 | % | | 1,640 | | | 4.39 | % |
| Available for sale: | Available for sale: | | Available for sale: | |
U.S. Treasuries | | U.S. Treasuries | 25,302 | | | 1.35 | % | | 9,277 | | | 1.24 | % | | — | | | — | % | | — | | | — | % |
U.S. Government agency obligations | U.S. Government agency obligations | 5,006 | | | 2.60 | % | | 221,071 | | | 0.54 | % | | 120,049 | | | 1.20 | % | | 4,124 | | | 1.77 | % | U.S. Government agency obligations | 57,051 | | | 0.57 | % | | 259,397 | | | 1.02 | % | | 59,604 | | | 1.38 | % | | 2,684 | | | 4.79 | % |
Issued by states and political subdivisions | Issued by states and political subdivisions | 2,202 | | | 4.06 | % | | 15,110 | | | 2.63 | % | | 21,084 | | | 3.09 | % | | 6,288 | | | 3.24 | % | Issued by states and political subdivisions | 3,391 | | | 2.72 | % | | 22,436 | | | 2.96 | % | | 19,230 | | | 3.19 | % | | 3,093 | | | 3.62 | % |
Mortgage-backed securities: | Mortgage-backed securities: | | Mortgage-backed securities: | |
Residential | Residential | — | | | — | % | | — | | | — | % | | 4,211 | | | 1.86 | % | | 105,576 | | | 2.42 | % | Residential | — | | | — | % | | 386 | | | 1.48 | % | | 5,691 | | | 2.29 | % | | 88,056 | | | 2.54 | % |
Commercial | Commercial | — | | | — | % | | — | | | — | % | | 13,512 | | | 1.54 | % | | 764 | | | 2.50 | % | Commercial | — | | | — | % | | 9,082 | | | 1.52 | % | | 2,637 | | | 1.58 | % | | 350 | | | 2.56 | % |
Asset-backed securities | Asset-backed securities | — | | | — | % | | — | | | — | % | | — | | | — | % | | 13,107 | | | 1.83 | % | Asset-backed securities | — | | | — | % | | — | | | — | % | | — | | | — | % | | 10,220 | | | 5.57 | % |
Corporate investments | Corporate investments | 4,004 | | | 2.13 | % | | 493 | | | 2.75 | % | | 38,953 | | | 4.12 | % | | 1,060 | | | 4.50 | % | Corporate investments | — | | | — | % | | 437 | | | 2.75 | % | | 42,767 | | | 4.12 | % | | 2,829 | | | 6.33 | % |
Total available for sale | Total available for sale | 11,212 | | | 2.72 | % | | 236,674 | | | 0.68 | % | | 197,809 | | | 2.01 | % | | 130,919 | | | 2.40 | % | Total available for sale | 85,744 | | | 0.89 | % | | 301,015 | | | 1.19 | % | | 129,929 | | | 2.59 | % | | 107,232 | | | 3.02 | % |
| Total securities | $ | 20,498 | | | 2.85 | % | | $ | 281,477 | | | 1.01 | % | | $ | 213,158 | | | 2.04 | % | | $ | 133,129 | | | 2.43 | % | |
Total investment securities | | Total investment securities | $ | 92,705 | | | 1.02 | % | | $ | 348,236 | | | 1.37 | % | | $ | 136,381 | | | 2.65 | % | | $ | 108,872 | | | 3.04 | % |
The objective of BancPlus’ investment policy is to invest funds to provide sufficient liquidity, optimize the total return of the portfolio, mitigate interest rate risk, and meet pledging requirements. In doing so, BancPlus balances the market and credit risks against the potential investment return, makes most investments compatible with the pledge requirements of any deposits of public funds, and maintains compliance with regulatory investment requirements. BancPlus’ investment policy allows portfolio holdings to include short-term securities purchased to provide needed liquidity and longer term securities purchased to generate stable income over periods of interest rate fluctuations.
Loan Portfolio
The following tables detail composition and percentage composition of BancPlus’ loan portfolio, by category, as of the dates indicated:
| | | As of September 30, 2022 | | As of December 31, 2021 | | As of March 31, 2023 | | As of December 31, 2022 |
(Dollars in thousands) | (Dollars in thousands) | Amount | | Percent | | Amount | | Percent | (Dollars in thousands) | Amount | | Percent | | Amount | | Percent |
| Secured by real estate: | Secured by real estate: | | Secured by real estate: | |
Residential properties | Residential properties | $ | 1,311,672 | | | 23.63 | % | | $ | 774,699 | | | 21.41 | % | Residential properties | $ | 1,429,332 | | | 24.01 | % | | $ | 1,403,974 | | | 24.11 | % |
Construction and land development | Construction and land development | 945,639 | | | 17.04 | % | | 543,763 | | | 15.02 | % | Construction and land development | 809,390 | | | 13.60 | % | | 772,357 | | | 13.26 | % |
Farmland | Farmland | 273,575 | | | 4.93 | % | | 211,503 | | | 5.84 | % | Farmland | 288,970 | | | 4.86 | % | | 283,832 | | | 4.87 | % |
Other commercial | Other commercial | 2,145,785 | | | 38.67 | % | | 1,396,085 | | | 38.58 | % | Other commercial | 2,525,887 | | | 42.43 | % | | 2,467,216 | | | 42.36 | % |
Total real estate | Total real estate | 4,676,671 | | | 84.27 | % | | 2,926,050 | | | 80.85 | % | Total real estate | 5,053,579 | | | 84.90 | % | | 4,927,379 | | | 84.60 | % |
Commercial and industrial | Commercial and industrial | 664,439 | | | 11.97 | % | | 527,102 | | | 14.56 | % | Commercial and industrial | 718,740 | | | 12.08 | % | | 706,466 | | | 12.13 | % |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 90,647 | | | 1.63 | % | | 86,520 | | | 2.39 | % | Agricultural production and other loans to farmers | 75,509 | | | 1.27 | % | | 80,770 | | | 1.39 | % |
Consumer and other | Consumer and other | 118,011 | | | 2.13 | % | | 79,500 | | | 2.20 | % | Consumer and other | 104,039 | | | 1.75 | % | | 109,534 | | | 1.88 | % |
Total loans, gross | Total loans, gross | 5,549,768 | | | 100.00 | % | | 3,619,172 | | | 100.00 | % | Total loans, gross | 5,951,867 | | | 100.00 | % | | 5,824,149 | | | 100.00 | % |
Allowance for loan losses | (42,533) | | | | | (45,000) | | | | |
Allowance for credit losses | | Allowance for credit losses | (64,403) | | | | | (42,875) | | | |
Total loans, net | Total loans, net | $ | 5,507,235 | | | $ | 3,574,172 | | | Total loans, net | $ | 5,887,464 | | | $ | 5,781,274 | | |
Our loan portfolio was comprised of 74.2% commercial loans and 25.8% consumer loans as of September 30, 2022,March 31, 2023, compared to 76.4% commercial loans and 23.6% consumer loans as of December 31, 2021.2022. Commercial loans consist of our construction and land development, farmland, other commercial, commercial and industrial, agricultural production and other loans to farmers categories and our consumer loans consist of our residential property and consumer and other categories.
As a general practice, BancPlus originates substantially all of its loans, but BancPlus occasionally participates in syndications and other loan participations. At September 30, 2022,March 31, 2023, BancPlus’ loan portfolio included $444.6$491.9 million of loan participations purchased, or 8.01%8.27% of total loans, which includes $276.5included $295.5 million of shared national credits. At December 31, 2021,2022, BancPlus’ loan portfolio included $333.0$471.3 million of loan participations purchased, or 9.20%8.09% of total loans, which includes $177.5included $274.4 million of shared national credits.
The following tables detail the contractual maturities and sensitivity to interest rate changes for BancPlus’ loan portfolio as of the dates indicated:
| | | As of September 30, 2022 | | As of March 31, 2023 |
(Dollars in thousands) | (Dollars in thousands) | Due in One Year or Less | | More Than One Year to Five | | More Than Five Years to Fifteen | | After Fifteen Years | | Total | (Dollars in thousands) | Due in One Year or Less | | More Than One Year to Five | | More Than Five Years to Fifteen | | After Fifteen Years | | Total |
Secured by real estate: | Secured by real estate: | | | | | | | | | | Secured by real estate: | | | | | | | | | |
Residential properties | Residential properties | $ | 115,435 | | | $ | 378,567 | | | $ | 490,262 | | | $ | 327,408 | | | $ | 1,311,672 | | Residential properties | $ | 140,540 | | | $ | 410,742 | | | $ | 508,759 | | | $ | 369,291 | | | $ | 1,429,332 | |
Construction and land development | Construction and land development | 344,399 | | | 462,206 | | | 105,599 | | | 33,435 | | | 945,639 | | Construction and land development | 261,134 | | | 408,703 | | | 124,540 | | | 15,013 | | | 809,390 | |
Farmland | Farmland | 42,125 | | | 122,176 | | | 89,927 | | | 19,347 | | | 273,575 | | Farmland | 41,867 | | | 114,118 | | | 101,146 | | | 31,839 | | | 288,970 | |
Other commercial | Other commercial | 158,742 | | | 1,280,395 | | | 482,197 | | | 224,451 | | | 2,145,785 | | Other commercial | 251,327 | | | 1,564,714 | | | 493,558 | | | 216,288 | | | 2,525,887 | |
Total real estate | Total real estate | 660,701 | | | 2,243,344 | | | 1,167,985 | | | 604,641 | | | 4,676,671 | | Total real estate | 694,868 | | | 2,498,277 | | | 1,228,003 | | | 632,431 | | | 5,053,579 | |
Commercial and industrial | Commercial and industrial | 131,473 | | | 440,969 | | | 91,997 | | | — | | | 664,439 | | Commercial and industrial | 128,290 | | | 494,835 | | | 95,615 | | | — | | | 718,740 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 46,813 | | | 43,068 | | | 766 | | | — | | | 90,647 | | Agricultural production and other loans to farmers | 18,092 | | | 55,839 | | | 1,578 | | | — | | | 75,509 | |
Consumer and other loans | Consumer and other loans | 51,180 | | | 62,144 | | | 4,673 | | | 14 | | | 118,011 | | Consumer and other loans | 29,363 | | | 67,404 | | | 7,258 | | | 14 | | | 104,039 | |
Total loans | Total loans | $ | 890,167 | | | $ | 2,789,525 | | | $ | 1,265,421 | | | $ | 604,655 | | | $ | 5,549,768 | | Total loans | $ | 870,613 | | | $ | 3,116,355 | | | $ | 1,332,454 | | | $ | 632,445 | | | $ | 5,951,867 | |
| | | As of December 31, 2021 | | As of December 31, 2022 |
(Dollars in thousands) | (Dollars in thousands) | Due in One Year or Less | | More Than One Year to Five | | More Than Five Years to Fifteen | | After Fifteen Years | | Total | (Dollars in thousands) | Due in One Year or Less | | More Than One Year to Five | | More Than Five Years to Fifteen | | After Fifteen Years | | Total |
Secured by real estate: | Secured by real estate: | | | | | | | | | | Secured by real estate: | | | | | | | | | |
Residential properties | Residential properties | $ | 105,854 | | | $ | 317,073 | | | $ | 340,436 | | | $ | 11,336 | | | $ | 774,699 | | Residential properties | $ | 149,146 | | | $ | 401,119 | | | $ | 497,926 | | | $ | 355,783 | | | $ | 1,403,974 | |
Construction and land development | Construction and land development | 217,487 | | | 285,923 | | | 31,161 | | | 9,192 | | | 543,763 | | Construction and land development | 272,454 | | | 379,245 | | | 104,632 | | | 16,026 | | | 772,357 | |
Farmland | Farmland | 38,671 | | | 104,034 | | | 61,553 | | | 7,245 | | | 211,503 | | Farmland | 46,925 | | | 114,854 | | | 96,937 | | | 25,116 | | | 283,832 | |
Other commercial | Other commercial | 172,914 | | | 878,887 | | | 299,853 | | | 44,431 | | | 1,396,085 | | Other commercial | 254,430 | | | 1,504,253 | | | 487,890 | | | 220,643 | | | 2,467,216 | |
Total real estate | Total real estate | 534,926 | | | 1,585,917 | | | 733,003 | | | 72,204 | | | 2,926,050 | | Total real estate | 722,955 | | | 2,399,471 | | | 1,187,385 | | | 617,568 | | | 4,927,379 | |
Commercial and industrial | Commercial and industrial | 98,197 | | | 342,243 | | | 86,662 | | | — | | | 527,102 | | Commercial and industrial | 151,895 | | | 451,261 | | | 103,310 | | | — | | | 706,466 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 49,748 | | | 36,214 | | | 558 | | | — | | | 86,520 | | Agricultural production and other loans to farmers | 40,558 | | | 39,665 | | | 547 | | | — | | | 80,770 | |
Consumer and other loans | Consumer and other loans | 20,686 | | | 57,222 | | | 1,578 | | | 14 | | | 79,500 | | Consumer and other loans | 39,667 | | | 64,715 | | | 5,138 | | | 14 | | | 109,534 | |
Total loans | Total loans | $ | 703,557 | | | $ | 2,021,596 | | | $ | 821,801 | | | $ | 72,218 | | | $ | 3,619,172 | | Total loans | $ | 955,075 | | | $ | 2,955,112 | | | $ | 1,296,380 | | | $ | 617,582 | | | $ | 5,824,149 | |
| | | As of September 30, 2022 | | As of March 31, 2023 |
(Dollars in thousands) | (Dollars in thousands) | Fixed Interest Rates | | Floating or Adjustable Rates | | Total | (Dollars in thousands) | Fixed Interest Rates | | Floating or Adjustable Rates | | Total |
Secured by real estate: | Secured by real estate: | | | | | | Secured by real estate: | | | | | |
Residential properties | Residential properties | $ | 1,052,094 | | | $ | 259,578 | | | $ | 1,311,672 | | Residential properties | $ | 1,134,271 | | | $ | 295,061 | | | $ | 1,429,332 | |
Construction and land development | Construction and land development | 406,658 | | | 538,981 | | | 945,639 | | Construction and land development | 440,404 | | | 368,986 | | | 809,390 | |
Farmland | Farmland | 183,530 | | | 90,045 | | | 273,575 | | Farmland | 181,777 | | | 107,193 | | | 288,970 | |
Other commercial | Other commercial | 1,598,161 | | | 547,624 | | | 2,145,785 | | Other commercial | 1,818,832 | | | 707,055 | | | 2,525,887 | |
Total real estate | Total real estate | 3,240,443 | | | 1,436,228 | | | 4,676,671 | | Total real estate | 3,575,284 | | | 1,478,295 | | | 5,053,579 | |
Commercial and industrial | Commercial and industrial | 300,685 | | | 363,754 | | | 664,439 | | Commercial and industrial | 323,891 | | | 394,849 | | | 718,740 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 49,891 | | | 40,756 | | | 90,647 | | Agricultural production and other loans to farmers | 46,644 | | | 28,865 | | | 75,509 | |
Consumer and other loans | Consumer and other loans | 87,836 | | | 30,175 | | | 118,011 | | Consumer and other loans | 69,221 | | | 34,818 | | | 104,039 | |
Total loans | Total loans | $ | 3,678,855 | | | $ | 1,870,913 | | | $ | 5,549,768 | | Total loans | $ | 4,015,040 | | | $ | 1,936,827 | | | $ | 5,951,867 | |
| | | As of December 31, 2021 | | As of December 31, 2022 |
(Dollars in thousands) | (Dollars in thousands) | Fixed Interest Rates | | Floating or Adjustable Rates | | Total | (Dollars in thousands) | Fixed Interest Rates | | Floating or Adjustable Rates | | Total |
Secured by real estate: | Secured by real estate: | | | | | | Secured by real estate: | | | | | |
Residential properties | Residential properties | $ | 644,842 | | | $ | 129,857 | | | $ | 774,699 | | Residential properties | $ | 1,115,571 | | | $ | 288,403 | | | $ | 1,403,974 | |
Construction and land development | Construction and land development | 262,573 | | | 281,190 | | | 543,763 | | Construction and land development | 413,291 | | | 359,066 | | | 772,357 | |
Farmland | Farmland | 154,154 | | | 57,349 | | | 211,503 | | Farmland | 181,973 | | | 101,859 | | | 283,832 | |
Other commercial | Other commercial | 1,157,465 | | | 238,620 | | | 1,396,085 | | Other commercial | 1,748,802 | | | 718,414 | | | 2,467,216 | |
Total real estate | Total real estate | 2,219,034 | | | 707,016 | | | 2,926,050 | | Total real estate | 3,459,637 | | | 1,467,742 | | | 4,927,379 | |
Commercial and industrial | Commercial and industrial | 258,036 | | | 269,066 | | | 527,102 | | Commercial and industrial | 316,909 | | | 389,557 | | | 706,466 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 58,206 | | | 28,314 | | | 86,520 | | Agricultural production and other loans to farmers | 44,941 | | | 35,829 | | | 80,770 | |
Consumer and other loans | Consumer and other loans | 54,923 | | | 24,577 | | | 79,500 | | Consumer and other loans | 78,411 | | | 31,123 | | | 109,534 | |
Total loans | Total loans | $ | 2,590,199 | | | $ | 1,028,973 | | | $ | 3,619,172 | | Total loans | $ | 3,899,898 | | | $ | 1,924,251 | | | $ | 5,824,149 | |
Additionally, BancPlus enters into various other transactions to meet the financing needs of its customers including commitments to extend credit and letters of credit. Commitments to extend credit beyond current funding are agreements to lend to a customer
as long as there is no violation of any condition established in the contract. Such commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. At September 30, 2022,March 31, 2023, BancPlus had total off-balance sheet commitments of $1.558$1.458 billion. At March 31, 2023, BancPlus had an allowance for credit loss on off-balance sheet commitments of $12.5 million.
Asset Quality
Federal regulations and BancPlus’ internal policies require that BancPlus utilize an asset classification system as a means of managing and reporting problem and potential problem assets. BancPlus has incorporated an internal asset classification system, substantially consistent with federal banking regulations, as part of its credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose BancPlus to sufficient risk to warrant classification in one of the categories mentioned above but possess weakness are required to be designated “watch” or “special mention.” Loans modified under Section 4013 of the CARES Act and related interagency guidance are excluded from being reported as troubled debt restructuring (“TDR”) loans.
The tables below set forth information on BancPlus’ asset classification as of the dates indicated. BancPlus had no assets classified as loss.
| | | As of September 30, 2022 | | As of March 31, 2023 |
(Dollars in thousands) | (Dollars in thousands) | Risk Grades 1-7 | | Substandard | | Doubtful | | Total | (Dollars in thousands) | Risk Grades 1-6 | | Special Mention | | Substandard | | Doubtful | | Total |
Secured by real estate: | Secured by real estate: | | | | | | | | Secured by real estate: | | | | | | | | | |
Residential properties | Residential properties | $ | 1,298,730 | | | $ | 12,899 | | | $ | 43 | | | $ | 1,311,672 | | Residential properties | $ | 1,414,477 | | | $ | — | | | $ | 14,772 | | | $ | 83 | | | $ | 1,429,332 | |
Construction and land development | Construction and land development | 944,089 | | | 1,550 | | | — | | | 945,639 | | Construction and land development | 806,583 | | | 346 | | | 2,461 | | | — | | | 809,390 | |
Farmland | Farmland | 270,512 | | | 3,063 | | | — | | | 273,575 | | Farmland | 285,683 | | | — | | | 3,287 | | | — | | | 288,970 | |
Other commercial | Other commercial | 2,134,473 | | | 11,312 | | | — | | | 2,145,785 | | Other commercial | 2,515,091 | | | — | | | 10,676 | | | 120 | | | 2,525,887 | |
Total real estate | Total real estate | 4,647,804 | | | 28,824 | | | 43 | | | 4,676,671 | | Total real estate | 5,021,834 | | | 346 | | | 31,196 | | | 203 | | | 5,053,579 | |
Commercial and industrial | Commercial and industrial | 651,158 | | | 13,274 | | | 7 | | | 664,439 | | Commercial and industrial | 705,926 | | | — | | | 12,749 | | | 65 | | | 718,740 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 90,192 | | | 368 | | | 87 | | | 90,647 | | Agricultural production and other loans to farmers | 75,423 | | | — | | | 86 | | | — | | | 75,509 | |
Consumer and other | Consumer and other | 117,798 | | | 213 | | | — | | | 118,011 | | Consumer and other | 102,686 | | | — | | | 1,353 | | | — | | | 104,039 | |
Total | Total | $ | 5,506,952 | | | $ | 42,679 | | | $ | 137 | | | $ | 5,549,768 | | Total | $ | 5,905,869 | | | $ | 346 | | | $ | 45,384 | | | $ | 268 | | | $ | 5,951,867 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 |
(Dollars in thousands) | Risk Grades 1-7 | | Substandard | | Doubtful | | Total |
Secured by real estate: | | | | | | | |
Residential properties | $ | 763,116 | | | $ | 11,583 | | | $ | — | | | $ | 774,699 | |
Construction and land development | 541,670 | | | 2,093 | | | — | | | 543,763 | |
Farmland | 208,318 | | | 3,185 | | | — | | | 211,503 | |
Other commercial | 1,386,240 | | | 9,845 | | | — | | | 1,396,085 | |
Total real estate | 2,899,344 | | | 26,706 | | | — | | | 2,926,050 | |
Commercial and industrial | 503,603 | | | 23,496 | | | 3 | | | 527,102 | |
Agricultural production and other loans to farmers | 86,292 | | | 228 | | | — | | | 86,520 | |
Consumer and other | 79,176 | | | 306 | | | 18 | | | 79,500 | |
Total | $ | 3,568,415 | | | $ | 50,736 | | | $ | 21 | | | $ | 3,619,172 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
(Dollars in thousands) | Risk Grades 1-6 | | Special Mention | | Substandard | | Doubtful | | Total |
Secured by real estate: | | | | | | | | | |
Residential properties | $ | 1,391,039 | | | $ | — | | | $ | 12,852 | | | $ | 83 | | | $ | 1,403,974 | |
Construction and land development | 768,699 | | | 303 | | | 3,355 | | | — | | | 772,357 | |
Farmland | 280,522 | | | — | | | 3,310 | | | — | | | 283,832 | |
Other commercial | 2,456,708 | | | — | | | 10,384 | | | 124 | | | 2,467,216 | |
Total real estate | 4,896,968 | | | 303 | | | 29,901 | | | 207 | | | 4,927,379 | |
Commercial and industrial | 693,963 | | | — | | | 12,503 | | | — | | | 706,466 | |
Agricultural production and other loans to farmers | 80,524 | | | — | | | 246 | | | — | | | 80,770 | |
Consumer and other | 108,279 | | | — | | | 1,255 | | | — | | | 109,534 | |
Total | $ | 5,779,734 | | | $ | 303 | | | $ | 43,905 | | | $ | 207 | | | $ | 5,824,149 | |
Nonperforming Assets
Nonperforming loans include loans accounted for on a nonaccrual basis and TDR loans that are 90 days past due and still accruing. Nonperforming assets consist of nonperforming loans plus foreclosed assets (i.e. real estate acquired through foreclosure).
The following table summarizes BancPlus’ nonperforming assets, by category, as of the dates indicated:
| (Dollars in thousands) | (Dollars in thousands) | September 30, 2022 | | December 31, 2021 | (Dollars in thousands) | March 31, 2023 | | December 31, 2022 |
Nonaccrual loans: | Nonaccrual loans: | | | | Nonaccrual loans: | | | |
Real estate loans: | Real estate loans: | | Real estate loans: | |
Residential properties | Residential properties | $ | 2,902 | | | $ | 3,154 | | Residential properties | $ | 2,585 | | | $ | 2,726 | |
Construction and land development | Construction and land development | 30 | | | 51 | | Construction and land development | — | | | 24 | |
Farmland | Farmland | 960 | | | 1,327 | | Farmland | 1,434 | | | 960 | |
Other commercial | Other commercial | 1,502 | | | 1,176 | | Other commercial | 1,795 | | | 1,215 | |
Total real estate | Total real estate | 5,394 | | | 5,708 | | Total real estate | 5,814 | | | 4,925 | |
Commercial and industrial | Commercial and industrial | 759 | | | 20 | | Commercial and industrial | 201 | | | 192 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | — | | | 3 | | Agricultural production and other loans to farmers | — | | | 155 | |
Consumer and other | Consumer and other | 26 | | | 166 | | Consumer and other | — | | | — | |
Total nonaccrual loans | Total nonaccrual loans | 6,179 | | | 5,897 | | Total nonaccrual loans | 6,015 | | | 5,272 | |
| Troubled debt restructuring loans – accruing: | | |
90+ days past due and accruing: | | 90+ days past due and accruing: | |
Real estate loans: | Real estate loans: | | Real estate loans: | |
Residential properties | Residential properties | 1,603 | | | 1,641 | | Residential properties | 1,497 | | | 1,079 | |
Construction and land development | Construction and land development | 833 | | | 1,558 | | Construction and land development | — | | | 1,578 | |
Farmland | Farmland | — | | | — | | Farmland | 158 | | | 427 | |
Other commercial | Other commercial | — | | | — | | Other commercial | 175 | | | 216 | |
Total real estate | Total real estate | 2,436 | | | 3,199 | | Total real estate | 1,830 | | | 3,300 | |
Commercial and industrial | Commercial and industrial | — | | | 381 | | Commercial and industrial | 204 | | | 545 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | — | | | — | | Agricultural production and other loans to farmers | — | | | — | |
Consumer and other | Consumer and other | — | | | — | | Consumer and other | 946 | | | 697 | |
Total troubled debt restructuring loans – accruing | 2,436 | | | 3,580 | | |
Total 90+ days past due and accruing | | Total 90+ days past due and accruing | 2,980 | | | 4,542 | |
Total nonperforming loans | Total nonperforming loans | 8,615 | | | 9,477 | | Total nonperforming loans | 8,995 | | | 9,814 | |
Plus: foreclosed assets | Plus: foreclosed assets | 4,850 | | | 5,815 | | Plus: foreclosed assets | 3,958 | | | 4,231 | |
Total nonperforming assets | Total nonperforming assets | $ | 13,465 | | | $ | 15,292 | | Total nonperforming assets | $ | 12,953 | | | $ | 14,045 | |
| Nonaccrual loans to total loans | Nonaccrual loans to total loans | 0.11 | % | | 0.16 | % | Nonaccrual loans to total loans | 0.10 | % | | 0.09 | % |
Nonperforming loans to total loans | Nonperforming loans to total loans | 0.16 | % | | 0.26 | % | Nonperforming loans to total loans | 0.15 | % | | 0.17 | % |
Nonperforming assets to total assets | Nonperforming assets to total assets | 0.20 | % | | 0.29 | % | Nonperforming assets to total assets | 0.18 | % | | 0.20 | % |
Allowance for loan losses to nonaccrual loans | 688.35 | % | | 763.10 | % | |
90+ days past due and accruing | $ | 1,558 | | | $ | 2,914 | | |
Total troubled debt restructuring loans | $ | 2,436 | | | $ | 3,746 | | |
Allowance for credit losses to nonaccrual loans | | Allowance for credit losses to nonaccrual loans | 1070.71 | % | | 813.26 | % |
Total nonperforming assets decreased by $1.8$1.1 million, or 11.9%7.8%, from $15.3$14.0 million at December 31, 20212022 to $13.5$13.0 million at September 30, 2022,March 31, 2023, primarily the result of sales of foreclosed assets and collections on TDR loans in the current year.year to date period on loans there were 90+ days past due at December 31, 2022. This decrease in nonperforming loans for the period ended March 31, 2023 resulted in corresponding decreases in the ratios for nonperforming loans to total loans and nonperforming assets to total assets, as well as the increase in the ratio of allowance for credit losses to nonaccrual loans.
The balance of nonperforming assets can fluctuate due to changes in economic conditions. BancPlus has established a policy to discontinue accruing interest on a loan (that is, place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection.
When a loan is placed on nonaccrual status, current year interest previously accrued but uncollected on such loans is reversed and charged against current income, and prior year interest, if any, is charged off against the allowance for loancredit losses. Generally, payments received on nonaccrual loans are applied directly to principal.
Allowance for LoanCredit Losses
The allowance for loancredit losses is a reserve established through charges to earnings in the form of a provision for loancredit losses. BancPlus maintains an allowance for loancredit losses at a level management considers adequate to provide for known and probable incurredexpected credit losses inon loans over the portfolio.life of the loan. The level of the allowance is based on management’s evaluation of estimated losses in the portfolio, after consideration of risk characteristics of the loans and prevailing economic conditions. Loan charge-offs (i.e. loans judged to be uncollectible) are charged against the reserve and any subsequent recovery is credited to the reserve. BancPlus’ officers analyzeBancPlus made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses. The Company calculates estimated credit loss on its portfolio primarily using quantitative methodologies using relevant available information from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The ACL is evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans and whether it needs to evaluate the allowance on an individual basis. The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit. The Company’s segments for loans include commercial real estate, commercial and industrial, residential and consumer.
Expected credit losses are estimated over the contractual term of each loan taking into consideration expected prepayments. The contractual term excludes expected extensions, renewals, and modifications. Also included in the loan portfolio on an ongoing basis. A risk system, consisting of multiple grading categoriesallowance for each portfolio class, is utilized as an analytical toolloans are qualitative reserves to assess riskcover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative method or the economic assumptions described above. For example, factors that the Company considers include the nature and appropriate reserves. In addition to the risk system, management further evaluates risk characteristicssize of the loan portfolio, underportfolio concentrations, the volume and severity of past due loans and non-accrual loans and current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors which management feels deserve recognition in establishing an appropriate reserve. business conditions.
These estimates are reviewed at least quarterly, and, as adjustments become necessary, they are recognized in the periods in which they become known. During the thirdfirst quarter of 2022,2023, the U.S. economy continued to experience volatility and there remains uncertainty surrounding future economic conditions as a result of supply chain disruptions, labor shortages, and the conflict in Ukraine, and the COVID-19 pandemic.Ukraine. Although management strives to maintain an allowance it deems adequate, future economic changes, deterioration of borrowers’ creditworthiness, and the impact of examinations by regulatory agencies all could cause changes to BancPlus’ allowance for loancredit losses.
The allowance for loancredit losses was $42.5$64.4 million and $45.0$42.9 million, and the allowance for loancredit losses as a percentage of loans was 0.77%1.08% and 1.24%0.74%, at September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. Net charge-offs (recoveries) totaled $3.4 million$636,000 and $(606,000)$979,000 for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. The variance iswas primarily the result of current year charge-offs on consumer and other commercial categories.
The allowance for loancredit losses decreasedincreased by $2.5$21.5 million, or 5.5%50.2%, to $42.5$64.4 million at September 30, 2022,March 31, 2023, from $45.0$42.9 million at December 31, 2021,2022, primarily due to an increase in net charge-offs in the current period.adoption of ASU 2016-13.
The following is a summary of the activity in the allowance for loancredit loss reserve as of and for the year-to-date periods indicated:
| (Dollars in thousands) | (Dollars in thousands) | September 30, 2022 | | September 30, 2021 | (Dollars in thousands) | March 31, 2023 | | March 31, 2022 |
| Balance, beginning of period | Balance, beginning of period | $ | 45,000 | | | $ | 36,000 | | Balance, beginning of period | $ | 42,875 | | | $ | 45,000 | |
Impact of adopting ASU 2016-13 | | Impact of adopting ASU 2016-13 | 20,744 | | | — | |
Charge-offs: | Charge-offs: | | Charge-offs: | |
Residential properties | Residential properties | 783 | | | 298 | | Residential properties | 173 | | | 250 | |
Construction and land development | Construction and land development | 1 | | | 240 | | Construction and land development | 7 | | | — | |
Farmland | Farmland | 120 | | | 157 | | Farmland | 8 | | | 120 | |
Other commercial | Other commercial | 559 | | | 581 | | Other commercial | 56 | | | 317 | |
Total real estate | Total real estate | 1,463 | | | 1,276 | | Total real estate | 244 | | | 687 | |
Commercial and industrial | Commercial and industrial | 1,753 | | | 317 | | Commercial and industrial | 288 | | | 58 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 2,829 | | | 111 | | Agricultural production and other loans to farmers | 13 | | | 981 | |
Consumer and other | Consumer and other | 507 | | | 2,832 | | Consumer and other | 943 | | | 261 | |
Total charge-offs | Total charge-offs | 6,552 | | | 4,536 | | Total charge-offs | 1,488 | | | 1,987 | |
Recoveries: | Recoveries: | | Recoveries: | |
Residential properties | Residential properties | 158 | | | 340 | | Residential properties | 58 | | | 54 | |
Construction and land development | Construction and land development | 449 | | | 143 | | Construction and land development | 3 | | | 70 | |
Farmland | Farmland | 16 | | | 292 | | Farmland | 5 | | | 5 | |
Other commercial | Other commercial | 361 | | | 1,842 | | Other commercial | 107 | | | 66 | |
Total real estate | Total real estate | 984 | | | 2,617 | | Total real estate | 173 | | | 195 | |
Commercial and industrial | Commercial and industrial | 114 | | | 479 | | Commercial and industrial | 88 | | | 22 | |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 1,771 | | | 3 | | Agricultural production and other loans to farmers | 3 | | | 744 | |
Consumer and other | Consumer and other | 276 | | | 2,043 | | Consumer and other | 588 | | | 47 | |
Total recoveries | Total recoveries | 3,145 | | | 5,142 | | Total recoveries | 852 | | | 1,008 | |
Net charge-offs (recoveries) | Net charge-offs (recoveries) | 3,407 | | | (606) | | Net charge-offs (recoveries) | 636 | | | 979 | |
Provision for loan losses | 940 | | | 7,395 | | |
Provision for credit losses | | Provision for credit losses | 1,420 | | | 217 | |
Balance, end of period | Balance, end of period | $ | 42,533 | | | $ | 44,001 | | Balance, end of period | $ | 64,403 | | | $ | 44,238 | |
| Total loans, end of period (including loans held for sale) | Total loans, end of period (including loans held for sale) | $ | 5,553,967 | | | $ | 3,539,990 | | Total loans, end of period (including loans held for sale) | $ | 5,960,224 | | | $ | 4,752,150 | |
Average loans | Average loans | 4,800,489 | | | 3,469,520 | | Average loans | 5,881,779 | | | 4,029,014 | |
Net charge-offs (annualized) to average loans | Net charge-offs (annualized) to average loans | 0.09 | % | | (0.02) | % | Net charge-offs (annualized) to average loans | 0.04 | % | | 0.10 | % |
Allowance for loan losses to total loans | 0.77 | % | | 1.24 | % | |
Allowance for credit losses to total loans | | Allowance for credit losses to total loans | 1.08 | % | | 0.93 | % |
The table below reflects net charge-offs to average loans outstanding, by category, during the periods presented.
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
(Dollars in thousands) | (Dollars in thousands) | Net Charge-offs | | Average Loans | | Net Charge-offs to Average Loans (Annualized) | | Net Charge-offs | | Average Loans | | Net Charge-offs to Average Loans (Annualized) | (Dollars in thousands) | Net Charge-offs | | Average Loans | | Net Charge-offs to Average Loans (Annualized) | | Net Charge-offs | | Average Loans | | Net Charge-offs to Average Loans (Annualized) |
Residential properties | Residential properties | $ | 625 | | | $ | 1,122,955 | | | 0.07 | % | | $ | (42) | | | $ | 750,238 | | | (0.01) | % | Residential properties | $ | 115 | | | $ | 1,407,039 | | | 0.03 | % | | $ | 196 | | | $ | 897,909 | | | 0.09 | % |
Construction and land development | Construction and land development | (448) | | | 759,731 | | | (0.08) | % | | 97 | | | 458,968 | | | 0.03 | % | Construction and land development | 4 | | | 812,238 | | | — | % | | (70) | | | 614,770 | | | (0.05) | % |
Farmland | Farmland | 104 | | | 236,554 | | | 0.06 | % | | (135) | | | 206,878 | | | (0.09) | % | Farmland | 3 | | | 283,020 | | | — | % | | 115 | | | 216,353 | | | 0.21 | % |
Other commercial | Other commercial | 198 | | | 1,896,115 | | | 0.01 | % | | (1,261) | | | 1,274,874 | | | (0.13) | % | Other commercial | (51) | | | 2,492,168 | | | (0.01) | % | | 251 | | | 1,592,295 | | | 0.06 | % |
Commercial and industrial | Commercial and industrial | 1,639 | | | 597,634 | | | 0.37 | % | | (162) | | | 589,070 | | | (0.04) | % | Commercial and industrial | 200 | | | 714,810 | | | 0.11 | % | | 36 | | | 550,125 | | | 0.03 | % |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 1,058 | | | 77,653 | | | 1.82 | % | | 108 | | | 89,773 | | | 0.16 | % | Agricultural production and other loans to farmers | 10 | | | 65,515 | | | 0.06 | % | | 237 | | | 64,658 | | | 1.47 | % |
Consumer and other | Consumer and other | 231 | | | 100,806 | | | 0.31 | % | | 789 | | | 83,432 | | | 1.26 | % | Consumer and other | 355 | | | 103,221 | | | 1.38 | % | | 214 | | | 83,964 | | | 1.02 | % |
Loans held for sale | Loans held for sale | — | | | 9,041 | | | — | % | | — | | | 16,287 | | | — | % | Loans held for sale | — | | | 3,768 | | | — | % | | — | | | 8,940 | | | — | % |
Total | Total | $ | 3,407 | | | $ | 4,800,489 | | | 0.09 | % | | $ | (606) | | | $ | 3,469,520 | | | (0.02) | % | Total | $ | 636 | | | $ | 5,881,779 | | | 0.04 | % | | $ | 979 | | | $ | 4,029,014 | | | 0.10 | % |
The following tables present a summary of the allocation of the allowance for loancredit losses by loan portfolio category, and the percentage of loans in each category, for the periods indicated:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(Dollars in thousands) | (Dollars in thousands) | Amount | | Percent | | Amount | | Percent | (Dollars in thousands) | Amount | | Percent | | Amount | | Percent |
Residential properties | Residential properties | $ | 9,513 | | | 22.4 | % | | $ | 9,488 | | | 21.1 | % | Residential properties | $ | 16,420 | | | 25.5 | % | | $ | 9,958 | | | 23.2 | % |
Construction and land development | Construction and land development | 8,086 | | | 19.0 | % | | 6,463 | | | 14.4 | % | Construction and land development | 19,044 | | | 29.6 | % | | 6,519 | | | 15.2 | % |
Farmland | Farmland | 1,975 | | | 4.6 | % | | 2,171 | | | 4.8 | % | Farmland | 1,380 | | | 2.1 | % | | 1,963 | | | 4.6 | % |
Other commercial | Other commercial | 16,759 | | | 39.4 | % | | 18,499 | | | 41.1 | % | Other commercial | 20,070 | | | 31.2 | % | | 18,219 | | | 42.5 | % |
Total real estate | Total real estate | 36,333 | | | 85.4 | % | | 36,621 | | | 81.4 | % | Total real estate | 56,914 | | | 88.4 | % | | 36,659 | | | 85.5 | % |
Commercial and industrial | Commercial and industrial | 4,717 | | | 11.1 | % | | 6,556 | | | 14.6 | % | Commercial and industrial | 6,404 | | | 9.9 | % | | 4,750 | | | 11.1 | % |
Agricultural production and other loans to farmers | Agricultural production and other loans to farmers | 824 | | | 1.9 | % | | 958 | | | 2.1 | % | Agricultural production and other loans to farmers | 452 | | | 0.7 | % | | 641 | | | 1.5 | % |
Consumer and other | Consumer and other | 659 | | | 1.5 | % | | 865 | | | 1.9 | % | Consumer and other | 633 | | | 1.0 | % | | 825 | | | 1.9 | % |
Total allowance for loan losses | $ | 42,533 | | | 100.0 | % | | $ | 45,000 | | | 100.0 | % | |
Total allowance for credit losses | | Total allowance for credit losses | $ | 64,403 | | | 100.0 | % | | $ | 42,875 | | | 100.0 | % |
Goodwill and Other Intangible Assets
Goodwill was $62.8 million and $2.6 million September 30, 2022as of both March 31, 2023 and December 31, 2021, respectively.2022. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired by the Company in prior acquisitions. The increase in goodwill is the result of the FTC Merger. Goodwill is not amortized but is subject to, at a minimum, an annual test for impairment. Other intangible assets consistconsisted of acquired customer relationships from a 2014 acquisition and core deposit intangibles from the SCC Merger and the FTC Merger. Total other intangible assets at September 30, 2022March 31, 2023 and December 31, 20212022 were $11.9$11.1 million and $5.1$11.5 million, respectively. Other intangible assets are amortized over their estimated useful life.
Deposits
The following table details composition and percentage composition of BancPlus’ deposit portfolio, by category, for the year to date periods indicated:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(Dollars in thousands) | (Dollars in thousands) | Average Balance | Average Rate | Percent | | Average Balance | Average Rate | Percent | (Dollars in thousands) | Average Balance | Average Rate | Percent | | Average Balance | Average Rate | Percent |
| Non-interest bearing | Non-interest bearing | $ | 1,745,151 | | 0.00 | % | 31.91 | % | | $ | 1,337,985 | | 0.00 | % | 30.13 | % | Non-interest bearing | $ | 1,585,862 | | 0.00 | % | 26.82 | % | | $ | 1,740,283 | | 0.00 | % | 31.61 | % |
Interest bearing: | Interest bearing: | | Interest bearing: | |
Transaction accounts | Transaction accounts | 1,578,415 | | 0.29 | % | 28.86 | % | | 1,453,493 | | 0.20 | % | 32.74 | % | Transaction accounts | 1,656,880 | | 0.78 | % | 28.02 | % | | 1,574,512 | | 0.35 | % | 28.60 | % |
Money market and other savings accounts | Money market and other savings accounts | 1,359,333 | | 0.16 | % | 24.85 | % | | 996,420 | | 0.09 | % | 22.44 | % | Money market and other savings accounts | 1,860,403 | | 2.27 | % | 31.46 | % | | 1,408,355 | | 0.42 | % | 25.58 | % |
Certificates of deposit | Certificates of deposit | 786,818 | | 0.35 | % | 14.38 | % | | 652,247 | | 0.56 | % | 14.69 | % | Certificates of deposit | 810,804 | | 1.66 | % | 13.71 | % | | 783,047 | | 0.45 | % | 14.22 | % |
Total deposits | Total deposits | $ | 5,469,717 | | 0.17 | % | 100.00 | % | | $ | 4,440,145 | | 0.17 | % | 100.00 | % | Total deposits | $ | 5,913,949 | | 1.16 | % | 100.00 | % | | $ | 5,506,197 | | 0.27 | % | 100.00 | % |
BancPlus relies on increasing its deposit base to fund loans and other asset growth. BancPlus competes for local deposits by offering a variety of products at competitive rates. The increase in total average deposits of $1,029.6$407.8 million, or 23.2%7.4%, to $5.47$5.91 billion at September 30, 2022March 31, 2023 from $4.44$5.51 billion as of December 31, 20212022 primarily resulted from increases in money market and other savings accounts driven by the FTC Merger.higher interest rate market. At September 30, 2022March 31, 2023 and December 31, 2021,2022, BancPlus held non-time deposits in excess of FDIC insurance limits estimated at $1.40$1.50 billion and $802.9 million,$1.53 billion, respectively.
The following table shows the maturity of certificates of deposit as of September 30, 2022:March 31, 2023:
| (Dollars in thousands) | (Dollars in thousands) | $250,000 or Greater | | Less than $250,000 | | Total | | Uninsured Portion | (Dollars in thousands) | $250,000 or Greater | | Less than $250,000 | | Total | | Uninsured Portion |
3 months or less | 3 months or less | $ | 68,530 | | | $ | 122,419 | | | $ | 190,949 | | | $ | 44,214 | | 3 months or less | $ | 14,942 | | | $ | 80,618 | | | $ | 95,560 | | | $ | 4,849 | |
Over 3 months through 6 months | Over 3 months through 6 months | 40,798 | | | 106,487 | | | 147,285 | | | 24,048 | | Over 3 months through 6 months | 24,054 | | | 65,916 | | | 89,970 | | | 9,980 | |
Over 6 months through 12 months | Over 6 months through 12 months | 39,690 | | | 143,849 | | | 183,539 | | | 13,690 | | Over 6 months through 12 months | 88,186 | | | 245,221 | | | 333,407 | | | 26,567 | |
Over 12 months | Over 12 months | 66,822 | | | 187,855 | | | 254,677 | | | 29,573 | | Over 12 months | 101,874 | | | 221,269 | | | 323,143 | | | 44,387 | |
Total certificates of deposit | Total certificates of deposit | $ | 215,840 | | | $ | 560,610 | | | $ | 776,450 | | | $ | 111,525 | | Total certificates of deposit | $ | 229,056 | | | $ | 613,024 | | | $ | 842,080 | | | $ | 85,783 | |
Borrowed Funds
Short-term Borrowings. In addition to deposits, BancPlus uses short-term borrowings, which consist of federal funds purchased and securities sold under agreements to repurchase, to meet the daily liquidity needs of its customers and fund its loan growth. Federal funds purchased represent primarily overnight borrowings through relationships with correspondent banks. Securities sold under agreements to repurchase are considered overnight borrowings and are secured by U.S. Government agency securities. At September 30, 2022March 31, 2023 and December 31, 2021, we2022, BancPlus had no short-term borrowings. The following is a summary of our short-term borrowings during the periods presented.
| | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Balances Outstanding | | Weighted Average Rate |
March 31, 2023 | Maximum Month End | Average Daily | At Period End | | During Period | At Period End |
Federal funds purchased | $ | — | | $ | 6,406 | | $ | — | | | 4.93 | % | — | % |
Securities sold under agreements to repurchase | — | | — | | — | | | — | % | — | % |
| $ | — | | $ | — | | $ | — | | | | |
| | | | | | |
December 31, 2022 | | | | | | |
Federal funds purchased | $ | 20,003 | | $ | 1,136 | | $ | — | | | 4.39 | % | — | % |
Securities sold under agreements to repurchase | — | | — | | — | | | — | % | — | % |
| $ | 20,003 | | $ | 1,136 | | $ | — | | | | |
Advances from Federal Home Loan Bank (“FHLB”) and Other Borrowings. BankPlus is a member of the FHLB, and as a result, is eligible for advances from the FHLB pursuant to the terms of various borrowing agreements, which assist BancPlus in the funding of its loan and investment portfolios. BancPlus’ FHLB advances are collateralized by a blanket lien on first mortgage and other qualifying loans. At September 30, 2022March 31, 2023 and December 31, 2021,2022, BancPlus had $310.1 million and $20.5$318.1 million in FHLB borrowings, at a weighted average interest rate of 3.08%5.01% and 1.49%4.52%, respectively.
On February 25, 2022, the Company entered into a $20.0 million revolving line of credit with a correspondent bank. The line of credit is collateralized by 9,000 shares of BankPlus common stock. The line of credit bears interest at a floating rate of Wall Street Journal Prime with 3.25% interest rate floor. Interest only payments are due on a quarterly basis with the principal due at maturity on February 25, 2024. Unused fees on the revolving line of credit are paid quarterly at 0.25%. For the year ended December 31, 2022, the Company paid unused fees of $24,000. The balance outstanding on this revolving line of credit was zero at September 30, 2022March 31, 2023 and December 31, 2021.2022.
Required principal payments on FHLB advances and other borrowings were as follows:
| (Dollars in thousands) | (Dollars in thousands) | September 30, 2022 | | December 31, 2021 | (Dollars in thousands) | March 31, 2023 | | December 31, 2022 |
2022 | $ | 310,019 | | | $ | 417 | | |
2023 | 2023 | 25 | | | 25 | | 2023 | $ | 310,009 | | | $ | 318,025 | |
2024 | 2024 | 13 | | | 13 | | 2024 | 13 | | | 13 | |
2025 | 2025 | 13 | | | 13 | | 2025 | 13 | | | 13 | |
2026 | 2026 | 14 | | | 14 | | 2026 | 14 | | | 14 | |
2027 | | 2027 | 14 | | | 14 | |
Thereafter | Thereafter | 15 | | | 20,019 | | Thereafter | 5 | | | 5 | |
Total | Total | $ | 310,099 | | | $ | 20,501 | | Total | $ | 310,068 | | | $ | 318,084 | |
Subordinated Debentures. On June 4, 2020, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers and institutional accredited investors pursuant to which the Company issued and sold $60.0 million in aggregate principal amount of its 6.000% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030 (the “Notes”). The Company incurred issuance costs of $1.4 million in conjunction with the issuance of the Notes. These issuance costs are netted with the balance of the Notes on the Company’s Consolidated Balance Sheetsconsolidated balance sheet and will be amortized over the life of the Notes. The Notes initially bear interest at a rate of 6.000% per annum from and including June 4, 2020, to but excluding June 15, 2025 or early redemption date, with interest during this period payable semiannually in arrears. From and including June 15, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to the Three-Month Term Secured Overnight Financing Rate (“SOFR”) plus 586 basis points, with interest during this period payable quarterly in arrears. The notes qualify as Tier 2 capital for regulatory capital purposes. The Company used the proceeds offrom the private placementNotes for general corporate purposes, including improving the Company’s liquidity and capital position.
The Notes are not redeemable by the Company, in whole or in part, prior to the fifth anniversary of the original date of issue, except that the Notes may be redeemed at any time in whole but not in part in the event of a Tier 2 Capital Event, a Tax Event, or an Investment Company Event, each as defined and described in the Notes. On or after the fifth anniversary of the original date of
issue, the Notes are redeemable on any interest payment date at the option of the Company, in whole or in part in integral multiples of $1,000, at an amount equal to 100% of the outstanding principal amount redeemed plus accrued but unpaid interest thereon. Any partial redemption will be made on a pro rata basis as to the holders of the Notes. Any redemption of the Notes is subject to any applicable regulatory requirements and approvals.
Effective March 1, 2022, in conjunction with the FTC Merger, the Company assumed FTC’s obligations under its Subordinated Note Purchase Agreement, dated as of December 23, 2020, and the several purchasers of the $21.0 million aggregate principal amount of 5.50% Fixed-to-Floating Rate Subordinated Notes due 2030 issued thereunder (the “Subordinated“FTC Subordinated Notes”). The FTC Subordinated Notes will mature on December 30, 2030 and bear interest at an initial fixed rate of 5.50% per annum, payable semi-annually in arrears. From and including December 30, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to a Three-Month Term Secured Overnight Financing RateSOFR plus 527 basis points, payable quarterly in arrears. BancPlus will be entitled to redeem the FTC Subordinated Notes, in whole or in part, on any interest payment date on or after December 30, 2025, and to redeem the FTC Subordinated Notes in whole upon certain other events. The FTC Subordinated Notes are not subject to redemption at the option of the holder. The FTC Subordinated Notes are unsecured, subordinated obligations of BancPlus only and are not obligations of, and are not guaranteed by, any subsidiary of BancPlus. The FTC Subordinated Notes rank junior in right to payment to BancPlus’ current and future senior indebtedness. The Subordinated Notes have been structured to qualify as Tier 2 capital for regulatory capital purposes. The FTC Subordinated Notes vary from the amount carried on the Consolidated Balance Sheetsconsolidated balance sheet at September 30, 2022March 31, 2023 due to the remaining purchase premium of $633,000,$536,000, which was established upon closing of the FTC Merger and is being amortized over the remaining life of the debentures.
BancPlus also owns the outstanding common stock of business trusts that have issued preferred capital securities to third parties. Under a grandfathering provision in the Basel III capital rules that applies to bank holding companies with less than $15 billion in total consolidated assets, theThe preferred capital securities have qualified as Tier 1 capital, subject to regulatory rules and limits. These trusts used the proceeds from the issuance of the common stock and preferred capital securities to purchase subordinated debentures that BancPlus issued. The subordinated debentures are these trusts’ only assets, and quarterly interest payments on these subordinated debentures are the sole source of cash for these trusts to pay quarterly distributions on the common stock and preferred capital securities. BancPlus has fully and unconditionally guaranteed the trusts’ obligations on preferred capital securities.
The following table is a summary of debentures payable to statutory trusts:
| (Dollars in thousands) | (Dollars in thousands) | Year of Maturity | | Interest Rate | | September 30, 2022 | | December 31, 2021 | (Dollars in thousands) | Year of Maturity | | Interest Rate | | March 31, 2023 | | December 31, 2022 |
First Bancshares of Baton Rouge Statutory Trust I | First Bancshares of Baton Rouge Statutory Trust I | 2034 | | 3 month LIBOR, plus 2.50% | | $ | 4,124 | | | $ | 4,124 | | First Bancshares of Baton Rouge Statutory Trust I | 2034 | | 3 month LIBOR, plus 2.50% | | $ | 4,124 | | | $ | 4,124 | |
State Capital Statutory Trust IV | State Capital Statutory Trust IV | 2035 | | 3 month LIBOR, plus 1.99% | | 5,155 | | | 5,155 | | State Capital Statutory Trust IV | 2035 | | 3 month LIBOR, plus 1.99% | | 5,155 | | | 5,155 | |
BancPlus Statutory Trust II | BancPlus Statutory Trust II | 2036 | | 3 month LIBOR, plus 1.50% | | 20,619 | | | 20,619 | | BancPlus Statutory Trust II | 2036 | | 3 month LIBOR, plus 1.50% | | 20,619 | | | 20,619 | |
BancPlus Statutory Trust III | BancPlus Statutory Trust III | 2037 | | 3 month LIBOR, plus 1.35% | | 20,619 | | | 20,619 | | BancPlus Statutory Trust III | 2037 | | 3 month LIBOR, plus 1.35% | | 20,619 | | | 20,619 | |
State Capital Master Trust | State Capital Master Trust | 2037 | | 3 month LIBOR, plus 1.46% | | 6,186 | | | 6,186 | | State Capital Master Trust | 2037 | | 3 month LIBOR, plus 1.46% | | 6,186 | | | 6,186 | |
| | $ | 56,703 | | | $ | 56,703 | | | $ | 56,703 | | | $ | 56,703 | |
The subordinated debentures payable to statutory trusts vary from the amount carried on the Consolidated Balance Sheetsconsolidated balance sheet at September 30, 2022March 31, 2023 due to the remaining purchase discount of $3.8$3.7 million, which was established upon the SCC Merger and is being amortized over the remaining life of the debentures. At March 31, 2023 and December 31, 2022, the remaining unamortized purchase discount was $3.7 million and $3.7 million, respectively.
Interest rates adjust quarterly for the subordinated debentures with rates that are indexed with LIBOR. On March 15, 2022 the Adjustable Interest Rate (LIBOR) Act was signed into law as part of the Consolidated Appropriations Act, 2022. The Adjustable Interest Rate (LIBOR) Act establishes a nationwide process for replacing LIBOR in financial contracts that mature after the cessation of the overnight, one-, three-, six- and 12-month U.S. dollar LIBOR tenors on June 30, 2023 and that do not provide for an effective means to replace LIBOR upon its cessation. For contracts in which a party has the discretion to identify a replacement rate, the Act also provides a safe harbor to parties if they choose the SOFR-based benchmark replacement rate to be identified by the Board of Governors of the Federal Reserve System. We are currently monitoring these developments to determine any potential impactIn January 2023, the Company was notified that the interest rate on the subordinated debentures.debentures would be replaced with SOFR.
BancPlus believes that it will be able to meet its principal and interest payment obligations as they come due through maintenance of adequate cash levels or subsequent borrowings. BancPlus expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. BancPlus has in place various borrowing mechanisms for both short-term and long-term liquidity needs.
Shareholders’ Equity
Shareholders’ equity is influenced primarily by earnings, quarterly dividend payments, changes in common stock outstanding, and changes in accumulated other comprehensive income (loss) caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on available for sale investment securities.
Shareholders’ equity increased $292.7decreased $6.8 million, or 75.0%1.0%, to $683.1$691.3 million at September 30, 2022March 31, 2023 from $390.4$698.1 million at December 31, 2021,2022, primarily due to the issuancecumulative change in accounting principle related to the adoption of $250.0 millionASU 2016-13 of preferred stock, $56.5 million of equity issued in the FTC Merger, net income of $44.9 million, partially offset by other comprehensive loss of $45.5$25.0 million and dividends paid of $13.7$5.2 million, partially offset by net income of $17.1 million and other comprehensive income of $5.3 million.
On June 22, 2022, the Company entered into a Letter Agreement with the Treasury under ECIP. Pursuant to the Purchase Agreement, the Company agreed to issue and sell 250,000 shares of Preferred Stock for an aggregate purchase price of $250.0 million in cash. The Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
The Preferred Stock bears no dividend for the first two years following the issuance of the Preferred Stock. Thereafter, the annual dividend rate will be adjusted, not lower than 0.5% and not higher than 2.0%, based on our extension of credit for qualified lending as defined in the terms of the ECIP Interim Final Rule, Purchase Agreement and the Certificate of Designations (the “Certificate of Designations”) and the investment amount. After the tenth anniversary of the issuance of the Preferred Stock, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10 compared to the baseline qualified lending and the average investment amount. The dividends will be payable quarterly in arrears on March 15, June 15, September 15, and December 15.
The Preferred Stock may be redeemed at the option of the Company on or after September 15, 2027 (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations. The restrictions on redemption are set forth in the Certificate of Designations filed with the Mississippi Secretary of State for the purpose of amending its Articles of Incorporation to fix the
designations, preferences, limitations and relative rights of the Preferred Stock as described in Item 5.03 of our Current Report on Form 8-K filed with the SEC on June 23, 2022.
In the Purchase Agreement, the Company also agreed to, upon the future written request of the Treasury, comply with the terms of a Registration Rights Agreement included as an annex to the Purchase Agreement and incorporated by reference therein (the “Registration Rights Agreement”), providing for certain registration rights of the Treasury. As long as the Company is not eligible to file on Form S-3, upon written request of the Treasury, the Company would be required to prepare and file a shelf registration statement covering the potential resale of the Preferred Stock as promptly as practicable. Once the Company is eligible to file on Form S-3, the Company agreed to prepare and file such shelf registration statement within 30 days. The Registration Rights Agreement also includes customary “piggyback” registration rights, suspension rights, indemnification, contribution, and assignment provisions.
Liquidity and Capital Resources
Bank Liquidity Management
Liquidity is BancPlus’ capacity to meet its cash and collateral obligations at a reasonable cost, having cash when BancPlus needs it and having the appropriate amount of cash and other assets that are quickly convertible into cash without incurring significant loss. BancPlus is expected to maintain adequate liquidity at BankPlus to meet the cash flow requirements of its customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Maintaining an adequate level of liquidity depends on BancPlus’ ability to efficiently meet both expected and unexpected cash flows and collateral needs without adversely affecting either BancPlus’ daily operations or its financial condition. BancPlus’ Asset Liability Management Committee (“ALCO”), which is comprised of members of senior management, is responsible for managing commitments to meet the needs of customers while achieving its financial objectives. ALCO meets regularly to review balance sheet composition, funding capacities, and current and forecasted loan demand, and BancPlus’ Treasury Management department continuously monitors its liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of its short-term and long-term cash requirements.
BancPlus manages its liquidity by maintaining adequate levels of cash and other assets from on and off-balance sheet arrangements. Specifically, on-balance sheet liquidity consists of cash and due from banks and unpledged investment securities, which BancPlus considers its primary liquidity. Furthermore, a significant portion of these unencumbered liquid assets are comprised of U.S. government agency obligations, mortgage backed securities and other agency securities, which the regulatory bodies consider the most marketable and liquid, especially in a stress scenario. In regard to off-balance sheet capacity, BancPlus maintains available borrowing capacity under secured borrowing lines with the FHLB and the Federal Reserve Bank of St. Louis, as well as unsecured lines of credit for the purpose of overnight funds with various correspondent banks, which BancPlus considersconsider its secondary liquidity. BancPlus also monitors its liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios, FHLB borrowings and deposits. As part of its liquidity management strategy, BancPlus is also focused on minimizing its costs of liquidity and attempting to decrease these costs by growing its noninterest-bearing and other low-cost deposits and replacing higher cost borrowed funds.
The following tables provide a summary of BancPlus’ primary and secondary liquidity levels.
| (Dollars in thousands) Primary Liquidity – On-Balance Sheet | (Dollars in thousands) Primary Liquidity – On-Balance Sheet | September 30, 2022 | | December 31, 2021 | (Dollars in thousands) Primary Liquidity – On-Balance Sheet | March 31, 2023 | | December 31, 2022 |
Cash and cash equivalents | Cash and cash equivalents | $ | 172,285 | | | $ | 664,165 | | Cash and cash equivalents | $ | 121,220 | | | $ | 137,895 | |
Total securities | Total securities | 680,547 | | | 648,262 | | Total securities | 720,843 | | | 686,194 | |
Less: pledged securities | Less: pledged securities | (429,189) | | | (489,184) | | Less: pledged securities | (608,506) | | | (487,372) | |
Total primary liquidity | Total primary liquidity | $ | 423,643 | | | $ | 823,243 | | Total primary liquidity | $ | 233,557 | | | $ | 336,717 | |
Ratio of primary liquidity to total deposits | Ratio of primary liquidity to total deposits | 7.6 | % | | 17.8 | % | Ratio of primary liquidity to total deposits | 3.9 | % | | 5.8 | % |
| Secondary Liquidity – Off-Balance Sheet Borrowing Capacity | Secondary Liquidity – Off-Balance Sheet Borrowing Capacity | September 30, 2022 | | December 31, 2021 | Secondary Liquidity – Off-Balance Sheet Borrowing Capacity | March 31, 2023 | | December 31, 2022 |
Net secured borrowing capacity with the FHLB | Net secured borrowing capacity with the FHLB | $ | 1,811,637 | | | $ | 1,476,825 | | Net secured borrowing capacity with the FHLB | $ | 2,064,771 | | | $ | 1,880,392 | |
Net secured borrowing capacity with the Federal Reserve Bank | Net secured borrowing capacity with the Federal Reserve Bank | 543,213 | | | 189,497 | | Net secured borrowing capacity with the Federal Reserve Bank | 593,031 | | | 573,588 | |
Unsecured borrowing capacity with correspondent lenders | Unsecured borrowing capacity with correspondent lenders | 243,000 | | | 223,000 | | Unsecured borrowing capacity with correspondent lenders | 243,000 | | | 243,000 | |
Available capacity on revolving line of credit | Available capacity on revolving line of credit | $ | 20,000 | | | $ | — | | Available capacity on revolving line of credit | 20,000 | | | 20,000 | |
Total secondary liquidity | Total secondary liquidity | $ | 2,617,850 | | | $ | 1,889,322 | | Total secondary liquidity | $ | 2,920,802 | | | $ | 2,716,980 | |
Ratio of primary and secondary liquidity to total deposits | Ratio of primary and secondary liquidity to total deposits | 54.4 | % | | 58.7 | % | Ratio of primary and secondary liquidity to total deposits | 52.9 | % | | 52.4 | % |
During the ninethree months ended September 30, 2022,March 31, 2023, BancPlus’ primary liquidity decreased by $399.6$103.2 million to $423.6$233.6 million, compared to $823.2$336.7 million at December 31, 2021,2022, primarily due to changes in cash and cash equivalents as a result of organic loan growth and a decrease in money market, negotiable orders of withdrawal, and savings deposits, partially offset by thean increase in cash as a result of ECIP.pledged securities. Secondary liquidity increased by $728.5$203.8 million to $2.62$2.92 billion as of September 30, 2022March 31, 2023 from $1.89$2.72 billion as of December 31, 2021.2022. This increase was primarily due to an increase in BancPlus’ FHLB borrowing capacity due to the FTC Merger.capacity.
In addition to its primary liquidity, BancPlus generates liquidity from cash flows from its loan and securities portfolios and from its large base of core customer deposits, defined as total deposits less brokered deposits and time deposits greater than $250,000. Core deposits totaled $5.39$5.76 billion and $4.45$5.66 billion and represented 96.3%96.6% of total deposits as of both September 30, 2022March 31, 2023 and December 31, 2021.2022. These core deposits are normally less volatile, often with customer relationships tied to other products, which promote long-standing relationships and stable funding sources. Although BancPlus’ policy allows the use of brokered deposits, BankPlus did not utilize this funding source during the 20222023 and 20212022 year to date periods.
BancPlus’ liquidity policy includes both policy limits and policy guidelines for measuring and monitoring liquidity. BancPlus’ policy measures include an Internal Liquidity Ratio, an Internal Liquidity Ratio adjusted for FHLB, an Internal Dependency Ratio adjusted for FHLB and a Maximum Available Funds to Total Assets Ratio. These ratios are calculated monthly. BancPlus also utilizes eleven liquidity guidelines that are reported quarterly. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, BancPlus was in compliance with all of its established liquidity guidelines.
Holding Company Liquidity Management
BancPlus is a corporation separate and apart from BankPlus and, therefore, it must provide for its own liquidity. BancPlus’ main source of funding is dividends declared and paid to it by BankPlus. Statutory and regulatory limitations exist that affect the ability of BankPlus to pay dividends to the holding company. BancPlus believes that these limitations will not impact the ability of the holding company to meet its ongoing short-term cash obligations.
Due to state banking laws, BankPlus may not declarepay dividends without the prior approval of the MDBCF. BankPlus received permission from the MDBCF to pay dividends of $18.9$7.2 million and $16.2$6.3 million for the year-to-date periods ended September 30,March 31, 2023 and March 31, 2022, and September 30, 2021, respectively.respectively to BancPlus. These dividends were used by the holding company to pay dividends to the BancPlus shareholders, principal and interest payments on debt and general operating expenses.
Capital Management and Regulatory Capital Requirements
BancPlus is subject to various capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on BancPlus’ business operations.
Under the regulatory capital rules, BancPlus must maintain minimum amounts and ratios of common equity Tier 1 (“CET1”) capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, referred to as the leverage ratio. The adequacy of our capital levels is also subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors.
In addition, BancPlus must maintain a capital conservation buffer of 2.5%, consisting of CET1 capital, on top of the risk-based minimum capital ratios. A banking organization with a conservation buffer of less than the required amount of 2.5% will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive
officers. Minimum capital requirements, including the capital conservation buffer, to which BankPlus and BancPlus are subject are summarized in the tables below.
In 2019, the federal bank regulatory agencies finalized a rule that simplifies capital requirements for qualifying community banks by providing an option to use a simple leverage ratio to measure capital adequacy and to not calculate risk-based capital ratios. A qualifying community bank has less than $10 billion in total consolidated assets, limited amounts of off-balance-sheet exposures and trading assets and liabilities, and a leverage ratio greater than 9 percent.9.0%. The community bank leverage ratio (“CBLR”) framework was effective on January 1, 2020, and the Company and the Bank elected to adopt the optional CBLR framework in the third quarter of 2022, as an alternative to the Basel III risk-basedgenerally applicable capital framework.rules.
Further, under prompt corrective action regulations, an insured depository institution is classified in one of several tiers based on its level of capital and other factors, and may be subject to an escalating series of remedial measures if it is less than “well capitalized.” An institution is deemed “well capitalized” if it satisfies certain capital ratios summarized in the tables below, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any
capital measure. As of March 31, 2023, the Bank maintained a leverage ratio of more than 9.0% and, as an institution has elected to adopt the CBLR framework, the Bank was therefore well capitalized under the regulatory framework for prompt corrective action.
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, BancPlus and BankPlus met the minimum leverage ratio orCBLR requirement and therefore satisfied the capital adequacy requirements to which they are subject. As a bank holding company, BancPlus is not subject to the prompt corrective action regime that applies to insured depository institutions, including BankPlus.
BancPlus’ consolidated and BankPlus’ actual capital amounts and ratios are shown in the following tables as of the dates indicated (dollars in thousands):
| | | Actual | | Minimum Requirement to be Well Capitalized | | Actual | | Minimum Requirement to be Well Capitalized |
As of September 30, 2022: | Capital Amount | | Ratio | | Capital Amount | | Ratio | |
As of March 31, 2023: | | As of March 31, 2023: | Capital Amount | | Ratio | | Capital Amount | | Ratio |
Consolidated: | Consolidated: | | | | | | | | Consolidated: | | | | | | | |
| Community Bank Leverage Ratio | Community Bank Leverage Ratio | 708,028 | | | 10.69 | % | | 595,970 | | | 9.00 | % | Community Bank Leverage Ratio | $ | 727,972 | | | 10.27 | % | | $ | 637,810 | | | 9.00 | % |
| Bank: | Bank: | | Bank: | |
| Community Bank Leverage Ratio | Community Bank Leverage Ratio | 622,789 | | | 9.41 | % | | 595,436 | | | 9.00 | % | Community Bank Leverage Ratio | $ | 672,902 | | | 9.50 | % | | $ | 637,283 | | | 9.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum For Capital Adequacy Purposes | | Required to be Well Capitalized |
As of December 31, 2021: | Capital Amount | | Ratio | | Capital Amount | | Ratio | | Capital Amount | | Ratio |
Consolidated: | | | | | | | | | | | |
CET1 Capital to Risk-Weighted Assets | $ | 382,736 | | | 9.40 | % | | $ | 285,078 | | | 7.00 | % | | N/A | | N/A |
Tier 1 Capital to Risk-Weighted Assets | 433,754 | | | 10.65 | % | | 346,166 | | | 8.50 | % | | N/A | | N/A |
Total Capital to Risk-Weighted Assets | 537,541 | | | 13.20 | % | | 427,617 | | | 10.50 | % | | N/A | | N/A |
Tier 1 Capital to Average Assets | 433,754 | | | 8.46 | % | | 205,072 | | | 4.00 | % | | N/A | | N/A |
| | | | | | | | | | | |
Bank: | | | | | | | | | | | |
CET1 Capital to Risk-Weighted Assets | $ | 428,602 | | | 10.55 | % | | $ | 284,509 | | | 7.00 | % | | $ | 264,187 | | | 6.50 | % |
Tier 1 Capital to Risk-Weighted Assets | 428,602 | | | 10.55 | % | | 345,475 | | | 8.50 | % | | 325,153 | | | 8.00 | % |
Total Capital to Risk-Weighted Assets | 473,602 | | | 11.65 | % | | 426,763 | | | 10.50 | % | | 406,441 | | | 10.00 | % |
Tier 1 Capital to Average Assets | 428,602 | | | 8.37 | % | | 204,714 | | | 4.00 | % | | 255,893 | | | 5.00 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Minimum Requirement to be Well Capitalized |
As of December 31, 2022: | Capital Amount | | Ratio | | Capital Amount | | Ratio |
Consolidated: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Community Bank Leverage Ratio | $ | 721,001 | | | 10.54 | % | | $ | 615,566 | | | 9.00 | % |
| | | | | | | |
Bank: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Community Bank Leverage Ratio | $ | 636,007 | | | 9.31 | % | | $ | 614,973 | | | 9.00 | % |
Contractual Obligations
Contractual obligations as of September 30, 2022,March 31, 2023 totaled $1.27$1.33 billion and were primarily comprised of deposits with maturities of $776.5$842.1 million, subordinated debentures of $133.4$133.5 million and operating lease obligations of $47.7$47.9 million. Contractual obligations due within the next twelve months were $837.1$833.1 million and were primarily related to time deposits with maturity dates and short-term FHLB advances due in 2022. Contractual obligations due in more than 12 months were $430.6$500.5 million and were comprised of $254.7$323.1 million of time deposits with maturity dates and $133.4$133.5 million of subordinated debentures with maturities ranging from 2030 through 2037. BancPlus expects to have adequate liquidity to meet these short and long-term obligations through profitability, repayments from loans and investment securities, deposit gathering activity and access to borrowing sources.
Recent Accounting Pronouncements
Accounting Standards Update 2016-13 (“ASU 2016-13”), “See Note 1 Basis of Presentation in our Condensed Notes to Consolidated Financial Instruments – Credit Losses (Topic 326): MeasurementStatements elsewhere in this Quarterly Report on Form 10-Q for details of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”)recently issued Accounting Standards Update (“ASU”) 2016-13, which requires earlier measurement of credit lossesaccounting pronouncements and enhances disclosures. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about thetheir expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses over the life of the loan. ASU 2016-13 was originally effective for the Company for annual and interim periods beginning on January 1, 2021. Subsequently, FASB approved a deferral of the effective date. ASU 2016-13 will now be effective for the Company for annual and interim periods beginning on January 1, 2023. The Company has a cross functional team that has been working with third-party vendors to build and validate a CECL model which has been running parallel with the Company’s current model while validation of the model is completed. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the Company adopts the new standard, but has not yet determined the magnitude of the one-time adjustment or the overall impact on the Company’sour consolidated financial statements.
Accounting Standards Update 2020-04 (“ASU 2020-04”), “Reference Rate Reform - Topic 848.” In March 2020, the FASB issued ASU 2020-04, which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications, hedge accounting, and other transactions affected that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Company does not expect ASU 2020-04 to have a material impact on the Company’s consolidated financial statements.
Accounting Standards Update 2022-02 (“ASU 2022-02”), “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” In March 2022, the FASB issued ASU 2022-02 which eliminates the TDR recognition and measurement guidance and instead requires that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. ASU 2022-02 also enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For public business entities, these amendments require that an entity disclose current period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. ASU 2022-02 is effective for the Company for annual and interim periods beginning on January 1, 2023. Implementation of ASU 2022-02 is not expected to materially impact the Company’s consolidated financial statements.
Critical Accounting Policies and Estimates
There have been no material changes to the critical accounting policies and estimates previously disclosed under Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, previously filed with the SEC.
Recent Supervision and Regulation Developments
On October 18, 2022 the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate schedules will remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds 2 percent.
As a result of the new rule, the FDIC insurance costs of insured depository institutions, including BankPlus, will generally increase.
In the third quarter of 2022, the Company and the Bank elected to adopt the optional CBLR framework as described above.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
Not applicable.Interest Rate Risk
As a financial institution, BancPlus’ primary market risk is interest rate risk, which is defined as the risk of economic loss due to changes in interest rates. These economic losses can be reflected as a loss of future net interest income and/or loss of current fair market value. BancPlus continually seeks to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest earning assets and interest-bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when BancPlus’ assets and liabilities each respond differently to changes in interest rates.
BancPlus’ management of interest rate risk is overseen by the ALCO. BancPlus’ risk management infrastructure approved by the BancPlus board of directors outlines reporting and measurement requirements. In particular, this infrastructure establishes limits and management targets for various metrics, including net interest income at risk and economic value of equity at risk, given instantaneous parallel shifts in interest rates. BancPlus’ risk management infrastructure also requires a periodic review of all key assumptions used, such as appropriate interest rate scenarios, loan prepayment rates, and transaction deposit durations.
BancPlus currently does not utilize derivative products to manage interest rate risk, although its policy does allow the use of derivatives within established parameters. BancPlus manages the interest rate risk associated with its interest bearing liabilities by managing the interest rates and terms associated with its borrowings and customer deposits on which BancPlus relies for funding. For instance, BancPlus occasionally uses special offers on deposits to attract additional balances and manage terms associated with its interest-bearing liabilities. BancPlus manages the interest rate risk associated with its earning assets by managing the interest rates and terms associated with its loan portfolio and investment securities portfolio.
Net Interest Income Simulation and Economic Value Analysis
On a quarterly basis, BancPlus uses a model to simulate and measure potential changes in its net interest income and economic value of equity (“EVE”) given instantaneous parallel shifts in interest rates. BancPlus’ net interest income at risk simulation measures shorter term risk over 12 and 24 month time frames. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value given the changes in interest rates. EVE is a point-in-time measurement that helps quantify longer term interest rate risk. The model has inherent limitations since the results are based on a given set of rate changes and assumptions as of a certain point in time. For purpose of the simulation, BancPlus assumes no balance sheet growth. Therefore, the model’s results reflect an interest rate shock to a static balance sheet.
Potential changes to BancPlus’ net interest income and EVE in hypothetical rising and declining interest rate scenarios calculated as of March 31, 2023 and December 31, 2022 are presented in the table below (dollars in thousands). The projections for March 31, 2023 and December 31, 2022 assume immediate, parallel shifts down from the yield curves of 100, 200, and 300 basis points and immediate, parallel shifts up of 100, 200, and 300 basis points.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2023 | | As of December 31, 2022 |
(Dollars in thousands) | | Change in Net Interest Income | | Change in Economic Value of Equity | | Change in Net Interest Income | | Change in Economic Value of Equity |
Parallel Rate Shift (basis points) | | $ | | % | | $ | | % | | $ | | % | | $ | | % |
300 | | $ | 1,840 | | | 0.8 | % | | $ | (55,074) | | | (8.1) | % | | $ | (907) | | | (0.4) | % | | $ | (28,909) | | | (2.7) | % |
200 | | $ | (5,836) | | | (2.5) | % | | $ | (35,481) | | | (5.2) | % | | $ | (3,041) | | | (1.2) | % | | $ | (19,101) | | | (1.8) | % |
100 | | $ | (3,808) | | | (1.6) | % | | $ | (16,431) | | | (2.4) | % | | $ | (2,090) | | | (0.8) | % | | $ | (9,706) | | | (0.9) | % |
Unchanged | | $ | — | | | — | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | — | | | — | % |
-100 | | $ | 3,382 | | | 1.5 | % | | $ | 12,583 | | | 1.9 | % | | $ | 430 | | | 0.2 | % | | $ | 13,299 | | | 1.2 | % |
-200 | | $ | 5,547 | | | 2.4 | % | | $ | 17,657 | | | 2.6 | % | | $ | (394) | | | (0.2) | % | | $ | 17,758 | | | 1.7 | % |
-300 | | $ | 6,561 | | | 2.8 | % | | $ | 11,544 | | | 1.7 | % | | $ | (9,414) | | | (3.7) | % | | $ | 6,027 | | | 0.6 | % |
The table above indicates that in the event of an immediate and sustained 300 basis point increase in interest rates, BancPlus would have experienced a 0.8% increase in net interest income and a 8.1% decrease in EVE as of March 31, 2023. At December 31, 2022, in the event of an immediate and sustained 300 basis point increase in interest, BancPlus would have experienced a 0.4% decrease in net interest income and a 2.7% decrease in EVE. In the event of an immediate 100 basis point
decrease in interest rates, BancPlus would have experienced an increase of 1.5% in net interest income and a 1.9% increase in EVE as of March 31, 2023, and a 0.2% increase in net interest income and a 1.2% increase in EVE as of December 31, 2022.
The results of this simulation analysis are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. The timing and magnitude of interest rate changes will most likely differ substantially from what is depicted. The shape or steepness of the yield curve typically changes with each change in the Fed Funds target range. Increasing rates could reduce net interest income if BancPlus is required to increase deposit rates faster than planned to maintain volumes or its mix of assets and funding changes. Results could also change depending on faster or slower prepays in loans or early withdrawals in deposits than those assumed in the model. Finally, the results do not incorporate growth in the balance sheet or strategic changes made in response to changes in rates.
Because of the flaws in the nature of the static balance sheet rate shocks, ALCO also periodically runs model simulations that incorporate many of the factors mentioned above. These alternate scenarios change given the current economic environment, but may include the following: (1) expected balance sheet growth, (2) changes in rates timed with Federal Open Market Committee meetings, (3) increased early withdrawals of time deposits, (4) shifts in funding out of deposits and into wholesale borrowings, and (5) decreased growth of loans and deposits. Using a variety of scenarios in addition to BancPlus’ standard shocked scenarios enables ALCO to form a more accurate analysis of BancPlus’ overall interest rate sensitivity.
Impact of Inflation and Changing Prices
BancPlus’ consolidated financial statements and related notes have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Unlike most industrial companies, nearly all of BancPlus’ assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on BancPlus’ performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods or services.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of BancPlus’ ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer, of the effectiveness of BancPlus’ disclosure controls and procedures, (asas defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the ChiefPrincipal Executive Officer and the ChiefPrincipal Financial Officer concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, BancPlus’ disclosure controls and procedures were effective to ensure that information required to be disclosed by BancPlus in the reports required to be filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within time periods specified in the SEC’s rules and forms.forms and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Effective January 1, 2023, BancPlus adopted FASB ASU 2016-13. BancPlus implemented changes to its policies, processes and controls over the estimation of the allowance for credit losses to support the adoption of FASB ASU 2016-13. Management revised previous internal controls used under legacy GAAP and incorporated new internal controls to ensure adequacy of the reserve levels under the new allowance for credit losses methodology. Changes to internal controls as a result of adopting FASB ASU 2016-13 were a result of changes in the calculation under the new allowance for credit losses methodology and did not change the overall nature of the controls.
There has been no change in BancPlus’ internal control over financial reporting identified in connection with the evaluation required by 15d-15(d) under the Exchange Act that occurred during the last fiscal quarterperiod covered by this report that has materially affected, or is reasonably likely to materially affect, BancPlus’ internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information about our legal proceedings refer to Footnote 13 to our Condensed Notes to Consolidated Financial Statements for the quarter ended September 30, 2022March 31, 2023 contained in Part I, Item 1 of this Quarterly Report on Form 10-Q10-Q.
In addition to the above, the Company, including its subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, previously filed with the SEC.SEC, except for the addition of the following risk factor:
A failure or the perceived risk of a failure to raise the statutory debt limit of the United States could have an adverse effect on our business, financial condition and results of operations.
The inability of U.S. lawmakers to pass legislation to raise the U.S. government’s debt limit of $31.4 trillion has increased the possibility of a default by the U.S. government on its debt obligations, which could have an adverse impact on financial markets, interest rates and economic conditions in the United States and worldwide. The U.S. government reached its debt limit of $31.4 trillion in January 2023. Since then, the U.S. Department of Treasury has implemented extraordinary measures to prevent default.
It is unclear if Congress and the President will reach an agreement to increase the U.S. government’s debt limit in a timely manner. The political stalemate over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations and related credit-rating downgrades. This creates uncertainty in the U.S. financial markets and domestic political conditions which could have an adverse impact on our business, financial condition and results of operations. If the United States is unable to increase the U.S. government’s debt limit in a timely manner, the U.S. government could shut down for a period of time and the United States could default or delay on payment of its obligations or both, which could have an adverse impact on financial markets and economic conditions in the United States and worldwide and an adverse effect on our business, financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
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2.1* | Agreement and Plan of Share Exchange and Merger, dated September 28, 2021, as amended February 9, 2022, by and among BancPlus Corporation, BankPlus, First Trust Corporation and First Bank and Trust (incorporated by reference to Annex A of the Company’s Registration Statement on Form S-4 (File No. 333-261311), as amended, filed on February 11, 2022) |
2.2* | Agreement and Plan of Share Exchange and Merger, dated September 18, 2019, by and among BancPlus Corporation,BankPlus,StateCapitalCorp.,andStateBank&TrustCompany(incorporatedbyreferenceto Annex A of the Company's Registration Statement on Form S-4, as amended (File No. 333-236022), of the Registrant, filed on February 10, 2020) |
3.1 | |
3.2 | |
4.1 | |
4.2 | |
4.3 | |
4.4 | |
4.5 | |
4.34.6 | |
10.1 | |
31.131.1+ | |
31.231.2+ | |
32.132.1++ | |
32.232.2++ | |
101101+ | Inline XBRL Interactive Data |
104104+ | Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101) |
* Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request.
+ Filed herewith.
++ Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BancPlus Corporation
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Date: | November 10, 2022May 12, 2023 | By: | /s/ William A. Ray |
| | | William A. Ray |
| | | Vice Chairman, President and Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | | | | | | | | | |
Date: | November 10, 2022May 12, 2023 | By: | /s/ Karlen Turbeville |
| | | Karlen Turbeville |
| | | Senior Executive Vice President and Chief Financial Officer |
| | | (Principal Financial Officer and Principal Accounting Officer) |