Red River Bank - SEC Filing

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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: June 30, 2019



☐	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: 001-38888



	Red River Bancshares, Inc.
	(Exact name of registrant as specified in its charter)



Louisiana		72-1412058
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)



1412 Centre Court Drive, Suite 402,	Alexandria,	Louisiana	71301
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: (318) 561-5028

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	RRBI	The NASDAQ Stock Market, LLC

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 Exchange Act). Yes ☐ No ☒

At July 31, 2019, the registrant had 7,306,221 shares of common stock, no par value, issued and outstanding.

TABLE OF CONTENTS



		Page
Glossary of Terms		3
Cautionary Note Regarding Forward-Looking Statements		4

PART I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Shareholder’s Equity	8
	Consolidated Statements of Cash Flows	9
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46

PART II	Other Information
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Used of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits and Financial Statement Schedules	48
	Signatures	49

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GLOSSARY OF TERMS

Unless the context indicates otherwise, references in this filing to “we,” “our,” “us,” “the Company,” and “our company” refer to Red River Bancshares, Inc., a Louisiana corporation and bank holding company, and its consolidated subsidiaries. All references in this filing to “Red River Bank,” the “bank,” and the “Bank” refer to Red River Bank, our wholly owned bank subsidiary.

Other abbreviations or acronyms used in this filing are defined below.



ABBREVIATION OR ACRONYM		DEFINITION
2018 2-for-1 stock split		A stock split that was accomplished by a stock dividend with a record date of October 1, 2018, whereby each holder of the Company's common stock received one additional share of common stock for each share owned as of such date.
AFS		Available-for-sale
AOCI		Accumulated other comprehensive income or loss
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
Basel III		Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
BOLI		Bank-owned life insurance
CECL		Current Expected Credit Losses, related to ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
Director Compensation Program		Compensation program which allows directors of the Company and the Bank an opportunity to select how to receive their annual director fees.
Economic Growth Act		Economic Growth, Regulatory Relief, and Consumer Protection Act
EPS		Earnings per share
Exchange Act		Securities Exchange Act of 1934, as amended
FDIA		Federal Deposit Insurance Act
FDIC		Federal Deposit Insurance Corporation
FBT CT I		FBT Capital Trust I, a Delaware statutory trust
FHLB		Federal Home Loan Bank
FTE		Fully taxable equivalent basis
GAAP		Generally Accepted Accounting Principles in the United States of America
HFI		Held for investment
HFS		Held for sale
HTM		Held-to-maturity
IPO		Initial public offering
LPO		Loan production office
MSA		Metropolitan statistical area
NOW		Negotiable order of withdrawal
OTTI		Other-than-temporary impairment
SBIC		Small Business Investment Company
Securities Act		Securities Act of 1933, as amended
SEC		Securities and Exchange Commission
TDR(s)		Troubled debt restructuring(s)
Trust II		Red River Statutory Trust II, a Connecticut statutory trust
Trust III		Red River Statutory Trust III, a Delaware statutory trust

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” and “outlook,” or the negative version of those words, or such 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, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Although we believe 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 factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:


•	business and economic conditions generally and in the financial services industry, nationally and within our local market areas;


•	government intervention in the U.S. financial system;


•	changes in management personnel;


•	increased competition in the financial services industry, particularly from regional and national institutions;


•	volatility and direction of market interest rates;


•	our ability to maintain important deposit customer relationships, our reputation, or to otherwise avoid liquidity risks;


•	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;


•	changes in the value of collateral securing our loans;


•	risks associated with system failures or failures to protect against cybersecurity threats, such as breaches of our network security;


•	deterioration of our asset quality;


•	the adequacy of our reserves, including our allowance for loan losses;


•	operational risks associated with our business;


•	natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, and other matters beyond our control;


•	our ability to prudently manage our growth and execute our strategy;


•	compliance with the extensive regulatory framework that applies to us;


•	changes in the laws, rules, regulations, interpretations, or policies relating to financial institution, accounting, tax, trade, monetary, and fiscal matters;


•	the impact of recent and future legislative and regulatory changes, including the Tax Cuts and Jobs Act of 2017, the Economic Growth Act, and other changes in banking, securities, accounting, and tax laws and regulations, and their application by our regulators; and


•	other risks and uncertainties listed from time to time in our reports and documents filed with the SEC.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this quarterly report on Form 10-Q. Additional information on these and other risk factors can be found in Item 1A "Risk Factors" of this quarterly report on Form 10-Q and in the section titled "Risk Factors" in our Prospectus that was filed with the SEC on May 3, 2019, relating to our IPO. 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 review any forward-looking statement, whether as a result of new information, future developments, or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. 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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RED RIVER BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS



(in thousands, except share amounts)	(Unaudited) June 30, 2019			(Audited) December 31, 2018
ASSETS
Cash and due from banks	$	29,854		$	34,070
Interest-bearing deposits in other banks	71,761			117,836
Total cash and cash equivalents	101,615			151,906
Securities available-for-sale	318,082			307,877
Equity securities	3,924			3,821
Nonmarketable equity securities	1,342			1,299
Loans held for sale	6,029			2,904
Loans held for investment	1,393,154			1,328,438
Allowance for loan losses	(13,591		)	(12,524		)
Premises and equipment, net	40,032			39,690
Accrued interest receivable	5,570			5,013
Bank-owned life insurance	21,570			21,301
Intangible assets	1,546			1,546
Right-of-use assets	4,748			—
Other assets	8,897			9,317
Total Assets	$	1,892,918		$	1,860,588
LIABILITIES
Noninterest-bearing deposits	$	576,934		$	547,880
Interest-bearing deposits	1,057,656			1,097,703
Total Deposits	1,634,590			1,645,583
Junior subordinated debentures	5,155			11,341
Accrued interest payable	1,998			1,757
Lease liabilities	4,773			—
Accrued expenses and other liabilities	8,491			8,204
Total Liabilities	1,655,007			1,666,885
COMMITMENTS AND CONTINGENCIES	—			—
STOCKHOLDERS' EQUITY
Preferred stock, no par value: Authorized - 1,000,000 shares; None Issued and Outstanding	—			—
Common stock, no par value: Authorized - 30,000,000 shares; Issued and Outstanding - 7,300,246 and 6,627,358 shares	68,082			41,094
Retained earnings	170,122			160,115
Accumulated other comprehensive income (loss)	(293		)	(7,506		)
Total Stockholders' Equity	237,911			193,703
Total Liabilities and Stockholders' Equity	$	1,892,918		$	1,860,588

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



(in thousands, except per share data)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019		2018			2019		2018
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	15,945	$	14,435		$	31,448	$	28,022
Interest on securities	1,784		1,744			3,547		3,565
Interest on federal funds sold	212		64			425		114
Interest on deposits in other banks	306		119			722		226
Dividends on stock	9		7			19		13
Total Interest and Dividend Income	18,256		16,369			36,161		31,940
INTEREST EXPENSE
Interest on deposits	2,449		1,665			4,746		3,200
Interest on other borrowed funds	—		2			—		4
Interest on junior subordinated debentures	156		136			312		260
Total Interest Expense	2,605		1,803			5,058		3,464
NET INTEREST INCOME	15,651		14,566			31,103		28,476
Provision for loan losses	529		526			1,055		937
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	15,122		14,040			30,048		27,539
NONINTEREST INCOME
Service charges on deposit accounts	1,083		1,124			2,109		2,324
Debit card income, net	785		764			1,481		1,468
Mortgage loan income	657		706			1,171		1,052
Brokerage income	626		590			991		925
Loan and deposit income	382		329			727		597
Bank-owned life insurance income	137		139			270		276
Gain (Loss) on equity securities	56		(93		)	104		(93		)
Gain on sale of investments	—		—			—		41
Other income	373		106			542		233
Total Noninterest Income	4,099		3,665			7,395		6,823
OPERATING EXPENSES
Personnel expenses	7,005		6,489			13,645		12,631
Occupancy and equipment expenses	1,334		1,081			2,509		2,161
Technology expenses	558		536			1,101		1,042
Advertising	396		211			605		386
Other business development expenses	277		241			560		547
Data processing expense	483		427			942		820
Other taxes	455		349			808		691
Loan and deposit expenses	392		222			615		402
Legal and professional expenses	383		344			702		668
Other operating expenses	1,121		1,047			2,075		1,907
Total Operating Expenses	12,404		10,947			23,562		21,255
INCOME BEFORE INCOME TAX EXPENSE	6,817		6,758			13,881		13,107
Income tax expense	1,279		1,226			2,647		2,344
NET INCOME	$	5,538	$	5,532		$	11,234	$	10,763
EARNINGS PER SHARE⁽¹⁾
Basic	$	0.79	$	0.82		$	1.64	$	1.60
Diluted	$	0.78	$	0.82		$	1.63	$	1.59


⁽¹⁾	2018 amounts adjusted to give effect to the 2018 2-for-1 stock split

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



(in thousands)	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	5,538		$	5,532		$	11,234		$	10,763
Other comprehensive income (loss):
Unrealized net gain (loss) on securities arising during period	4,213			(839		)	9,131			(5,084		)
Tax effect	(885		)	185			(1,918		)	1,092
Less: Gains included in net income	—			—			—			(41		)
Tax effect	—			—			—			9
Total other comprehensive income (loss)	3,328			(654		)	7,213			(4,024		)
Comprehensive income	$	8,866		$	4,878		$	18,447		$	6,739

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)



(in thousands, except share amounts)	Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of December 31, 2017	$	45,539		$	137,949		$	(5,385	)	$	178,103
Net income	—			5,231			—			5,231
Stock incentive plan expense	—			47			—			47
Issuance of 2,452 shares of common stock as board compensation⁽¹⁾	92			—			—			92
Cash dividend - $0.15 per share⁽¹⁾	—			(1,009		)	—			(1,009		)
Other comprehensive income (loss)	—			—			(3,370		)	(3,370		)
Balance as of March 31, 2018	$	45,631		$	142,218		$	(8,755	)	$	179,094
Net income	—			5,532			—			5,532
Stock incentive plan expense	—			46			—			46
Issuance of 2,000 shares of common stock through exercise of stock options⁽¹⁾	29			—			—			29
Reclassification for adoption of accounting standard	—			(74		)	74			—
Other comprehensive income (loss)	—			—			(654		)	(654		)
Balance as of June 30, 2018	$	45,660		$	147,722		$	(9,335	)	$	184,047

Balance as of December 31, 2018	$	41,094		$	160,115		$	(7,506	)	$	193,703
Net income	—			5,696			—			5,696
Stock incentive plan expense	—			49			—			49
Issuance of 7,200 shares of common stock through exercise of stock options	80			—			—			80
Issuance of 2,368 shares of common stock as board compensation	97			—			—			97
Cash dividend - $0.20 per share	—			(1,326		)	—			(1,326		)
Other comprehensive income (loss)	—			—			3,885			3,885
Balance as of March 31, 2019	$	41,271		$	164,534		$	(3,621	)	$	202,184
Net income	—			5,538			—			5,538
Stock incentive plan expense	—			50			—			50
Issuance of 663,320 shares of common stock through IPO	26,812			—			—			26,812
Board compensation adjustment	(1		)	—			—			(1		)
Other comprehensive income (loss)	—			—			3,328			3,328
Balance as of June 30, 2019	$	68,082		$	170,122		$	(293	)	$	237,911


⁽¹⁾	Adjusted to give effect to the 2018 2-for-1 stock split

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



(in thousands)	For the Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,234		$	10,763
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	847			822
Amortization	151			214
Share-based compensation earned	99			93
Share-based board compensation earned	96			92
(Gain) Loss on other assets owned	11			(12		)
Net (accretion) amortization on AFS securities	566			687
Net (accretion) amortization on HTM securities	—			7
Gains on sales of AFS securities	—			(41		)
Provision for loan losses	1,055			937
Deferred income tax benefit (expense)	(263		)	—
Net (increase) decrease in loans HFS	(3,125		)	(2,353		)
Net (increase) decrease in accrued interest receivable	(557		)	173
Net (increase) decrease in BOLI	(269		)	(276		)
Net increase (decrease) in accrued interest payable	241			(129		)
Other operating activities, net	(1,539		)	(1,092		)
Net cash provided by operating activities	8,547			9,885
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in AFS securities:
Sales	—			3,168
Maturities, prepayments, and calls	33,255			26,048
Purchases	(34,893		)	(3,009		)
Activity in HTM securities:
Maturities, prepayments, and calls	—			1,235
Purchase of nonmarketable equity securities	(43		)	(22		)
Net increase in loans HFI	(64,703		)	(78,962		)
Proceeds from sales of foreclosed assets	333			71
Purchases of premises and equipment	(1,174		)	(1,209		)
Net cash used in investing activities	(67,225		)	(52,680		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	(10,993		)	34,354
Repayments of other borrowed funds	—			(90		)
Redemption of junior subordinated debentures	(6,186		)	—
Proceeds from exercise of stock options	80			29
Proceeds from initial public offering, net	26,812			—
Cash dividends	(1,326		)	(1,009		)
Net cash provided by financing activities	8,387			33,284
Net change in cash and cash equivalents	(50,291		)	(9,511		)
Cash and cash equivalents - beginning of period	151,906			59,667
Cash and cash equivalents - end of period	$	101,615		$	50,156

SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest	$	4,817		$	3,594
Income taxes	$	3,323		$	2,469
Initial measurement and recognition of operating lease assets in exchange for lease liabilities	$	4,954		$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RED RIVER BANCSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with GAAP for interim financial information, general practices within the financial services industry, and with instructions for Form 10-Q and Regulation S-X. Accordingly, these interim financial statements do not include all of the information or footnotes required by GAAP for annual financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Prospectus filed with the SEC on May 3, 2019, relating to its IPO.

Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company's financial condition or results of operations.

Critical Accounting Policies and Estimates

There were no material changes or developments during the reporting period with respect to methodologies the Company uses when applying critical accounting policies and developing critical accounting estimates as disclosed in Note 1 of the notes to the audited consolidated financial statements for the year ended December 31, 2018, that were included in the Company's Prospectus as filed with the SEC on May 3, 2019. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in stockholders’ equity, and cash flows for the interim period presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Accounting Standards Adopted in 2019

As of January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) and the related amendments using the modified retrospective approach. The primary purpose of this ASU was to increase the transparency and comparability among organizations by recognizing a lease liability related to the lessee's obligation to make lease payments based on a lease contract, and a right-of-use asset related to the lessee's right to use the leased asset for the term of the lease. The Company recorded right-of-use assets and corresponding lease liabilities of $4.9 million at the time of adoption. The required disclosures are included in Note 5 to these unaudited consolidated financial statements.

ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 permits hedge accounting for risk components in hedging relationships involving nonfinancial risk and interest rate risk. It also changes the guidance for designating fair value hedges of interest rate risk and for measuring the change in fair value of the hedged item in fair value hedges of interest rate risk. In addition to the amendments to the designation and measurement guidance for qualifying hedging relationships, the amendments in this ASU also align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. ASU 2017-12 became effective for the Company on January 1, 2019, and did not have a material impact on the Company's financial statements.

Recent Accounting Pronouncements

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 sets forth the CECL model requiring the Company to measure all expected credit losses for financial instruments held as of the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. For public business entities that are SEC registrants, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company continues to evaluate the impact of this ASU on the consolidated financial statements and disclosures. In that regard, the Company has formed a cross functional working group and is currently working through its implementation plan which includes assessment and documentation of processes, internal controls, and data sources; model development and documentation; and implementation of a third-party vendor solution to assist in the application of ASU 2016-13.

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2.	Securities

Securities held for indefinite periods of time are classified as AFS and carried at estimated fair value. The Company does not hold HTM securities. The amortized cost and estimated fair values of securities AFS are summarized in the following tables (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of June 30, 2019
Securities AFS:
Mortgage-backed securities	$	209,919	$	482	$	(1,508	)	$	208,893
Municipal bonds	88,010		987		(489		)	88,508
U.S. agency securities	18,527		148		(14		)	18,661
U.S. Treasury securities	1,996		24		—			2,020
Total Securities AFS	$	318,452	$	1,641	$	(2,011	)	$	318,082



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2018
Securities AFS:
Mortgage-backed securities	$	221,799	$	11	$	(7,122	)	$	214,688
Municipal bonds	70,416		94		(2,235		)	68,275
U.S. agency securities	23,170		6		(261		)	22,915
U.S. Treasury securities	1,994		5		—			1,999
Total Securities AFS	$	317,379	$	116	$	(9,618	)	$	307,877

The amortized costs and estimated market values of debt securities as of June 30, 2019, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers have the right to call or repay obligations with or without call or prepayment penalties.



	Amortized Cost		Fair Value
Within one year	$	9,227	$	9,213
After one year but within five years	51,266		51,160
After five years but within ten years	86,933		87,172
After ten years	171,026		170,537
Total	$	318,452	$	318,082

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Information pertaining to securities with gross unrealized losses as of June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position is described as follows (in thousands):



	Less than twelve months					Twelve months or more
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
As of June 30, 2019:
Securities AFS:
Mortgage-backed securities	$	(9	)	$	1,944	$	(1,499	)	$	154,672
Municipal bonds	(23		)	2,927		(466		)	25,614
U.S. agency securities	—			—		(14		)	6,986
Total Securities AFS	$	(32	)	$	4,871	$	(1,979	)	$	187,272

As of December 31, 2018:
Securities AFS:
Mortgage-backed securities	$	(75	)	$	8,845	$	(7,047	)	$	200,532
Municipal bonds	(48		)	3,389		(2,187		)	52,879
U.S. agency securities	(41		)	3,801		(220		)	14,123
Total Securities AFS	$	(164	)	$	16,035	$	(9,454	)	$	267,534

The number of investment positions in an unrealized loss position totaled 192 as of June 30, 2019. The aggregate unrealized loss of these securities as of June 30, 2019, was 0.63% of the amortized cost basis of the total AFS securities portfolio. Management and the Asset-Liability Committee continually monitor the securities portfolio and are able to effectively measure and monitor the unrealized loss positions on these securities. Management does not intend to sell these securities prior to recovery, and it is more likely than not that the Company will have the ability to hold them, primarily due to adequate liquidity, until each security has recovered its cost basis. The unrealized losses of these securities has been determined by management to be a function of the movement of interest rates since the time of purchase. Based on review of available information, including recent changes in interest rates and credit rating information, management believes the declines in fair value of these securities are temporary. The Company does not consider these securities to have OTTI.

Management evaluates securities for OTTI on at least a quarterly basis, and more frequently if economic or market concerns merit such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects of the issuer; and (3) whether the Company intends to, and it is more likely than not that it will be able to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Additionally, the Company annually performs a detailed credit review of the municipal securities owned to identify any potential credit concerns. There were no OTTI losses on debt securities related to credit losses recognized during the six months ended June 30, 2019 or the year ended December 31, 2018.

Pledged Securities

Securities with carrying values of approximately $100.6 million and $93.5 million were pledged to secure public deposits, as of June 30, 2019 and December 31, 2018, respectively.

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3.	Loans and Asset Quality

Loans

Loans HFI by category and loans HFS are summarized below (in thousands):



	June 30, 2019		December 31, 2018
Real estate:
Commercial real estate	$	494,666	$	454,689
One-to-four family residential	416,122		406,963
Construction and development	119,255		102,868
Commercial and industrial	272,278		275,881
Tax-exempt	57,497		60,104
Consumer	33,336		27,933
Total loans HFI	$	1,393,154	$	1,328,438
Total loans HFS	$	6,029	$	2,904

Allowance for Loan Losses

The following table summarizes the activity in the allowance for loan losses by category for the six months ended June 30, 2019 (in thousands):



	Beginning Balance December 31, 2018		Provision for Loan Losses			Loans Charged-off			Recoveries		Ending Balance June 30, 2019
Real estate:
Commercial real estate	$	3,081	$	(101	)	$	—		$	—	$	2,980
One-to-four family residential	3,146		(15		)	(15		)	2		3,118
Construction and development	951		26			—			77		1,054
Commercial and industrial	4,604		1,032			(568		)	579		5,647
Tax-exempt	372		(42		)	—			—		330
Consumer	370		155			(136		)	73		462
Total allowance for loan losses	$	12,524	$	1,055		$	(719	)	$	731	$	13,591

The following table summarizes the activity in the allowance for loan losses by category for the twelve months ended December 31, 2018 (in thousands):