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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: March 31, 2020

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: 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 501,
Alexandria,
Louisiana
 
71301
(Address of Principal Executive Offices)
 
(Zip Code)

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

 
 
 
 
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. (Check one):
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  
As of April 30, 2020, the registrant had 7,322,532 shares of common stock, no par value, issued and outstanding. 
 



TABLE OF CONTENTS
 
 
Page
 
 
 
PART I
Financial Information
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II
Other Information
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 




2


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
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
bp(s)
 
Basis point(s)
CARES Act
 
Coronavirus Aid, Relief, and Economic Security Act
CBLR
 
Community Bank Leverage Ratio
CECL
 
Current Expected Credit Losses, related to ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
COVID-19
 
Coronavirus Disease 2019
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
Federal Reserve
 
Board of Governors of the Federal Reserve System
FHLB
 
Federal Home Loan Bank of Dallas
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
MSA
 
Metropolitan statistical area
NOW
 
Negotiable order of withdrawal
NPA(s)
 
Nonperforming asset(s)
OTTI
 
Other-than-temporary impairment
PPP
 
Paycheck Protection Program
SBA
 
Small Business Administration
SBIC
 
Small Business Investment Company
Securities Act
 
Securities Act of 1933, as amended
SEC
 
Securities and Exchange Commission
TDR(s)
 
Troubled debt restructuring(s)

3


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;
the impact of COVID-19 on our business, the communities where we have our branches, the state of Louisiana, and the United States, related to the economy and overall financial stability;
government and regulatory responses to the COVID-19 pandemic;
government intervention in the U.S. financial system, including the effects of recent and future legislative, tax, accounting, and regulatory actions and reforms, including the CARES Act and other changes in banking, securities, accounting, and tax laws and regulations, and their application by our regulators;
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, and 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, pandemics, 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;
uncertainty regarding the future of LIBOR and the impact of any replacement alternatives on our business;
changes in the laws, rules, regulations, interpretations, or policies relating to financial institution, accounting, tax, trade, monetary, and fiscal matters; 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 "Part II - Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and in "Part I - Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019. 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.


4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RED RIVER BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited)
March 31,
2020
 
(Audited)
December 31,
2019
ASSETS
 
 
 
Cash and due from banks
$
31,858

 
$
25,937

Interest-bearing deposits in other banks
48,605

 
107,355

Total Cash and Cash Equivalents
80,463

 
133,292

Securities available-for-sale
401,944

 
335,573

Equity securities
3,998

 
3,936

Nonmarketable equity securities
1,354

 
1,350

Loans held for sale
6,597

 
5,089

Loans held for investment
1,447,362

 
1,438,924

Allowance for loan losses
(14,393
)
 
(13,937
)
Premises and equipment, net
41,711

 
41,744

Accrued interest receivable
5,240

 
5,251

Bank-owned life insurance
21,987

 
21,845

Intangible assets
1,546

 
1,546

Right-of-use assets
4,454

 
4,553

Other assets
8,438

 
9,059

Total Assets
$
2,010,701

 
$
1,988,225

LIABILITIES
 
 
 
Noninterest-bearing deposits
$
607,322

 
$
584,915

Interest-bearing deposits
1,120,460

 
1,136,205

Total Deposits
1,727,782

 
1,721,120

Accrued interest payable
2,307

 
2,222

Lease liabilities
4,511

 
4,603

Accrued expenses and other liabilities
11,926

 
8,382

Total Liabilities
1,746,526

 
1,736,327

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 - 7,322,532 and 7,306,221 shares
68,177

 
68,082

Additional paid-in capital
1,333

 
1,269

Retained earnings
188,877

 
182,571

Accumulated other comprehensive income (loss)
5,788

 
(24
)
Total Stockholders' Equity
264,175

 
251,898

Total Liabilities and Stockholders' Equity
$
2,010,701

 
$
1,988,225



The accompanying notes are an integral part of these unaudited consolidated financial statements.
5



RED RIVER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
For the Three Months Ended March 31, 
 
2020
 
2019
INTEREST AND DIVIDEND INCOME
 
 
 
Interest and fees on loans
$
16,466

 
$
15,504

Interest on securities
1,791

 
1,763

Interest on federal funds sold
113

 
212

Interest on deposits in other banks
206

 
416

Dividends on stock
4

 
9

Total Interest and Dividend Income
18,580

 
17,904

INTEREST EXPENSE
 
 
 
Interest on deposits
2,492

 
2,296

Interest on junior subordinated debentures

 
156

Total Interest Expense
2,492

 
2,452

Net Interest Income
16,088

 
15,452

Provision for loan losses
503

 
526

Net Interest Income After Provision for Loan Losses
15,585

 
14,926

NONINTEREST INCOME
 
 
 
Service charges on deposit accounts
1,228

 
1,026

Debit card income, net
755

 
695

Mortgage loan income
889

 
514

Brokerage income
744

 
365

Loan and deposit income
300

 
346

Bank-owned life insurance income
142

 
133

Gain (Loss) on equity securities
63

 
48

Gain (Loss) on sale of securities
383

 

SBIC income
178

 
120

Other income
49

 
49

Total Noninterest Income
4,731

 
3,296

OPERATING EXPENSES
 
 
 
Personnel expenses
7,348

 
6,640

Occupancy and equipment expenses
1,185

 
1,175

Technology expenses
586

 
544

Advertising
261

 
209

Other business development expenses
295

 
282

Data processing expense
450

 
459

Other taxes
437

 
353

Loan and deposit expenses
246

 
223

Legal and professional expenses
495

 
319

Regulatory assessment expenses
26

 
142

Other operating expenses
621

 
812

Total Operating Expenses
11,950

 
11,158

Income Before Income Tax Expense
8,366

 
7,064

Income tax expense
1,621

 
1,368

Net Income
$
6,745

 
$
5,696

EARNINGS PER SHARE
 
 
 
Basic
$
0.92

 
$
0.86

Diluted
$
0.92

 
$
0.85



The accompanying notes are an integral part of these unaudited consolidated financial statements.
6



RED RIVER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
For the Three Months Ended March 31, 
 
2020
 
2019
Net income
$
6,745

 
$
5,696

Other comprehensive income (loss):
 
 
 
Unrealized net gain (loss) on securities arising during period
7,740

 
4,918

Tax effect
(1,625
)
 
(1,033
)
(Gain) loss on sale of securities included in net income
(383
)
 

Tax effect
80

 

Total change in other comprehensive income (loss)
5,812

 
3,885

Comprehensive Income
$
12,557

 
$
9,581


The accompanying notes are an integral part of these unaudited consolidated financial statements.
7



RED RIVER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands, except share amounts)

Common
Shares Issued
 
Common
Stock
 
Additional Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
Balance as of December 31, 2018
6,627,358

 
$
41,094

 
$
1,042

 
$
159,073

 
$
(7,506
)
 
$
193,703

Net income

 

 

 
5,696

 

 
5,696

Stock incentive plan

 

 
49

 

 

 
49

Issuance of shares of common stock through exercise of stock options
7,200

 
80

 

 

 

 
80

Issuance of shares of common stock as board compensation
2,368

 
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
6,636,926

 
$
41,271

 
$
1,091

 
$
163,443

 
$
(3,621
)
 
$
202,184

 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2019
7,306,221

 
$
68,082

 
$
1,269

 
$
182,571

 
$
(24
)
 
$
251,898

Net income

 

 

 
6,745

 

 
6,745

Stock incentive plan

 

 
64

 

 

 
64

Issuance of shares of common stock through exercise of stock options
14,720

 
8

 

 

 

 
8

Issuance of shares of common stock as board compensation
1,591

 
87

 

 

 

 
87

Cash dividend - $0.06 per share

 

 

 
(439
)
 

 
(439
)
Other comprehensive income (loss)

 

 

 

 
5,812

 
5,812

Balance as of March 31, 2020
7,322,532

 
$
68,177

 
$
1,333

 
$
188,877

 
$
5,788

 
$
264,175




























The accompanying notes are an integral part of these unaudited consolidated financial statements.
8



RED RIVER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
For the Three Months Ended March 31, 
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
6,745

 
$
5,696

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation
449

 
424

Amortization
144

 
113

Share-based compensation earned
64

 
49

Share-based board compensation earned
17

 
24

(Gain) Loss on other assets owned
(5
)
 
(20
)
Net (accretion) amortization on securities AFS
660

 
283

Gain on sale of securities AFS
(383
)
 

Provision for loan losses
503

 
526

Deferred income tax (benefit) expense
(130
)
 

Net (increase) decrease in loans HFS
(1,508
)
 
694

Net (increase) decrease in accrued interest receivable
11

 
25

Net (increase) decrease in BOLI
(142
)
 
(133
)
Net increase (decrease) in accrued interest payable
85

 
210

Other operating activities, net
2,344

 
1,913

Net cash provided by (used in) operating activities
8,854

 
9,804

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Activity in securities AFS:
 
 
 
Sales
31,160

 

Maturities, prepayments, and calls
18,354

 
17,005

Purchases
(108,805
)
 
(23,845
)
Purchase of nonmarketable equity securities
(4
)
 
(4
)
Net (increase) decrease in loans HFI
(8,508
)
 
(20,773
)
Proceeds from sales of foreclosed assets
299

 
333

Purchases of premises and equipment
(410
)
 
(767
)
Net cash used in investing activities
(67,914
)
 
(28,051
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Net increase (decrease) in deposits
6,662

 
45,551

Proceeds from exercise of stock options
8

 
80

Cash dividends
(439
)
 
(1,326
)
Net cash provided by financing activities
6,231

 
44,305

Net change in cash and cash equivalents
(52,829
)
 
26,058

Cash and cash equivalents - beginning of period
133,292

 
151,906

Cash and cash equivalents - end of period
$
80,463

 
$
177,964



The accompanying notes are an integral part of these unaudited consolidated financial statements.
9



RED RIVER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)

(in thousands)
For the Three Months Ended March 31, 
 
2020
 
2019
SUPPLEMENTAL DISCLOSURES
 
 
 
Cash paid during the year for:
 
 
 
Interest
$
2,407

 
$
2,242

Income taxes
$

 
$

Initial measurement and recognition of operating lease assets in exchange for lease liabilities
$

 
$
4,954

SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
 
 
 
Assets acquired in settlement of loans
$
23

 
$
81

Unsettled securities AFS purchases at period-end
$
1,741

 
$
1,314




The accompanying notes are an integral part of these unaudited consolidated financial statements.
10



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, 2019, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
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, 2019, that were included in the Company's Annual Report on Form 10-K for the year ended December 31, 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 2020
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. This standard was effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. ASU No. 2018-13 was adopted as of January 1, 2020, and did not have a material impact on the Company's financial statements.
ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment based on that difference. The impairment will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the requirement to calculate a goodwill impairment using Step 2, which requires an entity to calculate any impairment by comparing the implied fair value of goodwill with its carrying amount. This standard was effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. ASU 2017-04 was adopted as of January 1, 2020, and did not have a material impact on the Company's financial statements.
Recent Accounting Pronouncements
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance issued in this update simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition for deferred tax liabilities for outside basis differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted tax changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
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 at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires enhanced disclosures related to the significant estimates and judgments

11


used in estimating credit losses. In addition, the update amends the accounting for credit losses on AFS securities. As an SEC registrant with smaller reporting company filing status, CECL is effective for the Company beginning January 1, 2023. 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 an implementation plan. The implementation plan includes an assessment of data, model development and documentation, documentation of processes, and implementation of a third-party vendor solution to assist in the adoption of ASU 2016-13.
2.
Securities
Securities held for indefinite periods of time are classified as AFS and carried at estimated fair value. The Company did not have any HTM securities as of March 31, 2020. Investment activity for the three months ended March 31, 2020, included $108.8 million of securities purchased, partially offset by $31.2 million in sales, and $18.4 million in maturities, prepayments, and calls. The investment portfolio had an increase of $7.4 million in fair value for the three months ended March 31, 2020. The amortized cost and estimated fair values of securities AFS are summarized in the following tables:
 
March 31, 2020
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities AFS:
 
 
 
 
 
 
 
Mortgage-backed securities
$
297,445

 
$
6,262

 
$
(22
)
 
$
303,685

Municipal bonds
90,726

 
1,060

 
(125
)
 
91,661

U.S. agency securities
6,446

 
152

 

 
6,598

Total Securities AFS
$
394,617

 
$
7,474

 
$
(147
)
 
$
401,944

 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities AFS:
 
 
 
 
 
 
 
Mortgage-backed securities
$
236,572

 
$
299

 
$
(1,200
)
 
$
235,671

Municipal bonds
91,929

 
1,108

 
(279
)
 
92,758

U.S. agency securities
7,102

 
46

 
(4
)
 
7,144

Total Securities AFS
$
335,603

 
$
1,453

 
$
(1,483
)
 
$
335,573


The amortized costs and estimated fair value of debt securities as of March 31, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers have the right to call or repay obligations with or without call or prepayment penalties.
(in thousands)
Amortized
Cost
 
Fair
Value
Within one year
$
3,639

 
$
3,640

After one year but within five years
23,194

 
23,440

After five years but within ten years
58,481

 
59,591

After ten years
309,303

 
315,273

Total
$
394,617

 
$
401,944



12


Information pertaining to securities with gross unrealized losses as of March 31, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is described as follows:
 
Less than twelve months
 
Twelve months or more
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
March 31, 2020
 
 
 
 
 
 
 
Securities AFS:
 
 
 
 
 
 
 
Mortgage-backed securities
$
(21
)
 
$
2,896

 
$
(1
)
 
$
1,888

Municipal bonds
(104
)
 
15,299

 
(21
)
 
1,404

U.S. agency securities

 

 

 

Total Securities AFS
$
(125
)
 
$
18,195

 
$
(22
)
 
$
3,292

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Securities AFS:
 
 
 
 
 
 
 
Mortgage-backed securities
$
(474
)
 
$
109,416

 
$
(726
)
 
$
70,425

Municipal bonds
(172
)
 
18,735

 
(107
)
 
9,323

U.S. agency securities
(4
)
 
1,020

 

 

Total Securities AFS
$
(650
)
 
$
129,171

 
$
(833
)
 
$
79,748


As of March 31, 2020, the number of investment securities in an unrealized loss position totaled 42. The aggregate unrealized loss of these securities as of March 31, 2020, was 0.04% of the amortized cost basis of the total securities AFS 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 on these securities have 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 three months ended March 31, 2020, or the year ended December 31, 2019.
The proceeds from sales of securities AFS and their gross gain (loss) for the three months ended March 31, 2020 and 2019, are shown below:
 
Three Months Ended March 31,
(in thousands)
2020
 
2019
Proceeds (1)
$
31,160

 
$

Gross gain
$
456

 
$

Gross loss
$
(73
)
 
$

(1) 
The proceeds include the gross gain and loss.
Pledged Securities
Securities with carrying values of approximately $105.3 million and $89.8 million were pledged to secure public entity deposits as of March 31, 2020 and December 31, 2019, respectively.

13


3.
Loans and Asset Quality
Loans
Loans HFI by category and loans HFS are summarized below:
(in thousands)
March 31, 2020
 
December 31, 2019
Real estate:
 
 
 
Commercial real estate
$
538,077

 
$
531,990

One-to-four family residential
421,041

 
420,020

Construction and development
142,835

 
132,461

Commercial and industrial
263,888

 
267,940

Tax-exempt
54,490

 
56,494

Consumer
27,031

 
30,019

Total loans HFI
$
1,447,362

 
$
1,438,924

Total loans HFS
$
6,597

 
$
5,089


Allowance for Loan Losses
The following table summarizes the activity in the allowance for loan losses by category for the three months ended March 31, 2020:
(in thousands)
Beginning
Balance December 31, 2019
 
Provision
for Loan
Losses
 
Loans
Charged-off
 
Recoveries
 
Ending
Balance March 31, 2020
Real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
3,454

 
$
241

 
$

 
$

 
$
3,695

One-to-four family residential
3,323

 
242

 

 
3

 
3,568

Construction and development
1,211

 
149

 
(14
)
 

 
1,346

Commercial and industrial
5,175

 
(89
)
 
(2
)
 
5

 
5,089

Tax-exempt
334

 
10

 

 

 
344

Consumer
440

 
(50
)
 
(77
)
 
38

 
351

Total allowance for loan losses
$
13,937

 
$
503

 
$
(93
)
 
$
46

 
$
14,393

The following table summarizes the activity in the allowance for loan losses by category for the twelve months ended December 31, 2019:
(in thousands)
Beginning
Balance December 31, 2018
 
Provision
for Loan
Losses
 
Loans
Charged-off
 
Recoveries
 
Ending
Balance December 31, 2019
Real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
3,081

 
$
373

 
$

 
$

 
$
3,454

One-to-four family residential
3,146

 
216

 
(44
)
 
5

 
3,323

Construction and development
951

 
172

 

 
88

 
1,211

Commercial and industrial
4,604

 
850

 
(864
)
 
585

 
5,175

Tax-exempt
372

 
(38
)
 

 

 
334

Consumer
370

 
237

 
(311
)
 
144

 
440

Total allowance for loan losses
$
12,524

 
$
1,810

 
$
(1,219
)
 
$
822

 
$
13,937



14


The balance in the allowance for loan losses and the related recorded investment in loans by category as of March 31, 2020, are as follows:
(in thousands)
Individually
Evaluated
for
Impairment
 
Collectively
Evaluated
for
Impairment
 
Acquired with
Deteriorated
Credit
Quality
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
Real estate:
 
 
 
 
 
 
 
Commercial real estate
$
250

 
$
3,445

 
$

 
$
3,695

One-to-four family residential
40

 
3,528

 

 
3,568

Construction and development

 
1,346

 

 
1,346

Commercial and industrial
2,785

 
2,304

 

 
5,089

Tax-exempt

 
344

 

 
344

Consumer
62

 
289

 

 
351

Total allowance for loan losses
$
3,137

 
$
11,256

 
$

 
$
14,393

 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
Real estate:
 
 
 
 
 
 
 
Commercial real estate
$
2,427

 
$
535,650

 
$

 
$
538,077

One-to-four family residential
1,192

 
419,849

 

 
421,041

Construction and development

 
142,835

 

 
142,835

Commercial and industrial
8,732

 
255,156

 

 
263,888

Tax-exempt

 
54,490

 

 
54,490

Consumer
64

 
26,967

 

 
27,031

Total loans HFI
$
12,415

 
$
1,434,947

 
$

 
$
1,447,362

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2019, are as follows:
(in thousands)
Individually
Evaluated
for
Impairment
 
Collectively
Evaluated
for
Impairment
 
Acquired with
Deteriorated
Credit
Quality
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
Real estate:
 
 
 
 
 
 
 
Commercial real estate
$
260

 
$
3,194

 
$

 
$
3,454

One-to-four family residential
31

 
3,292

 

 
3,323

Construction and development
10

 
1,201

 

 
1,211

Commercial and industrial
2,916

 
2,259

 

 
5,175

Tax-exempt

 
334

 

 
334

Consumer
71

 
369

 

 
440

Total allowance for loan losses
$
3,288

 
$
10,649

 
$

 
$
13,937