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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: September 30, 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueRRBIThe 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 filerAccelerated 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 October 31, 2020, the registrant had 7,325,333 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

Table of Contents    
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 ACRONYMDEFINITION
AFSAvailable-for-sale
ASCAccounting Standards Codification
ASUAccounting Standards Update
Basel IIIBasel Committee's 2010 Regulatory Capital Framework (Third Accord)
BOLIBank-owned life insurance
bp(s)Basis point(s)
CARES ActCoronavirus Aid, Relief, and Economic Security Act, as amended
CBLRCommunity 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-19Coronavirus Disease 2019
Economic Growth ActEconomic Growth, Regulatory Relief, and Consumer Protection Act
EPSEarnings per share
Exchange ActSecurities Exchange Act of 1934, as amended
FDICFederal Deposit Insurance Corporation
Federal ReserveBoard of Governors of the Federal Reserve System
FHLBFederal Home Loan Bank of Dallas
FTEFully taxable equivalent basis
GAAPGenerally Accepted Accounting Principles in the United States of America
HFIHeld for investment
HFSHeld for sale
HTMHeld-to-maturity
IPOInitial public offering
MSAMetropolitan statistical area
NOWNegotiable order of withdrawal
NPA(s)Nonperforming asset(s)
OTTIOther-than-temporary impairment
PPPPaycheck Protection Program
SBASmall Business Administration
SBICSmall Business Investment Company
Securities ActSecurities Act of 1933, as amended
SECSecurities and Exchange Commission
TDR(s)Troubled debt restructuring(s)
3

Table of Contents    
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 banking centers, 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.

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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) September 30,
2020
(Audited) December 31,
2019
ASSETS
Cash and due from banks$31,422 $25,937 
Interest-bearing deposits in other banks239,466 107,355 
Total Cash and Cash Equivalents270,888 133,292 
Securities available-for-sale467,744 335,573 
Equity securities4,032 3,936 
Nonmarketable equity securities3,445 1,350 
Loans held for sale23,358 5,089 
Loans held for investment1,649,272 1,438,924 
Allowance for loan losses(16,192)(13,937)
Premises and equipment, net44,501 41,744 
Accrued interest receivable6,617 5,251 
Bank-owned life insurance22,270 21,845 
Intangible assets1,546 1,546 
Right-of-use assets4,255 4,553 
Other assets9,192 9,059 
Total Assets$2,490,928 $1,988,225 
LIABILITIES
Noninterest-bearing deposits$923,286 $584,915 
Interest-bearing deposits1,270,654 1,136,205 
Total Deposits2,193,940 1,721,120 
Accrued interest payable1,805 2,222 
Lease liabilities4,327 4,603 
Accrued expenses and other liabilities12,778 8,382 
Total Liabilities2,212,850 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 - 7,325,333 and 7,306,221 shares
68,055 68,082 
Additional paid-in capital1,487 1,269 
Retained earnings202,136 182,571 
Accumulated other comprehensive income (loss)6,400 (24)
Total Stockholders' Equity278,078 251,898 
Total Liabilities and Stockholders' Equity
$2,490,928 $1,988,225 

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 September 30, For the Nine Months Ended September 30, 
2020201920202019
INTEREST AND DIVIDEND INCOME
Interest and fees on loans$17,080 $16,578 $50,623 $48,026 
Interest on securities2,099 1,800 5,766 5,347 
Interest on federal funds sold30 178 179 603 
Interest on deposits in other banks27 213 265 935 
Dividends on stock13 12 19 30 
Total Interest and Dividend Income19,249 18,781 56,852 54,941 
INTEREST EXPENSE
Interest on deposits1,954 2,514 6,497 7,260 
Interest on other borrowed funds
  16  
Interest on junior subordinated debentures 73  385 
Total Interest Expense1,954 2,587 6,513 7,645 
Net Interest Income17,295 16,194 50,339 47,296 
Provision for loan losses1,590 378 3,618 1,432 
Net Interest Income After Provision for Loan Losses15,705 15,816 46,721 45,864 
NONINTEREST INCOME
Service charges on deposit accounts1,055 1,195 3,001 3,304 
Debit card income, net978 833 2,629 2,314 
Mortgage loan income2,884 1,014 5,720 2,186 
Brokerage income586 561 1,725 1,552 
Loan and deposit income413 404 1,340 1,131 
Bank-owned life insurance income139 137 425 407 
Gain (Loss) on equity securities 30 96 133 
Gain (Loss) on sale of securities125 5 1,348 5 
SBIC income200 139 568 634 
Other income (loss)40 68 122 115 
Total Noninterest Income6,420 4,386 16,974 11,781 
OPERATING EXPENSES
Personnel expenses8,077 7,007 23,072 20,652 
Occupancy and equipment expenses1,319 1,199 3,739 3,708 
Technology expenses661 595 1,863 1,697 
Advertising240 216 717 821 
Other business development expenses233 266 782 827 
Data processing expense491 479 1,412 1,420 
Other taxes433 425 1,308 1,234 
Loan and deposit expenses289 285 808 901 
Legal and professional expenses487 436 1,587 1,138 
Regulatory assessment expenses172 37 337 312 
Other operating expenses 849 940 2,445 2,737 
Total Operating Expenses13,251 11,885 38,070 35,447 
Income Before Income Tax Expense8,874 8,317 25,625 22,198 
Income tax expense
1,589 1,470 4,741 4,117 
Net Income$7,285 $6,847 $20,884 $18,081 
EARNINGS PER SHARE
Basic
$0.99 $0.94 $2.85 $2.59 
Diluted
$0.99 $0.93 $2.84 $2.57 
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 September 30, For the Nine Months Ended September 30, 
2020201920202019
Net income$7,285 $6,847 $20,884 $18,081 
Other comprehensive income (loss):
Unrealized net gain (loss) on securities arising during period353 721 9,479 9,852 
Tax effect(74)(150)(1,990)(2,068)
(Gain) loss on sale of securities included in net income(125)(5)(1,348)(5)
Tax effect26 1 283 1 
Total change in other comprehensive income (loss)180 567 6,424 7,780 
Comprehensive Income$7,465 $7,414 $27,308 $25,861 
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
Shares Issued
Common
Stock
Additional Paid-In CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
Balance as of December 31, 20186,627,358 $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 compensation2,368 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, 20196,636,926 $41,271 $1,091 $163,443 $(3,621)$202,184 
Net income— — — 5,538 — 5,538 
Stock incentive plan— — 50 — — 50 
Issuance of shares of common stock through IPO663,320 26,812 — — — 26,812 
Board compensation adjustment— (1)— — — (1)
Other comprehensive income (loss)— — — — 3,328 3,328 
Balance as of June 30, 20197,300,246 $68,082 $1,141 $168,981 $(293)$237,911 
Net income— — — 6,847 — 6,847 
Stock incentive plan— — 64 — — 64 
Issuance of restricted shares of common stock through stock incentive plan, net5,975 — — — —  
Other comprehensive income (loss)— — — — 567 567 
Balance as of September 30, 20197,306,221 $68,082 $1,205 $175,828 $274 $245,389 
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 (CONTINUED) (UNAUDITED)
(in thousands, except share amounts)Common
Shares Issued
Common
Stock
Additional Paid-In CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
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 
Net income— — — 6,854 — 6,854 
Stock incentive plan— — 96 — — 96 
Cash dividend - $0.06 per share
— — — (440)— (440)
Other comprehensive income (loss)— — — — 432 432 
Balance as of June 30, 20207,322,532 $68,177 $1,429 $195,291 $6,220 $271,117 
Net income— — — 7,285 — 7,285 
Stock incentive plan— — 58 — — 58 
Cash dividend - $0.06 per share
— — — (440)— (440)
Issuance of restricted shares of common stock through stock incentive plan, net5,625 — — — —  
Purchase of common stock under stock repurchase program(2,824)(122)— — — (122)
Other comprehensive income (loss)— — — — 180 180 
Balance as of September 30, 20207,325,333 $68,055 $1,487 $202,136 $6,400 $278,078 
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 Nine Months Ended September 30, 
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$20,884 $18,081 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation1,362 1,279 
Amortization404 468 
Share-based compensation earned218 163 
Share-based board compensation earned47 66 
(Gain) Loss on other assets owned5 (16)
Net (accretion) amortization on securities AFS2,130 963 
Gain on sale of securities AFS(1,348)(5)
Provision for loan losses3,618 1,432 
Deferred income tax (benefit) expense(127)(308)
Net (increase) decrease in loans HFS(18,269)(1,209)
Net (increase) decrease in accrued interest receivable(1,366)85 
Net (increase) decrease in BOLI(425)(406)
Net increase (decrease) in accrued interest payable(417)168 
Net increase (decrease) in accrued income taxes payable462 (252)
Other operating activities, net1,465 477 
Net cash provided by (used in) operating activities8,643 20,986 
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities AFS:
Sales93,376 34,957 
Maturities, prepayments, and calls75,305 49,267 
Purchases(293,503)(109,356)
Purchase of nonmarketable equity securities(2,095)(48)
Net (increase) decrease in loans HFI(211,734)(86,383)
Proceeds from sales of foreclosed assets330 902 
Purchases of premises and equipment(4,113)(1,402)
Net cash provided by (used in) investing activities(342,434)(112,063)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits472,820 31,268 
Proceeds from other borrowed funds50,000  
Repayments of other borrowed funds(50,000) 
Redemption of junior subordinated debentures (11,341)
Repurchase of common stock(122) 
Proceeds from exercise of stock options8 80 
Proceeds from initial public offering, net 26,812 
Cash dividends(1,319)(1,326)
Net cash provided by (used in) financing activities471,387 45,493 
Net change in cash and cash equivalents137,596 (45,584)
Cash and cash equivalents - beginning of period133,292 151,906 
Cash and cash equivalents - end of period$270,888 $106,322 

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 (CONTINUED) (UNAUDITED)

(in thousands)For the Nine Months Ended September 30, 
20202019
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest
$6,930 $7,477 
Income taxes
$4,387 $4,649 
Initial measurement and recognition of operating lease assets in exchange for lease liabilities$ $4,954 
SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans$23 $1,609 


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, 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 annual periods. ASU 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
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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 as determined on June 30, 2019, 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 September 30, 2020. Investment activity for the nine months ended September 30, 2020, included $293.5 million of securities purchased, partially offset by $93.4 million in sales and $75.3 million in maturities, prepayments, and calls. The net unrealized gain of the securities AFS portfolio increased $8.1 million for the nine months ended September 30, 2020. The amortized cost and estimated fair values of securities AFS are summarized in the following tables:
September 30, 2020
(in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Securities AFS:
Mortgage-backed securities$278,786 $3,995 $(268)$282,513 
Municipal bonds169,954 4,252 (82)174,124 
U.S. agency securities10,903 210 (6)11,107 
Total Securities AFS$459,643 $8,457 $(356)$467,744 
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 bonds91,929 1,108 (279)92,758 
U.S. agency securities7,102 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 September 30, 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$6,254 $6,281 
After one year but within five years41,179 42,008 
After five years but within ten years51,448 53,043 
After ten years360,762 366,412 
Total$459,643 $467,744 
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Information pertaining to securities with gross unrealized losses as of September 30, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is described as follows:
Less than twelve monthsTwelve months or more
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
September 30, 2020
Securities AFS:
Mortgage-backed securities$(268)$64,059 $ $ 
Municipal bonds(82)12,644   
U.S. agency securities(6)994   
Total Securities AFS$(356)$77,697 $ $ 
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 September 30, 2020, the number of investment securities in an unrealized loss position totaled 34. The aggregate unrealized loss of these securities as of September 30, 2020, was 0.08% 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 the 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 nine months ended September 30, 2020, or the year ended December 31, 2019.
The proceeds from sales of securities AFS and their gross gain (loss) for the three and nine months ended September 30, 2020 and 2019, are shown below:
Three Months Ended
September 30, 
Nine Months Ended
September 30, 
(in thousands)2020201920202019
Proceeds (1)
$6,451 $34,957 $93,376 $34,957 
Gross gain$125 $185 $1,441 $185 
Gross loss$ $(180)$(93)$(180)
(1)The proceeds include the gross gain and loss.
Pledged Securities
Securities with carrying values of approximately $92.3 million and $89.8 million were pledged to secure public entity deposits as of September 30, 2020 and December 31, 2019, respectively.
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3.    Loans and Asset Quality
Loans
Loans HFI by category and loans HFS are summarized below:
(in thousands)September 30, 2020December 31, 2019
Real estate:
Commercial real estate$567,037 $531,990 
One-to-four family residential426,758 420,020 
Construction and development129,879 132,461 
Commercial and industrial