Red River Bank - SEC Filing

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rrbi-20220331

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, 2022


☐			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.


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, 2022, the registrant had 7,176,365 shares of common stock, no par value, issued and outstanding.

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		Page
Glossary of Terms		3
Cautionary Note Regarding Forward-Looking Statements		5

PART I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	7
	Consolidated Statements of Income	8
	Consolidated Statements of Comprehensive Income	9
	Consolidated Statements of Changes in Stockholders ’ Equity	10
	Consolidated Statements of Cash Flows	11
	Notes to Unaudited Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54

PART II	Other Information
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56
	Signatures	57

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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
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, as amended
CBLR						Community bank leverage ratio
CCB						Capital conservation buffer
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
CRA						Community Reinvestment Act
Director Compensation Program						Amended and Restated Director Compensation program, which allows directors of the Company and the Bank an opportunity to select how to receive their annual director fees.
Economic Aid Act						Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
Economic Growth Act						Economic Growth, Regulatory Relief, and Consumer Protection Act
EPS						Earnings per share
Exchange Act						Securities Exchange Act of 1934, as amended
FDIC						Federal Deposit Insurance Corporation
Federal Reserve						Board of Governors of the Federal Reserve System
FOMC						Federal Open Market Committee
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
LDPO(s)						Loan and deposit production office(s)
LIBOR						London Interbank Offered Rate
MSA						Metropolitan statistical area
NOW						Negotiable order of withdrawal
NPA(s)						Nonperforming asset(s)
OTTI						Other-than-temporary impairment
PPP						Paycheck Protection Program
Report						Quarterly Report on Form 10-Q
SBA						Small Business Administration
SBIC						Small Business Investment Company

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ABBREVIATION OR ACRONYM						DEFINITION
Securities Act						Securities Act of 1933, as amended
SEC						Securities and Exchange Commission
TDR(s)						Troubled debt restructuring(s)

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, 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 (including the emergence of multiple COVID-19 variants) 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, the American Rescue Plan Act of 2021, and the Economic Aid Act, which established the SBA PPP, and other stimulus legislation or 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 and 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;

•the cessation of LIBOR effective June 30, 2023, 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

•the risk factors found in “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as well as in “Part II - Item 1A. Risk Factors” of this Report and other reports and documents we file from time to time 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 Report. Additional information on these and other risk factors can be found in “Part II - Item 1A. Risk Factors” of this Report and in “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. 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, except as required by applicable law. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot

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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 (UNAUDITED)




(in thousands, except share amounts)	March 31, 2022		December 31, 2021
ASSETS
Cash and due from banks	$	40,137	$	23,143
Interest-bearing deposits in other banks	506,982		761,721
Total Cash and Cash Equivalents	547,119		784,864
Securities available-for-sale, at fair value	810,804		659,178
Equity securities, at fair value	7,481		7,846
Nonmarketable equity securities	3,451		3,450
Loans held for sale	6,641		4,290
Loans held for investment	1,741,026		1,683,832
Allowance for loan losses	(19,244)		(19,176)
Premises and equipment, net	50,605		48,056
Accrued interest receivable	6,654		6,245
Bank-owned life insurance	28,233		28,061
Intangible assets	1,546		1,546
Right-of-use assets	4,506		3,743
Other assets	23,638		12,775
Total Assets	$	3,212,460	$	3,224,710
LIABILITIES
Noninterest-bearing deposits	$	1,181,136	$	1,149,672
Interest-bearing deposits	1,746,592		1,760,676
Total Deposits	2,927,728		2,910,348

Accrued interest payable	1,329		1,310
Lease liabilities	4,610		3,842
Accrued expenses and other liabilities	13,919		11,060
Total Liabilities	2,947,586		2,926,560
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 - 7,176,365 and 7,180,155 shares, respectively	60,050		60,233
Additional paid-in capital	1,877		1,814
Retained earnings	246,766		239,876
Accumulated other comprehensive income (loss)	(43,819)		(3,773)
Total Stockholders’ Equity	264,874		298,150
Total Liabilities and Stockholders’ Equity	$	3,212,460	$	3,224,710

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)


	For the Three Months Ended March 31,
(in thousands, except per share data)	2022		2021
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	16,770	$	17,165
Interest on securities	2,962		1,890
Interest on federal funds sold	25		22
Interest on deposits in other banks	251		100
Dividends on stock	1		1
Total Interest and Dividend Income	20,009		19,178
INTEREST EXPENSE
Interest on deposits	1,281		1,587

Total Interest Expense	1,281		1,587
Net Interest Income	18,728		17,591
Provision for loan losses	150		1,450
Net Interest Income After Provision for Loan Losses	18,578		16,141
NONINTEREST INCOME
Service charges on deposit accounts	1,308		1,059
Debit card income, net	936		1,046
Mortgage loan income	1,127		2,882
Brokerage income	775		834
Loan and deposit income	371		473
Bank-owned life insurance income	172		133
Gain (Loss) on equity securities	(365)		(70)
Gain (Loss) on sale and call of securities	39		159
SBIC income	20		241
Other income (loss)	19		18
Total Noninterest Income	4,402		6,775
OPERATING EXPENSES
Personnel expenses	8,452		8,021
Occupancy and equipment expenses	1,492		1,278
Technology expenses	771		665
Advertising	219		183
Other business development expenses	303		299
Data processing expense	316		385
Other taxes	636		525
Loan and deposit expenses	130		255
Legal and professional expenses	418		368
Regulatory assessment expenses	250		201
Other operating expenses	1,075		983
Total Operating Expenses	14,062		13,163
Income Before Income Tax Expense	8,918		9,753
Income tax expense	1,526		1,688
Net Income	$	7,392	$	8,065
EARNINGS PER SHARE
Basic	$	1.03	$	1.10
Diluted	$	1.03	$	1.10

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)


	For the Three Months Ended March 31,
(in thousands)	2022		2021
Net income	$	7,392	$	8,065
Other comprehensive income (loss):
Unrealized net gain (loss) on securities arising during period	(50,652)		(9,021)
Tax effect	10,637		1,895
(Gain) Loss on sale and call of securities included in net income	(39)		(159)
Tax effect	8		33
Total other comprehensive income (loss)	(40,046)		(7,252)
Comprehensive Income (Loss)	$	(32,654)	$	813

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)


(dollars in thousands, except per 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, 2020	7,325,333	$	68,055	$	1,545	$	208,957	$	6,921	$	285,478
Net income	—	—		—		8,065		—		8,065
Stock incentive plan	—	—		93		—		—		93

Issuance of shares of common stock as board compensation	1,075	56		—		—		—		56
Repurchase of common stock under stock repurchase program	(19,661)	(1,018)		—		—		—		(1,018)
Cash dividend - $0.07 per share	—	—		—		(511)		—		(511)
Other comprehensive income (loss)	—	—		—		—		(7,252)		(7,252)
Balance as of March 31, 2021	7,306,747	$	67,093	$	1,638	$	216,511	$	(331)	$	284,911













Balance as of December 31, 2021	7,180,155	$	60,233	$	1,814	$	239,876	$	(3,773)	$	298,150
Net income	—	—		—		7,392		—		7,392
Stock incentive plan	—	—		63		—		—		63
Issuance of shares of common stock as board compensation	675	35		—		—		—		35
Repurchase of common stock under stock repurchase program	(4,465)	(218)		—		—		—		(218)
Cash dividend - $0.07 per share	—	—		—		(502)		—		(502)
Other comprehensive income (loss)	—	—		—		—		(40,046)		(40,046)
Balance as of March 31, 2022	7,176,365	$	60,050	$	1,877	$	246,766	$	(43,819)	$	264,874

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)


	For the Three Months Ended March 31,
(in thousands)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,392	$	8,065
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	502		464
Amortization	164		150
Share-based compensation earned	63		93
Share-based board compensation earned	20		12
(Gain) Loss on other assets owned	26		7
Net (accretion) amortization on securities AFS	600		827
(Gain) Loss on sale and call of securities	(39)		(159)
Provision for loan losses	150		1,450
Deferred income tax (benefit) expense	(200)		(561)
Net (increase) decrease in loans HFS	(2,351)		10,667
Net (increase) decrease in accrued interest receivable	(409)		420
Net (increase) decrease in BOLI	(172)		(133)
Net increase (decrease) in accrued interest payable	19		(75)
Net increase (decrease) in accrued income taxes payable	1,802		2,265
Other operating activities, net	1,260		563
Net cash provided by (used in) operating activities	8,827		24,055
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities AFS:
Sales	—		64,769
Maturities, principal repayments, and calls	29,810		30,822
Purchases	(232,688)		(123,175)



Purchase of nonmarketable equity securities	(1)		—

Net (increase) decrease in loans HFI	(57,276)		(13,664)


Proceeds from sales of foreclosed assets	—		96
Purchases of premises and equipment	(3,077)		(490)
Net cash provided by (used in) investing activities	(263,232)		(41,642)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	17,380		174,915



Repurchase of common stock	(218)		(1,018)


Cash dividends	(502)		(511)
Net cash provided by (used in) financing activities	16,660		173,386
Net change in cash and cash equivalents	(237,745)		155,799
Cash and cash equivalents - beginning of period	784,864		447,201
Cash and cash equivalents - end of period	$	547,119	$	603,000




SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest	$	1,263	$	1,662

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 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 that 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, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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, 2021, that were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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 2022

ASU No. 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments. The guidance issued in this update addressed lessors’ concerns by amending the lease classification requirements. The amendments in this update address an issue related to a lessor’s accounting for certain leases with variable lease payments. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if two criteria are met. Those criteria are that the lease would have been classified as a sales-type lease or a direct financing lease in accordance with GAAP, and that the lessor would have otherwise recognized a day-one loss. ASU 2021-05 was adopted as of January 1, 2022, and did not have a material impact on the Company’s consolidated 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 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 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 on 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.

ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update address how to determine whether a contract liability is recognized by the acquirer in a business combination. The amendment also resolves the inconsistency of post-acquisition revenue recognition by providing specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination. This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This standard will be adopted by the Company on January 1, 2023. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

ASU No. 2022-02 Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance issued in this update eliminates the accounting guidance for TDRs by creditors in Subtopic

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310-40, Receivables – Troubled Debt Restructurings by Creditors, but also enhances the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The guidance requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost. This standard is effective for the Company on January 1, 2023. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

2. Securities

Securities held for indefinite periods of time are classified as AFS and carried at estimated fair value. Investment activity for the three months ended March 31, 2022, included $232.7 million of securities purchased and $29.8 million in maturities, principal repayments, and calls. The net unrealized loss on the securities AFS portfolio increased $50.7 million for the three months ended March 31, 2022, resulting in an unrealized loss of $55.5 million as of March 31, 2022.

The amortized cost and estimated fair values of securities AFS are summarized in the following tables:


	March 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities AFS:
Mortgage-backed securities	$	496,302	$	7	$	(34,821)	$	461,488
Municipal bonds	231,198		237		(18,165)		213,270
U.S. Treasury securities	131,508		—		(2,385)		129,123
U.S. agency securities	7,263		—		(340)		6,923
Total Securities AFS	$	866,271	$	244	$	(55,711)	$	810,804


	December 31, 2021
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities AFS:
Mortgage-backed securities	$	386,874	$	1,112	$	(8,460)	$	379,526
Municipal bonds	227,248		3,665		(942)		229,971
U.S. Treasury securities	41,770		—		(154)		41,616
U.S. agency securities	8,062		61		(58)		8,065
Total Securities AFS	$	663,954	$	4,838	$	(9,614)	$	659,178

The amortized cost and estimated fair value of debt securities as of March 31, 2022, 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	$	10,395	$	10,381
After one year but within five years	158,281		155,439
After five years but within ten years	86,136		82,829
After ten years	611,459		562,155
Total	$	866,271	$	810,804

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Information pertaining to securities with gross unrealized losses as of March 31, 2022 and December 31, 2021, 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
(in thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
March 31, 2022
Securities AFS:
Mortgage-backed securities	$	(20,405)	$	338,846	$	(14,416)	$	119,990
Municipal bonds	(15,753)		158,997		(2,412)		15,870
U.S. Treasury securities	(2,385)		129,123		—		—
U.S. agency securities	(245)		6,018		(95)		905
Total Securities AFS	$	(38,788)	$	632,984	$	(16,923)	$	136,765



December 31, 2021
Securities AFS:
Mortgage-backed securities	$	(6,627)	$	282,705	$	(1,833)	$	47,171
Municipal bonds	(918)		51,333		(24)		2,577
U.S. Treasury securities	(154)		41,616		—		—
U.S. agency securities	(58)		4,913		—		—
Total Securities AFS	$	(7,757)	$	380,567	$	(1,857)	$	49,748

As of March 31, 2022, the Company held 513 securities that were in unrealized loss positions. The aggregate unrealized loss of these securities as of March 31, 2022, was 6.43% of the amortized cost basis of the total securities AFS portfolio. Management and the Asset-Liability Management 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 a review of available information, including recent changes in interest rates and credit rating information, management believes the decline in fair value of these securities is 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, 2022, or the year ended December 31, 2021.

The proceeds from sales and calls of securities AFS and their gross gain (loss) for the three months ended March 31, 2022 and 2021, are shown below:


	Three Months Ended March 31,
(in thousands)	2022		2021
Proceeds (1)	$	8,074	$	64,769
Gross gain	$	39	$	442
Gross loss	$	—	$	(283)

(1)The proceeds include the gross gain and loss.

Pledged Securities

Securities with carrying values of approximately $133.6 million and $118.6 million were pledged to secure public entity deposits as of March 31, 2022 and December 31, 2021, respectively.

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3. Loans and Asset Quality

Loans

Loans HFI by category and loans HFS are summarized below:



(in thousands)	March 31, 2022		December 31, 2021
Real estate:
Commercial real estate	$	723,418	$	670,293
One-to-four family residential	484,871		474,420
Construction and development	117,526		106,339
Commercial and industrial	303,556		311,373
SBA PPP, net of deferred income	6,397		17,550
Tax-exempt	81,000		80,726
Consumer	24,258		23,131
Total loans HFI	$	1,741,026	$	1,683,832
Total loans HFS	$	6,641	$	4,290

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, 2022:


(in thousands)	Beginning Balance December 31, 2021		Provision for Loan Losses		Charge-offs		Recoveries		Ending Balance March 31, 2022
Real estate:
Commercial real estate	$	6,749	$	443	$	—	$	—	$	7,192
One-to-four family residential	5,375		(196)		—		3		5,182
Construction and development	1,326		(47)		—		—		1,279
Commercial and industrial	4,440		(118)		(6)		4		4,320
SBA PPP, net of deferred income	25		(16)		—		—		9
Tax-exempt	749		2		—		—		751
Consumer	512		82		(123)		40		511
Total allowance for loan losses	$	19,176	$	150	$	(129)	$	47	$	19,244

The following table summarizes the activity in the allowance for loan losses by category for the twelve months ended December 31, 2021:


(in thousands)	Beginning Balance December 31, 2020		Provision for Loan Losses		Charge-offs		Recoveries		Ending Balance December 31, 2021
Real estate:
Commercial real estate	$	5,798	$	1,401	$	(450)	$	—	$	6,749
One-to-four family residential	5,390		(23)		(10)		18		5,375
Construction and development	1,699		(375)		—		2		1,326
Commercial and industrial	3,631		856		(74)		27		4,440
SBA PPP, net of deferred income	318		(293)		—		—		25
Tax-exempt	680		69		—		—		749
Consumer	435		265		(351)		163		512
Total allowance for loan losses	$	17,951	$	1,900	$	(885)	$	210	$	19,176

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The balance in the allowance for loan losses and the related recorded investment in loans by category as of March 31, 2022, 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	$	34	$	7,158	$	—	$	7,192
One-to-four family residential	—		5,182		—		5,182
Construction and development	—		1,279		—		1,279
Commercial and industrial	42		4,278		—		4,320
SBA PPP, net of deferred income	—		9		—		9
Tax-exempt	—		751		—		751
Consumer	131		380		—		511
Total allowance for loan losses	$	207	$	19,037	$	—	$	19,244

Loans:
Real estate:
Commercial real estate	$	4,265	$	719,153	$	—	$	723,418
One-to-four family residential	427		484,444		—		484,871
Construction and development	—		117,526		—		117,526
Commercial and industrial	163		303,393		—		303,556
SBA PPP, net of deferred income	—		6,397		—		6,397
Tax-exempt	—		81,000		—		81,000
Consumer	137		24,121		—		24,258
Total loans HFI	$	4,992