UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: ~~June~~September 30, 2023


☐			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 301, Alexandria, Louisiana						71301
(Address of Principal Executive Offices)						(Zip Code)

Registrant’s telephone number, including area code: (318) 561-4000

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 ~~July~~October 31, 2023, the registrant had ~~7,175,056~~7,131,766 shares of common stock, no par value, issued and outstanding.

TABLE OF CONTENTS


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

PART I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	76
	Consolidated Statements of Income	87
	Consolidated Statements of Comprehensive Income	98
	Consolidated Statements of Changes in Stockholders’ Equity	109
	Consolidated Statements of Cash Flows	11
	Notes to Unaudited Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3435
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	60

PART II	Other Information
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	6362
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	63
	Signatures	64

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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
ACL						Allowance for credit losses
AFS						Available-for-sale
ALL						Allowance for loan losses
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
FHLB						Federal Home Loan Bank of Dallas
FOMC						Federal Open Market Committee
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

LDPO						Loan and deposit production office
LIBOR						London Interbank Offered Rate
MSA						Metropolitan statistical area
NOW						Negotiable order of withdrawal
NPA(s)						Nonperforming asset(s)
OFI						Office of Financial Institutions
Policy Statement						Federal Reserve’s Small Bank Holding Company Policy Statement
PPP						Paycheck Protection Program
Report						Quarterly Report on Form 10-Q

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ABBREVIATION OR ACRONYM						DEFINITION
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)

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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, the Inflation Reduction Act of 2022, 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~~credit losses;

•operational risks associated with our business;

•natural disasters and adverse weather, acts of terrorism, pandemics, an outbreak of hostilities, including the ongoing military ~~conflict~~conflicts between Russia and Ukraine and Israel and Hamas, 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 institutions, 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, 2022, 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, 2022. 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 risks emerge from time to time, and it is not possible for us to predict what risks 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)	(in thousands, except share amounts)	June 30, 2023		December 31, 2022		(in thousands, except share amounts)	September 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	36,662	$	37,824	Cash and due from banks	$	42,413	$	37,824
Interest-bearing deposits in other banks	Interest-bearing deposits in other banks	185,409		240,568		Interest-bearing deposits in other banks	279,786		240,568
Total Cash and Cash Equivalents	Total Cash and Cash Equivalents	222,071		278,392		Total Cash and Cash Equivalents	322,199		278,392
Securities available-for-sale, at fair value	Securities available-for-sale, at fair value	588,478		614,407		Securities available-for-sale, at fair value	529,046		614,407
Securities held-to-maturity, at amortized cost	Securities held-to-maturity, at amortized cost	146,569		151,683		Securities held-to-maturity, at amortized cost	143,420		151,683
Equity securities, at fair value	Equity securities, at fair value	3,946		9,979		Equity securities, at fair value	2,833		9,979
Nonmarketable equity securities	Nonmarketable equity securities	4,330		3,478		Nonmarketable equity securities	2,190		3,478
Loans held for sale	Loans held for sale	4,586		518		Loans held for sale	2,348		518
Loans held for investment	Loans held for investment	1,947,631		1,916,267		Loans held for investment	1,948,606		1,916,267
Allowance for credit losses	Allowance for credit losses	(21,085)		(20,628)		Allowance for credit losses	(21,183)		(20,628)
Premises and equipment, net	Premises and equipment, net	55,566		54,383		Premises and equipment, net	56,466		54,383
Accrued interest receivable	Accrued interest receivable	8,239		8,830		Accrued interest receivable	8,778		8,830
Bank-owned life insurance	Bank-owned life insurance	29,141		28,775		Bank-owned life insurance	29,332		28,775
Intangible assets	Intangible assets	1,546		1,546		Intangible assets	1,546		1,546
Right-of-use assets	Right-of-use assets	3,885		4,137		Right-of-use assets	3,757		4,137
Other assets	Other assets	32,291		30,919		Other assets	36,815		30,919
Total Assets	Total Assets	$	3,027,194	$	3,082,686	Total Assets	$	3,066,153	$	3,082,686
LIABILITIES	LIABILITIES					LIABILITIES
Noninterest-bearing deposits	Noninterest-bearing deposits	$	989,509	$	1,090,539	Noninterest-bearing deposits	$	972,155	$	1,090,539
Interest-bearing deposits	Interest-bearing deposits	1,674,674		1,708,397		Interest-bearing deposits	1,787,738		1,708,397
Total Deposits	Total Deposits	2,664,183		2,798,936		Total Deposits	2,759,893		2,798,936
Other borrowed funds		60,000		—

Accrued interest payable	Accrued interest payable	4,098		1,563		Accrued interest payable	6,800		1,563
Lease liabilities	Lease liabilities	4,015		4,258		Lease liabilities	3,892		4,258
Accrued expenses and other liabilities	Accrued expenses and other liabilities	11,526		12,176		Accrued expenses and other liabilities	13,617		12,176
Total Liabilities	Total Liabilities	2,743,822		2,816,933		Total Liabilities	2,784,202		2,816,933
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES	—		—		COMMITMENTS AND CONTINGENCIES	—		—
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Preferred stock, no par value: Authorized - 1,000,000 shares; None Issued and Outstanding	Preferred stock, no par value: Authorized - 1,000,000 shares; None Issued and Outstanding	—		—		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 - 7,175,056 and 7,183,915 shares, respectively		59,187		60,050
Common stock, no par value: Authorized - 30,000,000 shares; Issued and Outstanding - 7,150,685 and 7,183,915 shares, respectively						Common stock, no par value: Authorized - 30,000,000 shares; Issued and Outstanding - 7,150,685 and 7,183,915 shares, respectively	58,031		60,050
Additional paid-in capital	Additional paid-in capital	2,248		2,088		Additional paid-in capital	2,327		2,088
Retained earnings	Retained earnings	291,630		274,781		Retained earnings	299,079		274,781
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(69,693)		(71,166)		Accumulated other comprehensive income (loss)	(77,486)		(71,166)
Total Stockholders’ Equity	Total Stockholders’ Equity	283,372		265,753		Total Stockholders’ Equity	281,951		265,753
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	3,027,194	$	3,082,686	Total Liabilities and Stockholders’ Equity	$	3,066,153	$	3,082,686

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 September 30,				For the Nine Months Ended September 30,
(in thousands, except per share data)	2023		2022		2023		2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	23,925	$	19,740	$	68,541	$	54,543
Interest on securities	3,404		3,572		10,635		10,210
Interest on federal funds sold	—		317		886		458
Interest on deposits in other banks	2,950		1,238		6,359		2,160
Dividends on stock	45		19		106		22
Total Interest and Dividend Income	30,324		24,886		86,527		67,393
INTEREST EXPENSE
Interest on deposits	9,562		1,798		21,319		4,428
Interest on other borrowed funds	37		—		64		—
Total Interest Expense	9,599		1,798		21,383		4,428
Net Interest Income	20,725		23,088		65,144		62,965
Provision for credit losses	185		600		485		1,000
Net Interest Income After Provision for Credit Losses	20,540		22,488		64,659		61,965
NONINTEREST INCOME
Service charges on deposit accounts	1,489		1,488		4,317		4,205
Debit card income, net	830		934		2,687		2,926
Mortgage loan income	604		624		1,524		2,643
Brokerage income	1,029		870		2,759		2,536
Loan and deposit income	571		502		1,566		1,283
Bank-owned life insurance income	191		181		557		533
Gain (Loss) on equity securities	(113)		—		(145)		(447)
Gain (Loss) on sale and call of securities	—		16		—		(59)
SBIC income	920		231		2,479		401
Other income (loss)	60		21		184		107
Total Noninterest Income	5,581		4,867		15,928		14,128
OPERATING EXPENSES
Personnel expenses	9,461		8,853		28,008		25,879
Occupancy and equipment expenses	1,663		1,531		4,933		4,496
Technology expenses	675		653		2,066		2,118
Advertising	331		316		955		841
Other business development expenses	522		436		1,451		1,079
Data processing expense	651		604		1,689		1,484
Other taxes	664		650		2,042		1,933
Loan and deposit expenses	238		164		728		479
Legal and professional expenses	616		553		1,714		1,446
Regulatory assessment expenses	419		280		1,223		781
Other operating expenses	990		1,001		3,041		3,037
Total Operating Expenses	16,230		15,041		47,850		43,573
Income Before Income Tax Expense	9,891		12,314		32,737		32,520
Income tax expense	1,870		2,128		6,150		5,795
Net Income	$	8,021	$	10,186	$	26,587	$	26,725
EARNINGS PER SHARE
Basic	$	1.12	$	1.42	$	3.70	$	3.72
Diluted	$	1.12	$	1.42	$	3.70	$	3.71

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 June 30, For the Six Months Ended June 30,
(in thousands, except per share data) 2023 2022 2023 2022
INTEREST AND DIVIDEND INCOME
Interest and fees on loans $ 22,851 $ 18,032 $ 44,616 $ 34,802
Interest on securities 3,665 3,677 7,231 6,639
Interest on federal funds sold 251 116 886 141
Interest on deposits in other banks 1,671 671 3,409 922
Dividends on stock 33 2 61 3
Total Interest and Dividend Income 28,471 22,498 56,203 42,507
INTEREST EXPENSE
Interest on deposits 6,933 1,349 11,756 2,630
Interest on other borrowed funds 28 — 28 —
Total Interest Expense 6,961 1,349 11,784 2,630
Net Interest Income 21,510 21,149 44,419 39,877
Provision for credit losses 300 250 300 400
Net Interest Income After Provision for Credit Losses 21,210 20,899 44,119 39,477
NONINTEREST INCOME
Service charges on deposit accounts 1,435 1,410 2,828 2,718
Debit card income, net 924 1,056 1,858 1,992
Mortgage loan income 645 892 920 2,018
Brokerage income 923 890 1,730 1,666
Loan and deposit income 517 410 995 781
Bank-owned life insurance income 188 180 366 352
Gain (Loss) on equity securities (64) (82) (32) (447)
Gain (Loss) on sale and call of securities — (114) — (75)
SBIC income 1,380 151 1,559 171
Other income (loss) 59 67 123 86
Total Noninterest Income 6,007 4,860 10,347 9,262
OPERATING EXPENSES
Personnel expenses 9,547 8,574 18,547 17,026
Occupancy and equipment expenses 1,554 1,473 3,271 2,965
Technology expenses 642 695 1,390 1,466
Advertising 343 306 624 526
Other business development expenses 494 340 930 642
Data processing expense 638 564 1,038 880
Other taxes 693 647 1,378 1,283
Loan and deposit expenses 284 185 489 315
Legal and professional expenses 580 475 1,097 893
Regulatory assessment expenses 397 251 804 501
Other operating expenses 960 961 2,052 2,036
Total Operating Expenses 16,132 14,471 31,620 28,533
Income Before Income Tax Expense 11,085 11,288 22,846 20,206
Income tax expense 2,117 2,141 4,280 3,667
Net Income $ 8,968 $ 9,147 $ 18,566 $ 16,539
EARNINGS PER SHARE
Basic $ 1.25 $ 1.27 $ 2.59 $ 2.30
Diluted $ 1.25 $ 1.27 $ 2.58 $ 2.30


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net income	$	8,021	$	10,186	$	26,587	$	26,725
Other comprehensive income (loss):
Unrealized net gain (loss) on securities arising during period	(10,295)		(25,847)		(9,186)		(102,802)
Tax effect	2,162		5,428		1,930		21,589
(Gain) Loss on sale and call of securities included in net income	—		(16)		—		59
Tax effect	—		3		—		(13)
Change in unrealized net loss on securities transferred to held-to-maturity	430		623		1,185		1,513
Tax effect	(90)		(131)		(249)		(317)
Total other comprehensive income (loss)	(7,793)		(19,940)		(6,320)		(79,971)
Comprehensive Income (Loss)	$	228	$	(9,754)	$	20,267	$	(53,246)

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~~CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Three Months Ended June 30, For the Six Months Ended June 30,
(in thousands) 2023 2022 2023 2022
Net income $ 8,968 $ 9,147 $ 18,566 $ 16,539
Other comprehensive income (loss):
Unrealized net gain (loss) on securities arising during period (1,849) (26,302) 1,108 (76,954)
Tax effect 389 5,523 (231) 16,160
(Gain) Loss on sale and call of securities included in net income — 114 — 75
Tax effect — (24) — (16)
Change in unrealized net loss on securities transferred to held-to-maturity 390 891 755 891
Tax effect (82) (187) (159) (187)
Total other comprehensive income (loss) (1,152) (19,985) 1,473 (60,031)
Comprehensive Income (Loss) $ 7,816 $ (10,838) $ 20,039 $ (43,492)


(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, 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
Net income	—	—		—		9,147		—		9,147
Stock incentive plan	—	—		63		—		—		63


Cash dividend - $0.07 per share	—	—		—		(503)		—		(503)
Other comprehensive income (loss)	—	—		—		—		(19,985)		(19,985)
Balance as of June 30, 2022	7,176,365	$	60,050	$	1,940	$	255,410	$	(63,804)	$	253,596
Net income	—	—		—		10,186		—		10,186
Stock incentive plan	—	—		74		—		—		74
Issuance of restricted shares of common stock through stock incentive plan, net	7,550	—		—		—		—		—

Cash dividend - $0.07 per share	—	—		—		(503)		—		(503)
Other comprehensive income (loss)	—	—		—		—		(19,940)		(19,940)
Balance as of September 30, 2022	7,183,915	$	60,050	$	2,014	$	265,093	$	(83,744)	$	243,413

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)

(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, 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
Net income — — — 9,147 — 9,147
Stock incentive plan — — 63 — — 63
Cash dividend - $0.07 per share — — — (503) — (503)
Other comprehensive income (loss) — — — — (19,985) (19,985)
Balance as of June 30, 2022 7,176,365 $ 60,050 $ 1,940 $ 255,410 $ (63,804) $ 253,596


(dollars in thousands, except per share amounts)													(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, 2022	Balance as of December 31, 2022	7,183,915	$	60,050	$	2,088	$	274,781	$	(71,166)	$	265,753	Balance as of December 31, 2022	7,183,915	$	60,050	$	2,088	$	274,781	$	(71,166)	$	265,753
Net income	Net income	—	—		—		9,598		—		9,598		Net income	—	—		—		9,598		—		9,598
Stock incentive plan	Stock incentive plan	—	—		69		—		—		69		Stock incentive plan	—	—		69		—		—		69
Forfeiture of restricted shares of common stock	Forfeiture of restricted shares of common stock	(1,130)	—		—		—		—		—		Forfeiture of restricted shares of common stock	(1,130)	—		—		—		—		—
Issuance of shares of common stock as board compensation	Issuance of shares of common stock as board compensation	1,660	84		—		—		—		84		Issuance of shares of common stock as board compensation	1,660	84		—		—		—		84
Repurchase of common stock under stock repurchase program	Repurchase of common stock under stock repurchase program	(6,795)	(346)		—		—		—		(346)		Repurchase of common stock under stock repurchase program	(6,795)	(346)		—		—		—		(346)
Cash dividend - $0.08 per share	Cash dividend - $0.08 per share	—	—		—		(574)		—		(574)		Cash dividend - $0.08 per share	—	—		—		(574)		—		(574)
Cumulative effect of change in accounting principle	Cumulative effect of change in accounting principle	—	—		—		(569)		—		(569)		Cumulative effect of change in accounting principle	—	—		—		(569)		—		(569)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		2,625		2,625		Other comprehensive income (loss)	—	—		—		—		2,625		2,625
Balance as of March 31, 2023	Balance as of March 31, 2023	7,177,650	$	59,788	$	2,157	$	283,236	$	(68,541)	$	276,640	Balance as of March 31, 2023	7,177,650	$	59,788	$	2,157	$	283,236	$	(68,541)	$	276,640
Net income	Net income	—	—		—		8,968		—		8,968		Net income	—	—		—		8,968		—		8,968
Stock incentive plan	Stock incentive plan	—	—		91		—		—		91		Stock incentive plan	—	—		91		—		—		91

Issuance of restricted shares of common stock through stock incentive plan	Issuance of restricted shares of common stock through stock incentive plan	9,300	—		—		—		—		—		Issuance of restricted shares of common stock through stock incentive plan	9,300	—		—		—		—		—
Repurchase of common stock under stock repurchase program	Repurchase of common stock under stock repurchase program	(11,894)	(601)		—		—		—		(601)		Repurchase of common stock under stock repurchase program	(11,894)	(601)		—		—		—		(601)
Cash dividend - $0.08 per share	Cash dividend - $0.08 per share	—	—		—		(574)		—		(574)		Cash dividend - $0.08 per share	—	—		—		(574)		—		(574)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		(1,152)		(1,152)		Other comprehensive income (loss)	—	—		—		—		(1,152)		(1,152)
Balance as of June 30, 2023	Balance as of June 30, 2023	7,175,056	$	59,187	$	2,248	$	291,630	$	(69,693)	$	283,372	Balance as of June 30, 2023	7,175,056	$	59,187	$	2,248	$	291,630	$	(69,693)	$	283,372

Net income													Net income	—	—		—		8,021		—		8,021
Stock incentive plan													Stock incentive plan	—	—		79		—		—		79
Forfeiture of restricted shares of common stock													Forfeiture of restricted shares of common stock	(810)	—		—		—		—		—
Repurchase of common stock under stock repurchase program													Repurchase of common stock under stock repurchase program	(23,561)	(1,156)		—		—		—		(1,156)
Cash dividend - $0.08 per share													Cash dividend - $0.08 per share	—	—		—		(572)		—		(572)
Other comprehensive income (loss)													Other comprehensive income (loss)	—	—		—		—		(7,793)		(7,793)
Balance as of September 30, 2023													Balance as of September 30, 2023	7,150,685	$	58,031	$	2,327	$	299,079	$	(77,486)	$	281,951

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 Six Months Ended June 30,					For the Nine Months Ended September 30,
(in thousands)	(in thousands)	2023		2022		(in thousands)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	18,566	$	16,539	Net income	$	26,587	$	26,725
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	Depreciation	1,068		1,003		Depreciation	1,618		1,516
Amortization	Amortization	277		281		Amortization	410		406
Share-based compensation earned	Share-based compensation earned	160		126		Share-based compensation earned	239		200
Share-based board compensation earned	Share-based board compensation earned	22		39		Share-based board compensation earned	30		59
(Gain) Loss on other assets owned	(Gain) Loss on other assets owned	1		25		(Gain) Loss on other assets owned	(1)		60
Net (accretion) amortization on securities AFS	Net (accretion) amortization on securities AFS	851		322		Net (accretion) amortization on securities AFS	1,234		278
Net (accretion) amortization on securities HTM	Net (accretion) amortization on securities HTM	(736)		—		Net (accretion) amortization on securities HTM	(1,153)		—
(Gain) Loss on sale and call of securities	(Gain) Loss on sale and call of securities	—		75		(Gain) Loss on sale and call of securities	—		59
(Gain) Loss on equity securities	(Gain) Loss on equity securities	32		447		(Gain) Loss on equity securities	145		447
Provision for credit losses	Provision for credit losses	300		400		Provision for credit losses	485		1,000
Deferred income tax (benefit) expense	Deferred income tax (benefit) expense	(459)		(293)		Deferred income tax (benefit) expense	(79)		377
Net (increase) decrease in loans HFS	Net (increase) decrease in loans HFS	(4,068)		(234)		Net (increase) decrease in loans HFS	(1,830)		2,754
Net (increase) decrease in accrued interest receivable	Net (increase) decrease in accrued interest receivable	591		(1,111)		Net (increase) decrease in accrued interest receivable	52		(1,537)
Net (increase) decrease in BOLI	Net (increase) decrease in BOLI	(366)		(352)		Net (increase) decrease in BOLI	(557)		(533)
Net increase (decrease) in accrued interest payable	Net increase (decrease) in accrued interest payable	2,535		(134)		Net increase (decrease) in accrued interest payable	5,237		(116)
Net increase (decrease) in accrued income taxes payable	Net increase (decrease) in accrued income taxes payable	(747)		226		Net increase (decrease) in accrued income taxes payable	(656)		621
Other operating activities, net	Other operating activities, net	(109)		836		Other operating activities, net	258		3,027
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	17,918		18,195		Net cash provided by (used in) operating activities	32,019		35,343
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities AFS:	Activity in securities AFS:					Activity in securities AFS:
Sales	Sales	—		31,762		Sales	—		31,762
Maturities, principal repayments, and calls	Maturities, principal repayments, and calls	54,754		45,335		Maturities, principal repayments, and calls	109,521		60,292
Purchases	Purchases	(28,568)		(313,514)		Purchases	(34,581)		(313,514)
Activity in securities HTM:	Activity in securities HTM:					Activity in securities HTM:
Maturities, principal repayments, and calls	Maturities, principal repayments, and calls	5,850		7,632		Maturities, principal repayments, and calls	9,416		13,074
Sale of equity securities	Sale of equity securities	6,000		7,399		Sale of equity securities	7,000		7,399

Sale of nonmarketable equity securities						Sale of nonmarketable equity securities	2,178		—
Purchase of nonmarketable equity securities	Purchase of nonmarketable equity securities	(852)		(2)		Purchase of nonmarketable equity securities	(792)		(10)
Capital contribution in partnerships	Capital contribution in partnerships	(816)		(817)		Capital contribution in partnerships	(1,819)		(817)
Net (increase) decrease in loans HFI	Net (increase) decrease in loans HFI	(31,507)		(157,934)		Net (increase) decrease in loans HFI	(32,569)		(196,060)

Proceeds from sales of foreclosed assets						Proceeds from sales of foreclosed assets	—		641
Proceeds from sales of premises and equipment						Proceeds from sales of premises and equipment	11		—
Purchases of premises and equipment	Purchases of premises and equipment	(2,252)		(5,144)		Purchases of premises and equipment	(3,711)		(6,321)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	2,609		(385,283)		Net cash provided by (used in) investing activities	54,654		(403,554)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	Net increase (decrease) in deposits	(134,753)		(60,153)		Net increase (decrease) in deposits	(39,043)		(113,854)
Proceeds from other borrowed funds	Proceeds from other borrowed funds	60,000		—		Proceeds from other borrowed funds	60,000		—

Repayments of other borrowed funds						Repayments of other borrowed funds	(60,000)		—

Repurchase of common stock	Repurchase of common stock	(947)		(218)		Repurchase of common stock	(2,103)		(218)

Cash dividends	Cash dividends	(1,148)		(1,005)		Cash dividends	(1,720)		(1,508)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(76,848)		(61,376)		Net cash provided by (used in) financing activities	(42,866)		(115,580)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(56,321)		(428,464)		Net change in cash and cash equivalents	43,807		(483,791)
Cash and cash equivalents - beginning of period	Cash and cash equivalents - beginning of period	278,392		784,864		Cash and cash equivalents - beginning of period	278,392		784,864
Cash and cash equivalents - end of period	Cash and cash equivalents - end of period	$	222,071	$	356,400	Cash and cash equivalents - end of period	$	322,199	$	301,073

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

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For the Six Months Ended June 30,
(in thousands) 2023 2022
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 9,249 $ 2,764
Income taxes $ 5,480 $ 3,703
SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans $ 22 $ —
Transfers of investment securities from AFS to HTM, prior to market value adjustment $ — $ 184,238

RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
(in thousands)	2023		2022
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest	$	16,146	$	4,545
Income taxes	$	6,894	$	4,766

SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans	$	22	$	—
Transfers of investment securities from AFS to HTM, prior to market value adjustment	$	—	$	184,238

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

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

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.

On January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changed the impairment model for most financial assets that are measured at amortized cost, including loans HFI, securities, and unfunded commitments, from an incurred loss model to an expected loss model. Accounting policies related to the allowance for credit losses are considered critical as these policies involve considerable subjective judgment and estimation by management. Changes in factors and forecasts used in evaluating the overall loan portfolio may result in significant changes in the allowance for credit losses and related provision expense in future periods. The allowance level is influenced by loan portfolio growth, changes in the quality and composition of the loan portfolio, the level of nonperforming loans, delinquency and charge-off trends, current economic conditions, forecasted information, and other conditions influencing loss expectations. Changes to the assumptions in the model in future periods could have a material impact on the Company’s Consolidated Financial Statements. Refer to “- Accounting Standards Adopted in 2023” for a detailed discussion on the Company’s methodologies for estimating expected credit losses.

Accounting Standards Adopted in 2023

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. On January 1, 2023, the Company adopted ASC 326, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans HFI, securities HTM, and unfunded commitments. In addition, ASC 326 made changes to the accounting for securities AFS, which requires credit losses to be presented as an allowance rather than as a write-down on securities AFS that management does not intend to sell or believes that it is more likely than not that the Company will have the ability to hold until each security has recovered its cost basis.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and unfunded commitments. Results for reporting periods beginning after January 1, 2023, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a $569,000, net of tax, decrease to stockholders’ equity as of January 1, 2023, for the cumulative effect of

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adopting ASC 326. The transition adjustment included a $278,000 increase to the December 31, 2022 allowance for loan losses and established a $442,000 reserve for unfunded commitments as presented in the following table.


(in thousands)	(in thousands)	December 31, 2022 ALL		Impact of ASC 326 Adoption		January 1, 2023 ACL		(in thousands)	December 31, 2022 ALL		Impact of ASC 326 Adoption		January 1, 2023 ACL
Real estate:	Real estate:							Real estate:
Commercial real estate	Commercial real estate	$	7,720	$	876	$	8,596	Commercial real estate	$	7,720	$	876	$	8,596
One-to-four family residential	One-to-four family residential	5,682		1,231		6,913		One-to-four family residential	5,682		1,231		6,913
Construction and development	Construction and development	1,654		(444)		1,210		Construction and development	1,654		(444)		1,210
Commercial and industrial	Commercial and industrial	4,350		(822)		3,528		Commercial and industrial	4,350		(822)		3,528

SBA PPP, net of deferred income								SBA PPP, net of deferred income	—		—		—
Tax-exempt	Tax-exempt	751		(427)		324		Tax-exempt	751		(427)		324
Consumer	Consumer	471		(136)		335		Consumer	471		(136)		335
Total	Total	$	20,628	$	278	$	20,906	Total	$	20,628	$	278	$	20,906

Reserve for unfunded commitments	Reserve for unfunded commitments	$	—	$	442	$	442	Reserve for unfunded commitments	$	—	$	442	$	442

Loans Held for Investment

Loans that management has the intent and ability to hold, for the foreseeable future or until maturity or payoff, are reported at amortized cost. Amortized cost is the principal balance outstanding, net of deferred fees and costs. Accrued interest receivable is reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on loans is discontinued, and the loans are placed on nonaccrual status at the time the loan is 90 days past due unless the loan is well secured and in process of collection. Loans, excluding credit cards, are charged-off to the extent management is relatively certain that principal and interest will be uncollectible. Credit card loans continue to accrue interest until they are charged-off no later than 120 days past due unless the loan is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. When a loan is placed on nonaccrual status, uncollected accrued interest is reversed, reducing interest income, and future income accrual is discontinued. Subsequent payments, if any, of interest and fees are applied as reductions to the loan’s outstanding principal balance. Once the principal balance of a loan placed on nonaccrual status has been fully recovered, subsequent payments received are recognized as interest income on a cash basis. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Credit Losses - Loans

The ACL is a valuation account that is deducted from the amortized cost basis of loans HFI to present management’s best estimate of the expected credit losses to be collected over the lifetime of the loans. The amount of the ACL should not be interpreted as an indication that charge-offs in future periods will necessarily occur in those amounts, or at all. Loans are charged-off against the allowance when management is relatively certain that principal and interest will be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Subsequent recoveries, if any, are credited to the allowance.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. This reasonable and supportable forecast period is currently one year and incorporates Company and peer historical losses. After the forecast period, the Company reverts to an average historical loss rate over a two-year period. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in economic conditions, such as changes in unemployment rates, property values, or other relevant factors. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in ~~our~~the Company’s historic loss factors. The determination of the amount of allowance involves a high degree of judgement and subjectivity.

The ACL is measured on a collective pool basis when similar risk characteristics and risk profiles exist. The Company utilizes cohort loss rate (static pool analysis) and remaining life loss rate methodologies to estimate the quantitative portion of the ACL for loan pools. The cohort loss rate methodology tracks a closed pool of loans over their remaining lives

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to determine their loss behavior. The remaining life loss rate methodology takes the calculated loss rate and applies that rate to a pool of loans on a periodic basis based on the remaining life expectation of that pool.

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The portfolio pools are based primarily on regulatory call report codes. These pools and certain of the inherent risks in the Company’s loan portfolio are summarized in the following table.


Loan Pool			Risk Characteristics
Residential construction			This category consists of loans to residential developers and to individual clients for construction of single-family homes. Risks inherent in this portfolio pool include fluctuations in the value of real estate, project completion risk, and change in market trends.
Commercial construction			This category consists of loans to small and medium-sized businesses to construct owner occupied facilities and developers of commercial real estate investment properties. Risks inherent in this portfolio pool include fluctuations in the value of real estate, project completion risk, change in market trends, and the ability to sell the property upon completion.
Farmland			This category consists of loans secured by real estate that is used or usable for agricultural purposes, including land used for crops, livestock production, grazing/pastureland, and timberland. Risks inherent in this portfolio pool include adverse changes in climate, fluctuations in feed and livestock prices, and changes in property values.
Home equity loans and lines			This category consists of home equity loans and lines of credit. Risks inherent in this portfolio pool include local unemployment rates, local residential real estate market conditions, and the interest rate environment.
Secured closed-liens			This category consists of loans secured by primary and secondary liens on residential real estate. Risks inherent in this portfolio pool include local unemployment rates, local residential real estate market conditions, and the interest rate environment. Generally, these loans are for longer terms than home equity loans and lines of credit.
Multifamily			This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis. Risks inherent in this portfolio pool include local unemployment rates, changes in the local economy, and factors that would impact property values.
Owner occupied commercial real estate			This category consists of loans to established operating companies and secured by owner occupied offices and industrial real estate properties. Risks inherent in this portfolio pool include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, environmental contamination, and the quality of the borrower’s management.
Non-owner occupied commercial real estate			This category consists of loans to developers and other persons or entities and secured by non-owner occupied commercial real estate properties. Risks inherent in this portfolio pool include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination, and the quality of the borrower’s management.
Commercial and industrial			This category consists of secured and unsecured loans to purchase capital equipment, agriculture operating loans, and other business loans for working capital and operating purposes. Secured loans are primarily secured by accounts receivable, inventory, and other business assets. The performance of commercial and industrial loans may be adversely affected by, among other factors, conditions specific to the relevant industry, fluctuations in the value of the collateral, and individual performance factors related to the borrower such as the quality of the borrower’s management.
Consumer			This category consists of loans to individuals for household, family, and other personal use. Risks inherent in this portfolio pool include the borrower’s financial condition, local unemployment rates, local economic conditions, and the interest rate environment.
Tax-exempt			This category consists of loans to political subdivisions primarily of the State of Louisiana including parishes, municipalities, utility districts, school districts, and development authorities. These loans undergo the same underwriting as any of ~~our~~the Company’s other loans and are typically paid for by ad valorem taxes or specific revenue sources.
Other loans			This category consists of loans not included in any other category. Risks inherent in this portfolio pool include local unemployment rates, local economic conditions, and the interest rate environment.

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Loans that do not share similar risk characteristics are evaluated on an individual basis and excluded from the collective evaluation. For loans evaluated on an individual basis that are collateral dependent, the specific allowance is estimated by calculating the difference between the fair value of the underlying collateral less estimated selling costs and the Bank’s

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exposure. If the loan is not collateral dependent, the discounted cash flow methodology is used. Either of these determinations are highly subjective and based on information available at the time of valuation.

Reserve for Unfunded Commitments

Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The reserve for unfunded commitments is recorded within accrued interest payable on the consolidated balance sheets, and the related provision is recorded in other operating expenses on the consolidated statements of income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The loss rates computed for each pool and expected pool-level funding rates are applied to the related unfunded commitment balance to obtain the reserve amount.

Securities AFS

ASC 326 requires the Company to measure expected credit losses on securities AFS. Impairment is evaluated when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value. Management evaluates each security by considering the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, volatility of the security’s fair value, and historical loss information for financial assets secured with similar collateral, along with other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. If a decline in the fair value related to creditworthiness or other factors is determined, an ACL will be calculated using a discounted cash flow method, whereby management will compare the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses in the consolidated statements of income. Accrued interest receivable is excluded from the amortized cost basis in measuring expected credit losses on the investment securities and no ACL is recorded on accrued interest receivable. The Company’s current securities AFS portfolio consists of U.S. Treasury securities, mortgage-backed securities, U.S. agency securities, and municipal bonds. The Company’s securities AFS, other than the municipal bonds, are considered treasuries, agencies, and instrumentalities of the U.S. government, which have a zero credit loss assumption. These securities have the full faith and credit backing of the U.S. government or one of its agencies. Municipal bonds AFS do not fall under the zero credit loss assumption and are evaluated quarterly using the considerations mentioned above to determine whether there is a credit loss associated with a decline in fair value. Due to the zero credit loss assumption and the considerations applied to the securities AFS, no ACL was recorded on January 1, 2023 for securities AFS.

Securities HTM

ASC 326 requires the Company to measure expected credit losses on securities HTM. Securities HTM are measured on a collective basis by major security type with those sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the securities HTM portfolio. Management monitors the HTM portfolio to determine whether an ACL should be recorded. The Company’s current securities HTM portfolio consists of mortgage-backed securities and U.S. agency securities. The Company’s securities HTM are considered agencies and instrumentalities of the U.S. government that have a zero credit loss assumption. These securities have the full faith and credit backing of the U.S. government or one of its agencies. Due to the zero credit loss assumption, no ACL was recorded on January 1, 2023 for securities HTM.

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. On January 1, 2023, the Company adopted ASU No. 2021-08. Adoption of this ASU did not have an 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 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

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Amortized Cost. On January 1, 2023, the Company adopted ASU No. 2022-02 on a prospective basis. Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

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ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements. The guidance issued in this update addresses two issues. First, the standard requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is a lease, the accounting for the lease is treated the same as an arrangement with an unrelated party. This is a change in the requirement under Topic 840, Leases, which used the basis of economic substance. Secondly, the standard requires leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group as long as the lessee controls the use of the underlying asset. If the lessor obtained control of the use of the underlying asset through a lease with another entity not within the common control group, the amortization period may not exceed the amortization period of the common control group. If the lessee no longer controls the use of the underlying asset, the improvement is accounted for as a transfer between entities under common control through an adjustment to equity. These leasehold improvements are subject to the impairment guidance in Topic 360 Property, Plant and Equipment. Both items of this amendment are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted for both interim periods and annual financial statements that have not been issued. On January 1, 2023, the Company early adopted ASU No. 2023-01, and it did not have an impact on the Company’s consolidated financial statements.

ASU No. 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718). The guidance in this update amends various SEC paragraphs relating to financial disclosures. This update is an alignment of SEC and GAAP reporting. This update was issued in the third quarter of 2023 and was effective upon issuance. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

As of ~~June~~September 30, 2023, there were no recent accounting pronouncements that were applicable and not adopted.

2. Securities

Securities are classified as AFS, HTM, and equity securities. Total securities were ~~$739.0~~$675.3 million as of ~~June~~September 30, 2023.

Securities AFS and Securities HTM

Securities AFS and securities HTM are debt securities. Securities AFS are held for indefinite periods of time and are carried at estimated fair value. As of ~~June~~September 30, 2023, the estimated fair value of securities AFS was ~~$588.5~~$529.0 million. The net unrealized loss on securities AFS ~~decreased $1.1~~increased $9.2 million for the ~~six~~nine months ended ~~June~~September 30, 2023, resulting in a net unrealized loss of ~~$73.0~~$83.3 million as of ~~June~~September 30, 2023.

Securities HTM, which the Company has the intent and ability to hold until maturity, are carried at amortized cost. As of ~~June~~September 30, 2023, the amortized cost of securities HTM was ~~$146.6~~$143.4 million.

Investment activity for the ~~six~~nine months ended ~~June~~September 30, 2023, included ~~$60.6~~$118.9 million in maturities, principal repayments, and calls, partially offset by ~~$28.6~~$34.6 million of securities purchased. There were no sales of securities AFS, and there were no purchases or sales of securities HTM for the same period.

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


		June 30, 2023									September 30, 2023
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities AFS:	Securities AFS:									Securities AFS:
Mortgage-backed securities	Mortgage-backed securities	$	259,244	$	—	$	(33,496)	$	225,748	Mortgage-backed securities	$	249,746	$	—	$	(36,893)	$	212,853
Municipal bonds	Municipal bonds	216,112		2		(33,383)		182,731		Municipal bonds	213,112		—		(41,169)		171,943
U.S. Treasury securities	U.S. Treasury securities	164,119		—		(4,315)		159,804		U.S. Treasury securities	122,109		—		(3,247)		118,862
U.S. agency securities	U.S. agency securities	22,027		1		(1,833)		20,195		U.S. agency securities	27,397		6		(2,015)		25,388
Total Securities AFS	Total Securities AFS	$	661,502	$	3	$	(73,027)	$	588,478	Total Securities AFS	$	612,364	$	6	$	(83,324)	$	529,046

Securities HTM:	Securities HTM:									Securities HTM:
Mortgage-backed securities	Mortgage-backed securities	$	145,652	$	—	$	(21,966)	$	123,686	Mortgage-backed securities	$	142,501	$	—	$	(26,070)	$	116,431
U.S. agency securities	U.S. agency securities	917		—		(122)		795		U.S. agency securities	919		—		(143)		776
Total Securities HTM	Total Securities HTM	$	146,569	$	—	$	(22,088)	$	124,481	Total Securities HTM	$	143,420	$	—	$	(26,213)	$	117,207


	December 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities AFS:
Mortgage-backed securities	$	272,253	$	—	$	(31,272)	$	240,981
Municipal bonds	219,305		6		(35,219)		184,092
U.S. Treasury securities	176,380		—		(5,902)		170,478
U.S. agency securities	20,601		—		(1,745)		18,856
Total Securities AFS	$	688,539	$	6	$	(74,138)	$	614,407

Securities HTM:
Mortgage-backed securities	$	150,771	$	—	$	(19,142)	$	131,629
U.S. agency securities	912		—		(134)		778
Total Securities HTM	$	151,683	$	—	$	(19,276)	$	132,407

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The amortized cost and estimated fair value of securities AFS and securities HTM as of ~~June~~September 30, 2023, 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.


		June 30, 2023					September 30, 2023
(in thousands)	(in thousands)	Amortized Cost		Fair Value		(in thousands)	Amortized Cost		Fair Value
Securities AFS:	Securities AFS:					Securities AFS:
Within one year	Within one year	$	128,298	$	126,163	Within one year	$	98,990	$	97,219
After one year but within five years	After one year but within five years	77,266		73,318		After one year but within five years	62,186		58,778
After five years but within ten years	After five years but within ten years	82,004		74,791		After five years but within ten years	84,066		75,198
After ten years	After ten years	373,934		314,206		After ten years	367,122		297,851
Total Securities AFS	Total Securities AFS	$	661,502	$	588,478	Total Securities AFS	$	612,364	$	529,046

Securities HTM:	Securities HTM:					Securities HTM:
Within one year	Within one year	$	—	$	—	Within one year	$	—	$	—
After one year but within five years	After one year but within five years	—		—		After one year but within five years	—		—
After five years but within ten years	After five years but within ten years	917		795		After five years but within ten years	919		776
After ten years	After ten years	145,652		123,686		After ten years	142,501		116,431
Total Securities HTM	Total Securities HTM	$	146,569	$	124,481	Total Securities HTM	$	143,420	$	117,207

Accounting for Credit Losses – Securities AFS and Securities HTM

The Company evaluates securities AFS for impairment when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Due to the zero credit loss assumption and the considerations applied to the securities AFS, no ACL was recorded on January 1, 2023, and there was no ACL for securities AFS as of ~~June~~September 30, 2023. Also, as part of the Company’s evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategy, cash flow needs, liquidity position, capital adequacy, and interest rate risk position. 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.

Due to the zero credit loss assumption on the securities HTM portfolio, no ACL was recorded on January 1, 2023, and there was no ACL for securities HTM as of ~~June~~September 30, 2023.

Accrued interest receivable totaled ~~$2.9~~$2.6 million and $3.0 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively, for securities AFS and securities HTM and was reported in accrued interest receivable on the consolidated balance sheets.

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Information pertaining to securities AFS and securities HTM with gross unrealized losses as of ~~June~~September 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is described as follows:


		June 30, 2023									September 30, 2023
		Less than twelve months				Twelve months or more					Less than twelve months				Twelve months or more
(in thousands)	(in thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		(in thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities AFS:	Securities AFS:									Securities AFS:
Mortgage-backed securities	Mortgage-backed securities	$	(65)	$	4,385	$	(33,431)	$	221,162	Mortgage-backed securities	$	(94)	$	4,220	$	(36,799)	$	208,564
Municipal bonds	Municipal bonds	(185)		10,425		(33,198)		170,888		Municipal bonds	(418)		7,347		(40,751)		164,596
U.S. Treasury securities	U.S. Treasury securities	(12)		9,942		(4,303)		149,861		U.S. Treasury securities	—		—		(3,247)		118,862
U.S. agency securities	U.S. agency securities	(7)		1,993		(1,826)		17,214		U.S. agency securities	(5)		6,962		(2,010)		16,398
Total Securities AFS	Total Securities AFS	$	(269)	$	26,745	$	(72,758)	$	559,125	Total Securities AFS	$	(517)	$	18,529	$	(82,807)	$	508,420

Securities HTM:	Securities HTM:									Securities HTM:
Mortgage-backed securities	Mortgage-backed securities	$	—	$	—	$	(21,966)	$	123,686	Mortgage-backed securities	$	—	$	—	$	(26,070)	$	116,431
U.S. agency securities	U.S. agency securities	—		—		(122)		795		U.S. agency securities	—		—		(143)		776
Total Securities HTM	Total Securities HTM	$	—	$	—	$	(22,088)	$	124,481	Total Securities HTM	$	—	$	—	$	(26,213)	$	117,207

		December 31, 2022									December 31, 2022
		Less than twelve months				Twelve months or more					Less than twelve months				Twelve months or more
(in thousands)	(in thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		(in thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities AFS:	Securities AFS:									Securities AFS:
Mortgage-backed securities	Mortgage-backed securities	$	(10,214)	$	105,030	$	(21,058)	$	135,607	Mortgage-backed securities	$	(10,214)	$	105,030	$	(21,058)	$	135,607
Municipal bonds	Municipal bonds	(11,340)		84,691		(23,879)		98,607		Municipal bonds	(11,340)		84,691		(23,879)		98,607
U.S. Treasury securities	U.S. Treasury securities	(3,852)		131,107		(2,050)		39,371		U.S. Treasury securities	(3,852)		131,107		(2,050)		39,371
U.S. agency securities	U.S. agency securities	(608)		10,289		(1,137)		8,564		U.S. agency securities	(608)		10,289		(1,137)		8,564
Total Securities AFS	Total Securities AFS	$	(26,014)	$	331,117	$	(48,124)	$	282,149	Total Securities AFS	$	(26,014)	$	331,117	$	(48,124)	$	282,149

Securities HTM:	Securities HTM:									Securities HTM:
Mortgage-backed securities	Mortgage-backed securities	$	(19,142)	$	131,629	$	—	$	—	Mortgage-backed securities	$	(19,142)	$	131,629	$	—	$	—
U.S. agency securities	U.S. agency securities	(134)		778		—		—		U.S. agency securities	(134)		778		—		—
Total Securities HTM	Total Securities HTM	$	(19,276)	$	132,407	$	—	$	—	Total Securities HTM	$	(19,276)	$	132,407	$	—	$	—

As of ~~June~~September 30, 2023, the Company held ~~566~~554 securities AFS and securities HTM that were in unrealized loss positions. The aggregate unrealized loss of these securities as of ~~June~~September 30, 2023, was ~~11.77%~~14.49% of the amortized cost basis of total debt securities.

The proceeds from sales and calls of debt securities and their gross gain (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, are shown below:


		Three Months Ended June 30,				Six Months Ended June 30,			Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)	(in thousands)	2023		2022			2023			2022		(in thousands)	2023		2022			2023		2022
Proceeds (1)	Proceeds (1)	$	—	$	32,429		$	—		$	40,503	Proceeds (1)	$	—	$	731		$	—	$	41,234
Gross gain	Gross gain	$	—	$	9		$	—		$	48	Gross gain	$	—	$	16		$	—	$	64
Gross loss	Gross loss	$	—	$	(123)		$	—		$	(123)	Gross loss	$	—	$	—		$	—	$	(123)

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

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Equity Securities

Equity securities are an investment in a CRA mutual fund, consisting primarily of bonds. Equity securities are carried at fair value on the consolidated balance sheets with periodic changes in value recorded through the consolidated statements of income. As of December 31, 2022, equity securities had a fair value of $10.0 million with a recognized loss of $468,000 for the year ended December 31, 2022. The loss on equity securities during 2022 was due to a significant increase in interest rates. ~~In March~~During the nine months ended September 30, 2023, wethe Company sold ~~$6.0~~$7.0 million of the mutual fund. As of ~~June~~September 30, 2023, equity securities had a fair value of ~~$3.9~~$2.8 million with a recognized loss of ~~$32,000~~$145,000 for the ~~six~~nine months ended ~~June~~September 30, 2023.

Pledged Securities

Securities with carrying values of approximately ~~$201.5~~$232.7 million and ~~$168.2~~$191.2 million were ~~pledged to secure public entity deposits~~used as collateral as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

3. Loans and Asset Quality

Loans

Loans HFI by category and loans HFS are summarized below:


(in thousands)	(in thousands)	June 30, 2023		December 31, 2022		(in thousands)	September 30, 2023		December 31, 2022
Real estate:	Real estate:					Real estate:
Commercial real estate	Commercial real estate	$	819,260	$	794,723	Commercial real estate	$	829,836	$	794,723
One-to-four family residential	One-to-four family residential	565,725		543,511		One-to-four family residential	579,023		543,511
Construction and development	Construction and development	138,450		157,364		Construction and development	119,647		157,364
Commercial and industrial	Commercial and industrial	320,257		310,053		Commercial and industrial	315,388		310,053
SBA PPP, net of deferred income	SBA PPP, net of deferred income	13		14		SBA PPP, net of deferred income	10		14
Tax-exempt	Tax-exempt	75,697		83,166		Tax-exempt	74,703		83,166
Consumer	Consumer	28,229		27,436		Consumer	29,999		27,436
Total loans HFI	Total loans HFI	$	1,947,631	$	1,916,267	Total loans HFI	$	1,948,606	$	1,916,267
Total loans HFS	Total loans HFS	$	4,586	$	518	Total loans HFS	$	2,348	$	518

Accrued interest receivable on loans HFI totaled ~~$5.3~~$6.0 million and $5.8 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively, and was reported in accrued interest receivable on the accompanying consolidated balance sheets.

Allowance for Credit Losses

Effective January 1, 2023, the Company adopted the provisions of ASC 326 using the modified retrospective method. For reporting periods beginning on and after January 1, 2023, the Company maintains an ACL on all loans that reflects management’s estimate of expected credit losses for the full life of the loan portfolio.

The following table summarizes the activity in the ACL by category for the ~~six~~nine months ended ~~June~~September 30, 2023:


(in thousands)	(in thousands)	Beginning Balance December 31, 2022		Impact of ASC 326 Adoption		Provision for Credit Losses		Charge-offs		Recoveries		Ending Balance June 30, 2023		(in thousands)	Beginning Balance December 31, 2022		Impact of ASC 326 Adoption		Provision for Credit Losses		Charge-offs		Recoveries		Ending Balance September 30, 2023
Real Estate:	Real Estate:													Real Estate:
Commercial real estate	Commercial real estate	$	7,720	$	876	$	(293)	$	—	$	—	$	8,303	Commercial real estate	$	7,720	$	876	$	53	$	—	$	—	$	8,649
One-to-four family residential	One-to-four family residential	5,682		1,231		91		—		5		7,009		One-to-four family residential	5,682		1,231		554		—		8		7,475
Construction and development	Construction and development	1,654		(444)		184		(9)		—		1,385		Construction and development	1,654		(444)		32		(9)		—		1,233
Commercial and industrial	Commercial and industrial	4,350		(822)		(18)		(33)		23		3,500		Commercial and industrial	4,350		(822)		(562)		(51)		25		2,940
SBA PPP, net of deferred income	SBA PPP, net of deferred income	—		—		—		—		—		—		SBA PPP, net of deferred income	—		—		—		—		—		—
Tax-exempt	Tax-exempt	751		(427)		264		—		—		588		Tax-exempt	751		(427)		255		—		—		579
Consumer	Consumer	471		(136)		72		(182)		75		300		Consumer	471		(136)		153		(288)		107		307
Total allowance for credit losses	Total allowance for credit losses	$	20,628	$	278	$	300	$	(224)	$	103	$	21,085	Total allowance for credit losses	$	20,628	$	278	$	485	$	(348)	$	140	$	21,183

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Allowance for Loan Losses

For reporting periods prior to January 1, 2023, the Company maintained an ALL on loans that represented management’s estimate of probable losses incurred in the portfolio category.

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The following table summarizes the activity in the allowance for loan losses by category for the twelve months ended December 31, 2022:


(in thousands)	Beginning Balance December 31, 2021		Provision for Loan Losses		Charge-offs		Recoveries		Ending Balance December 31, 2022
Real estate:
Commercial real estate	$	6,749	$	970	$	—	$	1	$	7,720
One-to-four family residential	5,375		296		—		11		5,682
Construction and development	1,326		328		(18)		18		1,654
Commercial and industrial	4,440		(137)		(39)		86		4,350
SBA PPP, net of deferred income	25		(25)		—		—		—
Tax-exempt	749		2		—		—		751
Consumer	512		316		(490)		133		471
Total allowance for loan losses	$	19,176	$	1,750	$	(547)	$	249	$	20,628

Nonaccrual and Past Due Loans

The following table presents nonaccrual loans as of ~~June~~September 30, 2023:


(in thousands)	(in thousands)	Nonaccrual with No ACL		Nonaccrual with ACL		Total Nonaccrual		(in thousands)	Nonaccrual with No ACL		Nonaccrual with ACL		Total Nonaccrual
Real estate:	Real estate:							Real estate:
Commercial real estate	Commercial real estate	$	678	$	40	$	718	Commercial real estate	$	—	$	715	$	715
One-to-four family residential	One-to-four family residential	57		250		307		One-to-four family residential	—		297		297
Construction and development	Construction and development	—		—		—		Construction and development	—		—		—
Commercial and industrial	Commercial and industrial	—		718		718		Commercial and industrial	711		8		719
SBA PPP, net of deferred income	SBA PPP, net of deferred income	—		—		—		SBA PPP, net of deferred income	—		—		—
Tax-exempt	Tax-exempt	—		—		—		Tax-exempt	—		—		—
Consumer	Consumer	—		97		97		Consumer	—		93		93
Total loans HFI	Total loans HFI	$	735	$	1,105	$	1,840	Total loans HFI	$	711	$	1,113	$	1,824

No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

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The following table presents the aging analysis of the past due loans and loans 90 days or more past due and still accruing interest by loan category as of ~~June~~September 30, 2023:

Past Due
(in thousands) 30-59 Days 60-89 Days 90 Days or More Current Total Loans HFI 90 Days or More Past Due and Accruing
Real estate:
Commercial real estate $ 39 $ — $ 747 $ 818,474 $ 819,260 $ 69
One-to-four family residential — 134 214 565,377 565,725 38
Construction and development — — — 138,450 138,450 —
Commercial and industrial 142 85 721 319,309 320,257 3
SBA PPP, net of deferred income 13 — — — 13 —
Tax-exempt — — — 75,697 75,697 —
Consumer 97 6 8 28,118 28,229 8
Total loans HFI $ 291 $ 225 $ 1,690 $ 1,945,425 $ 1,947,631 $ 118

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	Past Due
(in thousands)	30-59 Days		60-89 Days		90 Days or More		Current		Total Loans HFI		90 Days or More Past Due and Accruing
Real estate:
Commercial real estate	$	8	$	—	$	747	$	829,081	$	829,836	$	69
One-to-four family residential	595		47		322		578,059		579,023		149
Construction and development	382		—		—		119,265		119,647		—
Commercial and industrial	121		279		714		314,274		315,388		—
SBA PPP, net of deferred income	—		—		—		10		10		—
Tax-exempt	—		—		—		74,703		74,703		—
Consumer	60		12		4		29,923		29,999		4
Total loans HFI	$	1,166	$	338	$	1,787	$	1,945,315	$	1,948,606	$	222

The following table presents the current, past due, and nonaccrual loans by loan category as of December 31, 2022:


	Accruing
(in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Loans
Real estate:
Commercial real estate	$	793,540	$	463	$	—	$	720	$	794,723
One-to-four family residential	542,666		602		—		243		543,511
Construction and development	157,355		—		—		9		157,364
Commercial and industrial	308,597		165		—		1,291		310,053
SBA PPP, net of deferred income	14		—		—		—		14
Tax-exempt	83,166		—		—		—		83,166
Consumer	27,291		42		2		101		27,436
Total loans HFI	$	1,912,629	$	1,272	$	2	$	2,364	$	1,916,267

Impaired Loans

For reporting periods prior to January 1, 2023, when ASC 326 was adopted, the Company individually evaluated impaired loans, including TDRs and performing and nonperforming loans. Once a loan was deemed to be impaired, the difference between the loan value and the Bank’s exposure was charged-off or a specific reserve was established.

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Information pertaining to impaired loans as of December 31, 2022, is as follows:


(in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With no related allowance recorded:
Real estate:
Commercial real estate	$	3,804	$	3,796	$	—	$	3,194
One-to-four family residential	1,458		1,387		—		797
Construction and development	9		9		—		104
Commercial and industrial	51		51		—		58
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		—		—		—
Consumer	26		26		—		9
Total with no related allowance	5,348		5,269		—		4,162
With allowance recorded:
Real estate:
Commercial real estate	717		717		15		1,264
One-to-four family residential	120		120		16		48
Construction and development	—		—		—		—
Commercial and industrial	1,360		1,351		172		623
SBA PPP, net of deferred income	—		—		—		—
Tax-exempt	—		—		—		—
Consumer	113		111		111		122
Total with related allowance	2,310		2,299		314		2,057
Total impaired loans	$	7,658	$	7,568	$	314	$	6,219

The interest income recognized on impaired loans for the year ended December 31, 2022 was $252,000.

Loan Modifications

The Company adopted ASU No. 2022-02 Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023, using the prospective method. This ASU eliminates the TDR recognition and measurement guidance and requires all loan modifications to be evaluated based on whether the

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modification represents a new loan or a continuation of an existing loan. Modifications are made to a borrower experiencing financial difficulty, and the modified terms are in the form of principal forgiveness, interest rate reduction, other-than-insignificant payment delay, or a term extension in the current reporting period. As of ~~June~~September 30, 2023, no loan modifications were made to borrowers experiencing financial ~~difficulty.~~difficulty that resulted in an other-than-insignificant delay in payment.

Troubled Debt Restructurings

For reporting periods prior to January 1, 2023, when ASC 326 was adopted, the restructuring of a loan was considered a TDR if the borrower was experiencing financial difficulties and the Bank had granted a concession. ~~There were no~~

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A summary of loans modified as TDRs that occurred during the ~~six~~period indicated is as follows:


	For the Nine Months Ended
	September 30, 2022
		Recorded Investment
(dollars in thousands)	Loan Count	Pre Modification		Post Modification
Real estate:
Commercial real estate	1	$	50	$	50
One-to-four family residential	4	673		677
Construction and development	—	—		—
Commercial and industrial	—	—		—
SBA PPP, net of deferred income	—	—		—
Tax-exempt	—	—		—
Consumer	1	104		104
Total	6	$	827	$	831

The loans modified as TDRs during the nine months ended ~~June~~September 30, ~~2022.~~2022 increased the allowance for loan losses by $103,000. Additionally, there were no defaults on loans during the ~~six~~nine months ended ~~June~~September 30, 2022, that had been modified as a TDR during the prior twelve months.

Credit Quality Indicators

Loans are categorized based on the degree of risk inherent in the credit and the ability of the borrower to service the debt. A description of the general characteristics of the Bank’s risk rating grades follows:

Pass - These loans are of satisfactory quality and do not require a more severe classification.

Special mention - This category includes loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan. However, the loss potential does not warrant substandard classification.

Substandard - Loans in this category have well-defined weaknesses that jeopardize normal repayment of principal and interest. Prompt corrective action is required to reduce exposure and to assure adequate remedial actions are taken by the borrower. If these weaknesses do not improve, loss is possible.

Doubtful - Loans in this category have well-defined weaknesses that make full collection improbable.

Loss - Loans classified in this category are considered uncollectible and charged-off to the allowance for credit losses.

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As of ~~June~~September 30, 2023, the Company had no loans classified as doubtful or loss. The following table summarizes loans by risk rating and year of origination as of ~~June~~September 30, 2023:


		Year of Origination																	Year of Origination
(in thousands)	(in thousands)	2023		2022		2021		2020		2019		Prior Years		Revolving Lines		Total		(in thousands)	2023		2022		2021		2020		2019		Prior Years		Revolving Lines		Total
Real estate:	Real estate:																	Real estate:
Commercial real estate	Commercial real estate																	Commercial real estate
Pass	Pass	$	41,906	$	264,422	$	242,840	$	95,484	$	68,893	$	77,928	$	20,012	$	811,485	Pass	$	79,103	$	262,810	$	240,290	$	78,810	$	67,074	$	70,776	$	19,873	$	818,736
Special mention	Special mention	73		—		3,246		—		1,086		839		—		5,244		Special mention	73		—		3,217		—		1,059		4,239		—		8,588
Substandard	Substandard	—		808		671		335		—		717		—		2,531		Substandard	184		794		673		146		—		715		—		2,512

Total	Total	$	41,979	$	265,230	$	246,757	$	95,819	$	69,979	$	79,484	$	20,012	$	819,260	Total	$	79,360	$	263,604	$	244,180	$	78,956	$	68,133	$	75,730	$	19,873	$	829,836

One-to-four family residential	One-to-four family residential																	One-to-four family residential
Pass	Pass	$	54,709	$	142,877	$	135,643	$	95,429	$	33,621	$	83,987	$	18,178	$	564,444	Pass	$	88,609	$	135,725	$	133,372	$	91,995	$	32,291	$	79,060	$	16,062	$	577,114
Special mention	Special mention	—		—		—		—		—		56		—		56		Special mention	—		—		—		—		—		262		—		262
Substandard	Substandard	—		105		—		38		81		981		20		1,225		Substandard	—		104		—		38		389		1,041		75		1,647

Total	Total	$	54,709	$	142,982	$	135,643	$	95,467	$	33,702	$	85,024	$	18,198	$	565,725	Total	$	88,609	$	135,829	$	133,372	$	92,033	$	32,680	$	80,363	$	16,137	$	579,023

Construction and development	Construction and development																	Construction and development
Pass	Pass	$	21,704	$	81,860	$	27,121	$	2,218	$	2,342	$	1,147	$	2,058	$	138,450	Pass	$	31,448	$	68,315	$	13,986	$	1,925	$	2,214	$	1,040	$	719	$	119,647
Special mention	Special mention	—		—		—		—		—		—		—		—		Special mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—

Total	Total	$	21,704	$	81,860	$	27,121	$	2,218	$	2,342	$	1,147	$	2,058	$	138,450	Total	$	31,448	$	68,315	$	13,986	$	1,925	$	2,214	$	1,040	$	719	$	119,647

Commercial and industrial	Commercial and industrial																	Commercial and industrial
Pass	Pass	$	42,985	$	67,973	$	59,760	$	18,617	$	9,848	$	2,369	$	107,156	$	308,708	Pass	$	59,422	$	57,329	$	55,800	$	16,984	$	8,716	$	1,345	$	103,607	$	303,203
Special mention	Special mention	—		—		4,935		—		535		1,867		3,336		10,673		Special mention	27		959		4,798		—		423		1,782		3,251		11,240
Substandard	Substandard	5		—		32		9		63		55		712		876		Substandard	4		—		22		6		59		53		801		945

Total	Total	$	42,990	$	67,973	$	64,727	$	18,626	$	10,446	$	4,291	$	111,204	$	320,257	Total	$	59,453	$	58,288	$	60,620	$	16,990	$	9,198	$	3,180	$	107,659	$	315,388

SBA PPP, net of deferred income	SBA PPP, net of deferred income																	SBA PPP, net of deferred income
Pass	Pass	$	—	$	—	$	—	$	13	$	—	$	—	$	—	$	13	Pass	$	—	$	—	$	—	$	10	$	—	$	—	$	—	$	10
Special mention	Special mention	—		—		—		—		—		—		—		—		Special mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—

Total	Total	$	—	$	—	$	—	$	13	$	—	$	—	$	—	$	13	Total	$	—	$	—	$	—	$	10	$	—	$	—	$	—	$	10

Tax-exempt	Tax-exempt																	Tax-exempt
Pass	Pass	$	511	$	15,679	$	8,173	$	14,885	$	4,530	$	31,919	$	—	$	75,697	Pass	$	954	$	15,679	$	8,173	$	14,219	$	4,530	$	31,148	$	—	$	74,703
Special mention	Special mention	—		—		—		—		—		—		—		—		Special mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—

Total	Total	$	511	$	15,679	$	8,173	$	14,885	$	4,530	$	31,919	$	—	$	75,697	Total	$	954	$	15,679	$	8,173	$	14,219	$	4,530	$	31,148	$	—	$	74,703

Consumer	Consumer																	Consumer
Pass	Pass	$	10,985	$	10,265	$	3,226	$	1,325	$	606	$	556	$	1,160	$	28,123	Pass	$	15,813	$	8,505	$	2,680	$	1,095	$	466	$	184	$	1,127	$	29,870
Special mention	Special mention	—		—		—		—		—		—		—		—		Special mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		97		9		106		Substandard	—		26		—		—		—		94		9		129

Total	Total	$	10,985	$	10,265	$	3,226	$	1,325	$	606	$	653	$	1,169	$	28,229	Total	$	15,813	$	8,531	$	2,680	$	1,095	$	466	$	278	$	1,136	$	29,999

Total loans HFI	Total loans HFI	$	172,878	$	583,989	$	485,647	$	228,353	$	121,605	$	202,518	$	152,641	$	1,947,631	Total loans HFI	$	275,637	$	550,246	$	463,011	$	205,228	$	117,221	$	191,739	$	145,524	$	1,948,606

Current period gross charge-offs	Current period gross charge-offs	$	1	$	8	$	—	$	—	$	9	$	1	$	205	$	224	Current period gross charge-offs	$	7	$	15	$	—	$	—	$	9	$	2	$	315	$	348

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The following table summarizes loans by risk rating as of December 31, 2022:


(in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
Real estate:
Commercial real estate	$	786,394	$	5,759	$	2,570	$	—	$	—	$	794,723
One-to-four family residential	542,112		62		1,337		—		—		543,511
Construction and development	157,355		—		9		—		—		157,364
Commercial and industrial	297,152		11,428		1,473		—		—		310,053
SBA PPP, net of deferred income	14		—		—		—		—		14
Tax-exempt	83,166		—		—		—		—		83,166
Consumer	27,298		—		138		—		—		27,436
Total loans HFI	$	1,893,491	$	17,249	$	5,527	$	—	$	—	$	1,916,267

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s evaluation of the customer’s ability to repay. As of ~~June~~September 30, 2023 and December 31, 2022, unfunded loan commitments totaled approximately ~~$347.0~~$382.3 million and $377.6 million, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. As of ~~June~~September 30, 2023 and December 31, 2022, commitments under standby letters of credit totaled approximately ~~$14.1~~$15.2 million and $14.6 million, respectively. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Effective January 1, 2023, the Company adopted the provision of ASC 326 using the modified retrospective method and established a reserve for unfunded commitments based on estimates of expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. As of ~~June~~September 30, 2023, the reserve on unfunded commitments was $442,000.

4. Deposits

Deposits were ~~$2.66~~$2.76 billion and $2.80 billion as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The ~~$134.8~~$39.0 million decrease was primarily a result of the changing interest rate environment impacting customer deposit movement and activity, combined with normal tax payments. Also in 2023, there was a deposit mix shift between deposit categories as customers moved funds from lower yielding categories to higher yielding categories. Deposits are summarized below:


(in thousands)	(in thousands)	June 30, 2023		December 31, 2022		(in thousands)	September 30, 2023		December 31, 2022
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	$	989,509	$	1,090,539	Noninterest-bearing demand deposits	$	972,155	$	1,090,539
Interest-bearing deposits:	Interest-bearing deposits:					Interest-bearing deposits:
Interest-bearing demand deposits	Interest-bearing demand deposits	94,058		89,144		Interest-bearing demand deposits	145,764		89,144
NOW accounts	NOW accounts	384,676		503,308		NOW accounts	382,047		503,308
Money market accounts	Money market accounts	537,890		578,161		Money market accounts	531,740		578,161
Savings accounts	Savings accounts	179,053		195,479		Savings accounts	178,933		195,479
Time deposits less than or equal to $250,000	Time deposits less than or equal to $250,000	328,870		250,875		Time deposits less than or equal to $250,000	380,564		250,875
Time deposits greater than $250,000	Time deposits greater than $250,000	150,127		91,430		Time deposits greater than $250,000	168,690		91,430
Total interest-bearing deposits	Total interest-bearing deposits	1,674,674		1,708,397		Total interest-bearing deposits	1,787,738		1,708,397
Total deposits	Total deposits	$	2,664,183	$	2,798,936	Total deposits	$	2,759,893	$	2,798,936

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Collateral for Deposits

As of September 30, 2023 and December 31, 2022, securities and FHLB letters of credit with values of approximately $210.0 million and $268.6 million, respectively, were pledged as collateral to secure public entity deposits.

5. Other Borrowed Funds

The Company has established various lines of credit with the FHLB and other correspondent banks to provide additional sources of operating funds. The Company’s FHLB line of credit is collateralized by eligible Red River Bank loans. As of June 30, 2023, the Company had $60.0 million in short-term advances at an interest rate

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of 5.49% from the FHLB under its existing line of credit. The ~~Company’s FHLB line of credit is collateralized by eligible Red River Bank loans. The~~ $60.0 million advance matured and was repaid in July 2023. As of September 30, 2023, the Company had no outstanding borrowings.

6. Contingencies

The Company and the Bank are involved, from time to time, in various legal matters arising in the ordinary course of business. While the outcome of these claims or litigation cannot be determined at this time, in the opinion of management, neither the Company nor the Bank are involved in such legal proceedings that the resolution is expected to have a material adverse effect on the consolidated results of operations, financial condition, or cash flows.

7. Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair Value Disclosure

Securities AFS, loans HFS, and equity securities are recorded at fair value on a recurring basis. Additionally, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, foreclosed assets, and other certain assets. The nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

ASC 820, Fair Value Measurements and Disclosures indicates that assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels:

•Level 1 pricing represents quotes on the exact financial instrument that is traded in active markets. Quoted prices on actively traded equities, for example, are in this category.

•Level 2 pricing is derived from observable data including market spreads, current and projected rates, prepayment data, and credit quality. The valuation may be based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 pricing is derived without the use of observable data. In such cases, mark-to-model strategies are typically employed. Often, these types of instruments have no active market, possess unique characteristics, and are thinly traded.

The Company used the following methods and significant assumptions to estimate fair value:

Securities AFS and Equity Securities: The fair values for securities AFS are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Loans HFS: Residential mortgage loans originated and held for sale are carried at the lower of cost or estimated fair value on an individual basis. The fair values of mortgage loans HFS are based on commitments on hand from investors within the secondary market for loans with similar characteristics. As such, the fair value adjustments for mortgage loans HFS are recurring Level 2.

Loans HFI: The Company does not record loans HFI at fair value on a recurring basis. However, from time to time, a loan may be considered impaired and an allowance may be established. Loans for which it was probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using estimated fair value methodologies. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value, and discounted cash flows. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company considers the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determined the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company considers the impaired loan as nonrecurring Level 3.

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Foreclosed Assets: Foreclosed assets, consisting of properties obtained through foreclosure or in satisfaction of loans, are reported at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level 2). However, foreclosed assets are considered Level 3 in the fair value hierarchy because management has qualitatively applied a discount due to the size, supply of inventory, and the incremental discounts applied to the appraisals. Management also considers other factors, including changes in absorption rates, length of time the property has been on the market, and anticipated sales values, which have resulted in adjustments to the collateral value estimates indicated in certain appraisals.

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Fair Value of Assets Measured on a Recurring Basis

The table below presents the recorded amount of assets measured at fair value on a recurring basis:


(in thousands)	(in thousands)	Fair Value		Level 1		Level 2		Level 3		(in thousands)	Fair Value		Level 1		Level 2		Level 3
June 30, 2023
September 30, 2023										September 30, 2023
Loans HFS	Loans HFS	$	4,586	$	—	$	4,586	$	—	Loans HFS	$	2,348	$	—	$	2,348	$	—
Securities AFS:	Securities AFS:									Securities AFS:
Mortgage-backed securities	Mortgage-backed securities	$	225,748	$	—	$	225,748	$	—	Mortgage-backed securities	$	212,853	$	—	$	212,853	$	—
Municipal bonds	Municipal bonds	$	182,731	$	—	$	182,731	$	—	Municipal bonds	$	171,943	$	—	$	171,943	$	—
U.S. Treasury securities	U.S. Treasury securities	$	159,804	$	—	$	159,804	$	—	U.S. Treasury securities	$	118,862	$	—	$	118,862	$	—
U.S. agency securities	U.S. agency securities	$	20,195	$	—	$	20,195	$	—	U.S. agency securities	$	25,388	$	—	$	25,388	$	—
Equity securities	Equity securities	$	3,946	$	3,946	$	—	$	—	Equity securities	$	2,833	$	2,833	$	—	$	—

December 31, 2022	December 31, 2022									December 31, 2022
Loans HFS	Loans HFS	$	518	$	—	$	518	$	—	Loans HFS	$	518	$	—	$	518	$	—
Securities AFS:	Securities AFS:									Securities AFS:
Mortgage-backed securities	Mortgage-backed securities	$	240,981	$	—	$	240,981	$	—	Mortgage-backed securities	$	240,981	$	—	$	240,981	$	—
Municipal bonds	Municipal bonds	$	184,092	$	—	$	184,092	$	—	Municipal bonds	$	184,092	$	—	$	184,092	$	—
U.S. Treasury securities	U.S. Treasury securities	$	170,478	$	—	$	170,478	$	—	U.S. Treasury securities	$	170,478	$	—	$	170,478	$	—
U.S. agency securities	U.S. agency securities	$	18,856	$	—	$	18,856	$	—	U.S. agency securities	$	18,856	$	—	$	18,856	$	—
Equity securities	Equity securities	$	9,979	$	9,979	$	—	$	—	Equity securities	$	9,979	$	9,979	$	—	$	—

There were no transfers between Level 1, 2, or 3 during the ~~six~~nine months ended ~~June~~September 30, 2023 or the year ended December 31, 2022.

Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis

Financial Assets and Financial Liabilities: Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances. Financial assets measured at fair value on a nonrecurring basis include certain impaired collateral dependent loans reported at fair value of the underlying collateral if repayment is expected solely from the collateral. Prior to foreclosure of these loans, fair value of the collateral is estimated using Level 3 inputs based on customized discounting criteria.

The table below presents certain impaired loans that were remeasured and reported at fair value through the allowance for loan losses or credit losses based upon the fair value of the underlying collateral during the reported periods:


		For the Six Months Ended					For the Nine Months Ended
(in thousands)	(in thousands)	June 30, 2023		June 30, 2022		(in thousands)	September 30, 2023		September 30, 2022
Carrying value of impaired loans before allowance	Carrying value of impaired loans before allowance	$	214	$	129	Carrying value of impaired loans before allowance	$	454	$	3,141
Specific allowance	Specific allowance	(38)		(15)		Specific allowance	(69)		(299)
Fair value of impaired loans	Fair value of impaired loans	$	176	$	114	Fair value of impaired loans	$	385	$	2,842

The Company had no financial liabilities measured at fair value on a nonrecurring basis for the ~~six~~nine months ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022.

Nonfinancial Assets and Liabilities: Certain nonfinancial assets and nonfinancial liabilities are measured at fair value on a nonrecurring basis. These include certain foreclosed assets, which are remeasured and reported at fair value through a charge-off to the allowance for credit losses upon initial recognition as a foreclosed asset. Subsequent to their initial recognition, certain foreclosed assets are remeasured at fair value through an adjustment included in other noninterest

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income. The fair value of foreclosed assets is estimated using Level 3 inputs based on customized discounting criteria less estimated selling costs.

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The following table presents foreclosed assets that were remeasured and reported at fair value during the reported periods:


	For the ~~Six~~Nine Months Ended
(in thousands)	~~June~~September 30, 2023		~~June~~September 30, 2022
Foreclosed assets remeasured at initial recognition:
Carrying value of foreclosed assets prior to remeasurement	$	22	$	—
Charge-offs	—		—
Fair value of foreclosed assets	$	22	$	—

There were no foreclosed assets that were remeasured subsequent to initial recognition for the ~~six~~nine months ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022.

The Company had no nonfinancial liabilities measured at fair value on a nonrecurring basis for the ~~six~~nine months ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022.

The unobservable inputs used for the Level 3 fair value measurements on a nonrecurring basis were as follows:

(dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Discount Ranges

Weighted Average Discount

(dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Discount Ranges

Weighted Average Discount

June 30, 2023

September 30, 2023

Impaired loans

2,134

Discounted appraisals