Red River Bancshares(RRBI) - 2024 Q4 - Annual Report

Loan Portfolio - As of December 31, 2024, the company's owner-occupied commercial real estate (CRE) loans totaled $425.7 million, representing 20.5% of loans held for investment (HFI) [125] - The company's construction and development loans, non-owner occupied CRE loans, and non-real estate secured loans financing CRE activities amounted to $615.4 million, or 29.7% of loans HFI as of December 31, 2024 [125] - A significant portion of the loan portfolio, $1.65 billion or 79.7% of loans HFI, is secured by real estate as the primary collateral as of December 31, 2024 [126] - Approximately $614.6 million, or 29.6% of the total loan portfolio, was secured by primary and secondary liens on one-to-four family residential loans as of December 31, 2024 [128] - Commercial and industrial loans accounted for approximately $327.1 million, or 15.8% of loans HFI as of December 31, 2024 [130] - Health care loans amounted to $167.3 million, representing 8.1% of loans HFI, highlighting significant exposure to the health care sector [150] - Energy loans totaled $29.8 million, or 1.4% of loans HFI, reflecting vulnerability to fluctuations in oil and natural gas prices [151] - The Company's loans held for investment portfolio totaled $2.08 billion as of December 31, 2024, with an allowance for credit losses of $21.73 million [396] - Unfunded loan commitments amounted to $521.50 million, with a reserve for unfunded commitments of $642,000 [396] Credit Losses and Nonperforming Assets - The allowance for credit losses (ACL) totaled $21.7 million, approximately 1.05% of loans HFI as of December 31, 2024 [131] - Nonperforming assets (NPAs) were reported at $3.3 million, or 0.10% of total assets as of December 31, 2024 [135] - The company may need to increase its provision for credit losses due to potential future credit losses exceeding current estimates [132] - Increased credit losses may arise from negative conditions in the health care sector and volatility in the energy industry, affecting overall loan portfolio quality [150][151] - The provision for credit losses was $1.20 million in 2024, up from $735,000 in 2023 [410] - The company reported a provision for credit losses of $1,200,000 in 2024, an increase from $735,000 in 2023 [417] - Nonaccrual loans totaled $2,968,000 as of December 31, 2024, with $1,267,000 having no ACL and $1,701,000 with ACL [493] Financial Performance - Total interest and dividend income for 2024 was $137.23 million, an increase from $118.57 million in 2023 [410] - Net interest income after provision for credit losses was $88.09 million for 2024, compared to $85.70 million in 2023 [410] - Net income for 2024 was $34.24 million, a decrease from $34.88 million in 2023 [410] - Basic earnings per share for 2024 were $4.96, compared to $4.87 in 2023 [410] - Comprehensive income for 2024 was $34,482,000, down from $45,551,000 in 2023, reflecting a significant decline in other comprehensive income [412] - Total stockholders' equity as of December 31, 2024, was $319,739,000, a decrease from $303,851,000 in 2023 [415] - Cash and cash equivalents at the end of 2024 were $268,975,000, down from $305,426,000 in 2023, indicating a net change of $(36,451,000) [417] - Operating activities provided net cash of $38,284,000 in 2024, compared to $40,111,000 in 2023 [417] Regulatory and Compliance Risks - The company operates in a highly regulated environment, which imposes extensive compliance costs and could adversely affect operations and profitability [191] - The company may need to raise additional capital in the future to meet regulatory requirements and support growth, which is influenced by various external factors [160] - Regulatory changes may require the company to invest significant resources to comply, potentially impacting profitability [193] - The company is subject to capital requirements that could limit growth opportunities and require additional capital raising [197] - The FDIC may change deposit insurance assessment rates, which could reduce profitability and adversely affect financial condition [202] - The company faces risks related to regulatory examinations, which could result in penalties or restrictions on operations [196] Technology and Operational Challenges - The company faces operational challenges in implementing new technology, which may prevent it from fully realizing anticipated benefits [172] - The company has a continuing need for technological improvements but may not have sufficient resources to effectively implement new technology [173] - The company relies heavily on its executive management team and key employees, and unexpected loss of their services could adversely affect business and profitability [166] - The company is subject to significant risks related to data security, including unauthorized access and cyber-attacks, which may increase costs and harm reputation [167] Market and Competitive Environment - The company faces significant competition from larger banks and non-bank competitors, which may impact its ability to attract and retain customers [152] - The company is exposed to risks from changing interest rates, which could adversely affect net interest income and the valuation of assets and liabilities [138] - The company’s stock price may be subject to substantial fluctuations, making it difficult for investors to sell shares at desired volumes or prices [179] - Future sales of substantial amounts of equity securities could adversely affect the market price of the company’s common stock [180] - The company’s ability to pay dividends may be limited by potential future outstanding indebtedness and regulatory restrictions [185] - The company’s stock repurchase program may not enhance long-term shareholder value and could increase stock price volatility [186] Investment Securities - The Company’s securities AFS portfolio includes U.S. Treasury securities, mortgage-backed securities, U.S. agency securities, and municipal bonds [430] - The Company’s securities HTM portfolio consists of mortgage-backed securities and U.S. agency securities, both having a zero credit loss assumption [431] - The total amortized cost of available-for-sale (AFS) securities was $613,393 thousand as of December 31, 2024, with a fair value of $550,148 thousand, indicating an unrealized loss of approximately 10.40% [482] - The company held 485 AFS securities in unrealized loss positions as of December 31, 2024, with an aggregate unrealized loss of $62,942 thousand [482] - The total amortized cost of held-to-maturity (HTM) securities was $131,796 thousand, with a fair value of $108,990 thousand as of December 31, 2024 [478] Accounting and Financial Reporting - The company’s financial results depend on management's selection of accounting methods and estimates, which could lead to materially different results than originally estimated [174] - The company utilizes statistical and quantitative models for decision-making, and faulty data or modeling could negatively impact its operations [175] - The Company adopted ASC 326 on January 1, 2023, which requires loans acquired with evidence of credit deterioration to be recorded at amortized cost with an allowance for expected credit loss [449] - The provision for income tax is based on a corporate tax rate of 21.0% as of December 31, 2024, and 2023 [460] - The Company performed its annual impairment test of goodwill for 2024 and 2023, indicating no impairment [454] - The Company has adopted stock incentive plans for key employees, with stock-based compensation costs recognized over the vesting period [457] - The Company does not expect the adoption of recent accounting standards to have a material impact on its consolidated financial statements [466][467][468][469]