Red River Bancshares(RRBI) - 2023 Q2 - Quarterly Report

Glossary of Terms This section defines key abbreviations and acronyms used throughout the filing to ensure clarity and consistency in terminology - The section defines key abbreviations and acronyms used throughout the filing, such as ACL (Allowance for credit losses), AFS (Available-for-sale), CECL (Current Expected Credit Losses), and EPS (Earnings per share), to ensure clarity and consistency in terminology[9][10][11][12][13] Cautionary Note Regarding Forward-Looking Statements This section warns readers about forward-looking statements, highlighting inherent uncertainties and risks that may cause actual results to differ materially - This section advises readers that the report contains forward-looking statements based on current expectations, estimates, and projections, which are subject to inherent uncertainties and risks[14][15][16] - Actual results may differ materially from these statements due to various factors, including economic conditions, regulatory changes, competition, and cybersecurity threats[17] PART I. Financial Information This part presents the Company's unaudited consolidated financial statements and related disclosures Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes on significant accounting policies, securities, loans, deposits, regulatory capital, and fair value measurements for the periods ended June 30, 2023 Consolidated Balance Sheets This table presents the Company's financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :------------------------------- | :--------- | :--------- | | Total Assets | $3,027,194 | $3,082,686 | (55,492) | (1.8)% | | Total Liabilities | $2,743,822 | $2,816,933 | (73,111) | (2.6)% | | Total Stockholders' Equity | $283,372 | $265,753 | 17,619 | 6.6% | | Loans held for investment | $1,947,631 | $1,916,267 | 31,364 | 1.6% | | Total Deposits | $2,664,183 | $2,798,936 | (134,753) | (4.8)% | | Other borrowed funds | $60,000 | $— | 60,000 | N/A | Consolidated Statements of Income This table presents the Company's financial performance, detailing revenues, expenses, and net income over specific periods | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Total Interest and Dividend Income | $28,471 | $22,498 | 5,973 | 26.6% | | Total Interest Expense | $6,961 | $1,349 | 5,612 | 416.0% | | Net Interest Income | $21,510 | $21,149 | 361 | 1.7% | | Provision for credit losses | $300 | $250 | 50 | 20.0% | | Total Noninterest Income | $6,007 | $4,860 | 1,147 | 23.6% | | Total Operating Expenses | $16,132 | $14,471 | 1,661 | 11.5% | | Net Income | $8,968 | $9,147 | (179) | (2.0)% | | Basic EPS | $1.25 | $1.27 | (0.02) | (1.6)% | | Diluted EPS | $1.25 | $1.27 | (0.02) | (1.6)% | | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Total Interest and Dividend Income | $56,203 | $42,507 | 13,696 | 32.2% | | Total Interest Expense | $11,784 | $2,630 | 9,154 | 348.1% | | Net Interest Income | $44,419 | $39,877 | 4,542 | 11.4% | | Provision for credit losses | $300 | $400 | (100) | (25.0)% | | Total Noninterest Income | $10,347 | $9,262 | 1,085 | 11.7% | | Total Operating Expenses | $31,620 | $28,533 | 3,087 | 10.8% | | Net Income | $18,566 | $16,539 | 2,027 | 12.3% | | Basic EPS | $2.59 | $2.30 | 0.29 | 12.6% | | Diluted EPS | $2.58 | $2.30 | 0.28 | 12.2% | Consolidated Statements of Comprehensive Income This table presents the Company's comprehensive income, including net income and other comprehensive income (loss) components | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Net income | $8,968 | $9,147 | (179) | (2.0)% | | Total other comprehensive income (loss) | $(1,152) | $(19,985) | 18,833 | (94.2)% | | Comprehensive Income (Loss) | $7,816 | $(10,838) | 18,654 | (172.1)% | | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Net income | $18,566 | $16,539 | 2,027 | 12.3% | | Total other comprehensive income (loss) | $1,473 | $(60,031) | 61,504 | (102.4)% | | Comprehensive Income (Loss) | $20,039 | $(43,492) | 63,531 | (146.1)% | Consolidated Statements of Changes in Stockholders' Equity This table outlines changes in the Company's equity accounts, including common stock, retained earnings, and comprehensive income Total Stockholders' Equity (in thousands) | Metric | Balance as of December 31, 2022 (in thousands) | Balance as of June 30, 2023 (in thousands) | Change ($) | | :-------------------------------- | :----------------------------------- | :--------------------------------- | :--------- | | Common Stock | $60,050 | $59,187 | (863) | | Additional Paid-In Capital | $2,088 | $2,248 | 160 | | Retained Earnings | $274,781 | $291,630 | 16,849 | | Accumulated Other Comprehensive Income (Loss) | $(71,166) | $(69,693) | 1,473 | | Total Stockholders' Equity | $265,753 | $283,372 | 17,619 | - Key changes in stockholders' equity for the six months ended June 30, 2023, include $18.6 million in net income, a $569,000 (net of tax) adjustment to retained earnings due to CECL adoption, $1.1 million in cash dividends, and $947,000 for common stock repurchases[25][222][223] Consolidated Statements of Cash Flows This table summarizes the Company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Change ($) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | | Net cash provided by (used in) operating activities | $17,918 | $18,195 | (277) | | Net cash provided by (used in) investing activities | $2,609 | $(385,283) | 387,892 | | Net cash provided by (used in) financing activities | $(76,848) | $(61,376) | (15,472) | | Net change in cash and cash equivalents | $(56,321) | $(428,464) | 372,143 | | Cash and cash equivalents - end of period | $222,071 | $356,400 | (134,329) | - Cash and cash equivalents decreased by $56.3 million in the first six months of 2023, primarily due to a decrease in deposits, partially offset by $60.0 million in new FHLB advances[27][233] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements 1. Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited consolidated financial statements, critical accounting policies and estimates, and details the adoption of new accounting standards in 2023, particularly ASU No. 2016-13 (CECL) and its impact on the Allowance for Credit Losses (ACL) - The Company adopted ASU No. 2016-13 (CECL) on January 1, 2023, changing the impairment model for financial assets from an incurred loss to an expected loss model[34][35] - This resulted in a $569,000 (net of tax) decrease to stockholders' equity and a $278,000 increase to the allowance for loan losses as of January 1, 2023[36] Impact of ASC 326 Adoption on ACL (January 1, 2023) | Loan Category | December 31, 2022 ALL (in thousands) | Impact of ASC 326 Adoption (in thousands) | January 1, 2023 ACL (in thousands) | | :-------------------------- | :----------------------------------- | :---------------------------------------- | :------------------------------- | | Commercial real estate | $7,720 | $876 | $8,596 | | One-to-four family residential | $5,682 | $1,231 | $6,913 | | Construction and development | $1,654 | $(444) | $1,210 | | Commercial and industrial | $4,350 | $(822) | $3,528 | | Tax-exempt | $751 | $(427) | $324 | | Consumer | $471 | $(136) | $335 | | Total | $20,628 | $278 | $20,906 | | Reserve for unfunded commitments | $— | $442 | $442 | - No Allowance for Credit Losses (ACL) was recorded for securities AFS or HTM as of January 1, 2023, due to a zero credit loss assumption for U.S. government and agency-backed securities, and management's intent and ability to hold other securities until recovery[48][49] 2. Securities This note provides a detailed breakdown of the Company's securities portfolio, including available-for-sale (AFS), held-to-maturity (HTM), and equity securities, along with their fair values, amortized costs, unrealized gains/losses, and investment activities Securities Portfolio Summary (in thousands) | Category | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Securities AFS, at fair value | $588,478 | $614,407 | (25,929) | (4.2)% | | Securities HTM, at amortized cost | $146,569 | $151,683 | (5,114) | (3.4)% | | Equity securities, at fair value | $3,946 | $9,979 | (6,033) | (60.5)% | | Total Securities | $739,000 | $776,069 | (37,070) | (4.8)% | - The net unrealized loss on securities AFS decreased by $1.1 million for the six months ended June 30, 2023, resulting in a net unrealized loss of $73.0 million[55] - Investment activity for the six months ended June 30, 2023, included $60.6 million in maturities, principal repayments, and calls, partially offset by $28.6 million of securities purchased[56] - There were no sales of AFS or purchases/sales of HTM securities[56] - Equity securities, primarily a CRA mutual fund, had a fair value of $3.9 million as of June 30, 2023, with a recognized loss of $32,000 for the six months ended June 30, 2023[67] - $6.0 million of the mutual fund was sold in March 2023[67] 3. Loans and Asset Quality This note details the Company's loan portfolio, including loans held for investment (HFI) and held for sale (HFS), activity in the Allowance for Credit Losses (ACL), nonaccrual and past due loans, and credit quality indicators based on risk ratings Loans Held for Investment (HFI) (in thousands) | Loan Category | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Commercial real estate | $819,260 | $794,723 | 24,537 | 3.1% | | One-to-four family residential | $565,725 | $543,511 | 22,214 | 4.1% | | Construction and development | $138,450 | $157,364 | (18,914) | (12.0)% | | Commercial and industrial | $320,257 | $310,053 | 10,204 | 3.3% | | Tax-exempt | $75,697 | $83,166 | (7,469) | (9.0)% | | Consumer | $28,229 | $27,436 | 793 | 2.9% | | Total loans HFI | $1,947,631 | $1,916,267 | 31,364 | 1.6% | | Total loans HFS | $4,586 | $518 | 4,068 | 785.3% | Allowance for Credit Losses (ACL) Activity (Six Months Ended June 30, 2023, in thousands) | Metric | Amount | | :------------------------------------ | :----- | | Allowance at beginning of period (Dec 31, 2022) | $20,628 | | Impact of adopting ASC 326 | $278 | | Provision for Credit Losses | $300 | | Charge-offs | $(224) | | Recoveries | $103 | | Allowance at end of period (June 30, 2023) | $21,085 | Nonaccrual and Past Due Loans (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :-------------------------- | :-------------- | :---------------- | | Nonaccrual loans | $1,840 | $2,364 | | Accruing loans 90+ days past due | $118 | $2 | | Total nonperforming loans | $1,958 | $2,366 | | NPAs to assets | 0.07% | 0.08% | | Nonperforming loans to loans HFI | 0.10% | 0.12% | Loans Held for Investment by Risk Rating (in thousands) | Risk Rating | June 30, 2023 | December 31, 2022 | | :---------------- | :-------------- | :---------------- | | Pass | $1,926,920 | $1,893,491 | | Special Mention | $15,973 | $17,249 | | Substandard | $4,738 | $5,527 | | Doubtful | $— | $— | | Loss | $— | $— | | Total loans HFI | $1,947,631 | $1,916,267 | 4. Deposits This note provides a summary of the Company's deposit portfolio, highlighting a decrease in total deposits and a shift from noninterest-bearing to higher-yielding interest-bearing accounts due to the changing interest rate environment Deposit Composition (in thousands) | Deposit Type | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :------------------------------------ | :-------------- | :---------------- | :--------- | :--------- | | Noninterest-bearing deposits | $989,509 | $1,090,539 | (101,030) | (9.3)% | | Interest-bearing deposits | $1,674,674 | $1,708,397 | (33,723) | (2.0)% | | Total Deposits | $2,664,183 | $2,798,936 | (134,753) | (4.8)% | - The decrease in total deposits was primarily due to the changing interest rate environment impacting customer deposit movement and activity, combined with normal tax payments[90] - There was a shift from lower-yielding to higher-yielding deposit categories[90] 5. Other Borrowed Funds This note details the Company's other borrowed funds, specifically short-term advances from the FHLB, and their repayment - As of June 30, 2023, the Company had $60.0 million in short-term advances from the FHLB at an interest rate of 5.49%[91] - This advance matured and was repaid in July 2023[92] 6. Contingencies This note addresses the Company's involvement in legal matters arising in the ordinary course of business - Management believes that the resolution of current legal proceedings is not expected to have a material adverse effect on the Company's consolidated results of operations, financial condition, or cash flows[93] 7. Fair Value This note describes the Company's fair value measurements for assets and liabilities, categorizing them within a three-level hierarchy based on the observability of inputs, and provides disclosures for both recurring and nonrecurring fair value measurements - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[96] Fair Value of Assets Measured on a Recurring Basis (June 30, 2023, in thousands) | Asset Category | Fair Value | Level 1 | Level 2 | Level 3 | | :-------------------------- | :--------- | :------ | :------ | :------ | | Loans HFS | $4,586 | $— | $4,586 | $— | | Securities AFS | $588,478 | $— | $588,478 | $— | | Equity securities | $3,946 | $3,946 | $— | $— | Fair Value of Impaired Loans and Foreclosed Assets (Six Months Ended June 30, 2023, in thousands) | Asset Category | Carrying Value Before Allowance | Specific Allowance | Fair Value | | :-------------------------- | :------------------------------ | :----------------- | :--------- | | Impaired loans | $214 | $(38) | $176 | | Foreclosed assets (initial recognition) | $22 | $— | $22 | 8. Regulatory Capital Requirements This note details the Company's and the Bank's compliance with Basel III capital guidelines, the impact of the Economic Growth Act on regulatory status, and the decision not to utilize the Community Bank Leverage Ratio (CBLR) framework - Effective January 1, 2023, the Company became subject to consolidated capital requirements as its assets exceeded $3.0 billion as of June 30, 2022, losing benefits under the Small Bank Holding Company Policy Statement[110] Company Capital Ratios (June 30, 2023, in thousands) | Capital Ratio | Actual Amount | Actual Ratio | Minimum Amount | Minimum Ratio | | :-------------------------- | :------------ | :----------- | :------------- | :------------ | | Total Risk-Based Capital | $373,046 | 18.13% | $215,996 | 10.50% | | Tier I Risk-Based Capital | $351,519 | 17.09% | $174,854 | 8.50% | | Common Equity Tier I Capital | $351,519 | 17.09% | $143,997 | 7.00% | | Tier I Leverage Capital | $351,519 | 11.48% | $122,433 | 4.00% | Bank Capital Ratios (June 30, 2023, in thousands) | Capital Ratio | Actual Amount | Actual Ratio | Minimum Amount | Minimum Ratio | Well Capitalized Amount | Well Capitalized Ratio | | :-------------------------- | :------------ | :----------- | :------------- | :------------ | :---------------------- | :--------------------- | | Total Risk-Based Capital | $363,601 | 17.68% | $215,928 | 10.50% | $205,645 | 10.00% | | Tier I Risk-Based Capital | $342,074 | 16.63% | $174,799 | 8.50% | $164,516 | 8.00% | | Common Equity Tier I Capital | $342,074 | 16.63% | $143,952 | 7.00% | $133,670 | 6.50% | | Tier I Leverage Capital | $342,074 | 11.18% | $122,400 | 4.00% | $153,000 | 5.00% | - Both the Company and the Bank qualify for the CBLR framework but management does not intend to utilize it[113] 9. Earnings Per Common Share This note provides the computations for basic and diluted earnings per common share, detailing the numerator (net income) and denominator (weighted average shares outstanding) for both three and six-month periods Earnings Per Common Share (Three Months Ended June 30) | Metric | 2023 | 2022 | | :-------------------------------- | :--- | :--- | | Net income - basic (in thousands) | $8,968 | $9,147 | | Weighted average shares outstanding - basic | 7,177,621 | 7,176,365 | | Basic EPS | $1.25 | $1.27 | | Net income - diluted (in thousands) | $8,968 | $9,147 | | Weighted average shares outstanding - diluted | 7,194,634 | 7,196,643 | | Diluted EPS | $1.25 | $1.27 | Earnings Per Common Share (Six Months Ended June 30) | Metric | 2023 | 2022 | | :-------------------------------- | :--- | :--- | | Net income - basic (in thousands) | $18,566 | $16,539 | | Weighted average shares outstanding - basic | 7,180,187 | 7,177,986 | | Basic EPS | $2.59 | $2.30 | | Net income - diluted (in thousands) | $18,566 | $16,539 | | Weighted average shares outstanding - diluted | 7,197,412 | 7,198,624 | | Diluted EPS | $2.58 | $2.30 | 10. Equity This note covers changes in equity, including the stock repurchase program, the impact of reclassifying securities from AFS to HTM on Accumulated Other Comprehensive Income (AOCI), and the adjustment to retained earnings from the adoption of the CECL methodology - The Company repurchased 11,894 shares of common stock for $601,000 in Q2 2023, and 18,689 shares for $947,000 in the first six months of 2023, under a program authorizing up to $5.0 million through December 31, 2023[116][223] - A $166.3 million reclassification of securities from AFS to HTM in Q2 2022 resulted in a net unrealized loss of $17.9 million ($14.2 million net of tax) included in AOCI, which is being amortized over the remaining life of the securities[117][225] - As of June 30, 2023, the net unamortized unrealized loss was $15.2 million ($12.0 million net of tax)[117] - The adoption of the CECL methodology on January 1, 2023, resulted in a $720,000 adjustment to the ACL and reserve for unfunded commitments, and a $569,000 (net of tax) adjustment to retained earnings[118][224] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a comprehensive analysis of the Company's financial condition as of June 30, 2023, and results of operations for the three and six months ended June 30, 2023, compared to prior periods. It covers net income, net interest income, noninterest income, operating expenses, and key balance sheet items, along with discussions on liquidity, capital, and risk management Corporate Summary This section provides an overview of Red River Bancshares, Inc., its banking operations, and strategic focus on market expansion and acquisitions - Red River Bancshares, Inc. is a bank holding company for Red River Bank, a Louisiana state-chartered bank established in 1999, offering integrated banking products and services to commercial and retail customers[123] - The Bank operates 27 banking centers and one combined Loan and Deposit Production Office (LDPO) across various Louisiana markets, including Alexandria, Shreveport-Bossier City, Baton Rouge, Lake Charles, Covington, Lafayette, and New Orleans[123] - The Company's strategy focuses on expanding market share in existing areas, opportunistic de novo expansion, and strategic acquisitions of financial institutions[124] Second Quarter 2023 Financial and Operational Highlights This section summarizes key financial and operational performance metrics for the second quarter of 2023, including net income, EPS, asset quality, and capital levels Q2 2023 Financial Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q1 2023 | Change ($) | Change (%) | | :----------------------------------- | :------ | :------ | :--------- | :--------- | | Net Income | $9,000 | $9,600 | $(600) | (6.3)% | | Diluted EPS | $1.25 | $1.33 | $(0.08) | (6.0)% | | Return on average assets | 1.20% | 1.28% | (0.08)% | (6.3)% | | Return on average equity | 12.78% | 14.33% | (1.55)% | (10.8)% | | Total Assets (period end) | $3,030,000 | $3,030,000 | $0 | 0.0% | | Total Deposits (period end) | $2,660,000 | $2,730,000 | $(70,000) | (2.6)% | | Loans HFI (period end) | $1,950,000 | $1,920,000 | $30,000 | 1.6% | | Total Securities (period end) | $739,000 | $765,200 | $(26,200) | (3.4)% | | FHLB advances | $60,000 | $0 | $60,000 | N/A | | Stockholders' equity to assets | 9.36% | 9.13% | 0.23% | 2.5% | | Cash dividends per share | $0.08 | $0.08 | $0.00 | 0.0% | - Net interest income and net interest margin FTE decreased in Q2 2023 compared to Q1 2023, primarily due to higher interest expense on deposits driven by intensified deposit rate pressure[129] - The Company repurchased 11,894 shares of common stock at an aggregate cost of $601,000 in Q2 2023[129] - S&P Market Intelligence ranked Red River Bank 45th among the top 50 best-performing community banks in 2022 with assets between $3.0 and $10.0 billion[129] Results of Operations This section analyzes the Company's financial performance, detailing changes in net income, net interest income, noninterest income, and operating expenses Net Income This section analyzes the Company's net income performance, highlighting a decrease in Q2 2023 compared to Q1 2023 due to higher interest expense, and an increase for the six months ended June 30, 2023, compared to the same period in 2022 Net Income and EPS Performance | Metric | Q2 2023 | Q1 2023 | Change ($) | Change (%) | | :---------------- | :------ | :------ | :--------- | :--------- | | Net Income (in thousands) | $8,968 | $9,598 | $(630) | (6.6)% | | Diluted EPS | $1.25 | $1.33 | $(0.08) | (6.0)% | | Return on assets | 1.20% | 1.28% | (0.08)% | (6.3)% | | Return on equity | 12.78% | 14.33% | (1.55)% | (10.8)% | | Efficiency ratio | 58.63% | 56.84% | 1.79% | 3.1% | Net Income and EPS Performance (Six Months Ended June 30) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :---------------- | :----- | :----- | :--------- | :--------- | | Net Income (in thousands) | $18,566 | $16,539 | $2,027 | 12.3% | | Diluted EPS | $2.58 | $2.30 | $0.28 | 12.2% | | Return on assets | 1.24% | 1.04% | 0.20% | 19.2% | | Return on equity | 13.54% | 12.17% | 1.37% | 11.3% | | Efficiency ratio | 57.74% | 58.07% | (0.33)% | (0.6)% | Net Interest Income and Net Interest Margin This section analyzes the Company's net interest income and net interest margin, detailing the impact of rising interest rates, increased deposit costs, and changes in asset yields for both quarterly and year-to-date periods Net Interest Income and Margin (QoQ, in thousands) | Metric | Q2 2023 | Q1 2023 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Net Interest Income | $21,510 | $22,909 | $(1,399) | (6.1)% | | Net Interest Margin FTE | 2.96% | 3.13% | (0.17)% | (5.4)% | | Cost of deposits | 1.03% | 0.71% | 0.32% | 45.1% | | Loan income increase | $1,100 | N/A | N/A | N/A | | Loan rate | 7.09% | 6.68% | 0.41% | 6.1% | Net Interest Income and Margin (YoY, in thousands) | Metric | YTD June 30, 2023 | YTD June 30, 2022 | Change ($) | Change (%) | | :-------------------- | :---------------- | :---------------- | :--------- | :--------- | | Net Interest Income | $44,419 | $39,877 | $4,542 | 11.4% | | Net Interest Margin FTE | 3.04% | 2.61% | 0.43% | 16.5% | | Cost of deposits | 0.87% | 0.18% | 0.69% | 383.3% | | Loan income increase | $9,800 | N/A | N/A | N/A | | Loan yield | 4.61% | 3.97% | 0.64% | 16.1% | - The FOMC increased the federal funds rate by 25 bps on July 26, 2023[137] - The Company anticipates approximately $100.0 million in cash flows from its securities portfolio for the remainder of 2023, which should be redeployed into higher-yielding assets[137] Provision for Credit Losses This section discusses the provision for credit losses, noting the impact of the CECL methodology adoption and the factors influencing the provision amount for the current and prior periods - The provision for credit losses for Q2 2023 was $300,000, with no provision recorded in Q1 2023 under the new CECL methodology[148] - This provision was due to potential economic challenges and loan growth[148] - For the six months ended June 30, 2023, the provision for credit losses decreased by $100,000 (25.0%) to $300,000 compared to $400,000 in the same period of 2022, driven by the current inflationary environment, changing monetary policy, economic forecasts, and slower loan growth[149] Noninterest Income This section analyzes the Company's noninterest income, detailing changes in key categories such as SBIC income, mortgage loan income, and brokerage income for both quarterly and year-to-date periods Noninterest Income (QoQ, in thousands) | Metric | Q2 2023 | Q1 2023 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Total Noninterest Income | $6,007 | $4,340 | $1,667 | 38.4% | | SBIC income | $1,380 | $180 | $1,200 | 666.7% | | Mortgage loan income | $645 | $275 | $370 | 134.5% | | Brokerage income | $923 | $807 | $116 | 14.4% | Noninterest Income (YoY, in thousands) | Metric | YTD June 30, 2023 | YTD June 30, 2022 | Change ($) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :--------- | :--------- | | Total Noninterest Income | $10,347 | $9,262 | $1,085 | 11.7% | | SBIC income | $1,559 | $171 | $1,388 | 811.7% | | Gain (Loss) on equity securities | $(32) | $(447) | $415 | 92.8% | | Loan and deposit income | $995 | $781 | $214 | 27.4% | | Mortgage loan income | $920 | $2,018 | $(1,098) | (54.4)% | - SBIC income significantly increased due to the sale of an investment by the SBIC in Q2 2023[151][152] - Mortgage loan income increased QoQ due to improved purchase activity but decreased YoY due to higher interest rates[155][157] Operating Expenses This section provides an analysis of the Company's operating expenses, detailing changes in personnel, occupancy, technology, data processing, and regulatory assessment expenses for both quarterly and year-to-date periods Operating Expenses (QoQ, in thousands) | Metric | Q2 2023 | Q1 2023 | Change ($) | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Total Operating Expenses | $16,132 | $15,488 | $644 | 4.2% | | Personnel expenses | $9,547 | $9,000 | $547 | 6.1% | | Data processing expense | $638 | $400 | $238 | 59.5% | | Occupancy and equipment expenses | $1,554 | $1,717 | $(163) | (9.5)% | | Technology expenses | $642 | $748 | $(106) | (14.2)% | Operating Expenses (YoY, in thousands) | Metric | YTD June 30, 2023 | YTD June 30, 2022 | Change ($) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :--------- | :--------- | | Total Operating Expenses | $31,620 | $28,533 | $3,087 | 10.8% | | Personnel expenses | $18,547 | $17,026 | $1,521 | 8.9% | | Occupancy and equipment expenses | $3,271 | $2,965 | $306 | 10.3% | | Regulatory assessment expenses | $804 | $501 | $303 | 60.5% | | Other business development expenses | $930 | $642 | $288 | 44.9% | | Legal and professional expenses | $1,097 | $893 | $204 | 22.8% | - Personnel expenses increased due to annual merit raises, higher health insurance costs, and additional employees[161][167] - Regulatory assessment expenses rose due to the FDIC increasing the deposit insurance assessment rate[169] Income Tax Expense This section reviews the Company's income tax expense and effective tax rates, noting changes influenced by pre-tax income and accrued tax rates for both quarterly and year-to-date periods Income Tax Expense (QoQ, in thousands) | Metric | Q2 2023 | Q1 2023 | Change ($) | Change (%) | | :----------------- | :------ | :------ | :--------- | :--------- | | Income tax expense | $2,117 | $2,163 | $(46) | (2.1)% | | Effective tax rate | 19.1% | 18.4% | 0.7% | 3.8% | Income Tax Expense (YoY, in thousands) | Metric | YTD June 30, 2023 | YTD June 30, 2022 | Change ($) | Change (%) | | :----------------- | :---------------- | :---------------- | :--------- | :--------- | | Income tax expense | $4,280 | $3,667 | $613 | 16.7% | | Effective tax rate | 18.7% | 18.1% | 0.6% | 3.3% | Financial Condition This section provides an overview of the Company's balance sheet, including assets, liabilities, and equity, and discusses key changes and trends Overview This section provides an overview of the Company's financial condition, highlighting changes in total assets, deposits, loans, and stockholders' equity from December 31, 2022, to June 30, 2023 Key Financial Condition Metrics (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total Assets | $3,027,194 | $3,082,686 | (55,492) | (1.8)% | | Total Deposits | $2,664,183 | $2,798,936 | (134,753) | (4.8)% | | Loans HFI | $1,947,631 | $1,916,267 | 31,364 | 1.6% | | Stockholders' Equity | $283,372 | $265,753 | 17,619 | 6.6% | | Cash and cash equivalents | $222,100 | $278,400 | (56,300) | (20.2)% | | Total Securities | $739,000 | $776,100 | (37,100) | (4.8)% | - The loans HFI to deposits ratio increased to 73.10% as of June 30, 2023, from 68.46% as of December 31, 2022, while the noninterest-bearing deposits to total deposits ratio decreased to 37.14% from 38.96%[176] Interest-bearing Deposits in Other Banks This section details the changes in interest-bearing deposits held in other banks, which serve as a placement for excess liquidity Interest-bearing Deposits in Other Banks (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Interest-bearing deposits in other banks | $185,409 | $240,568 | (55,159) | (22.9)% | | Percentage of assets | 6.1% | 7.8% | (1.7)% | (21.8)% | - The decrease in these deposits during the first half of 2023 was primarily due to a decrease in the Company's overall deposits[177] Securities This section provides an in-depth look at the Company's securities portfolio, including available-for-sale (AFS), held-to-maturity (HTM), and equity securities, detailing their values, unrealized losses, investment activities, and maturity profiles Securities Portfolio Summary (in thousands) | Category | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total Debt Securities | $735,000 | $766,100 | (31,100) | (4.1)% | | Securities AFS, at fair value | $588,478 | $614,407 | (25,929) | (4.2)% | | Securities HTM, at amortized cost | $146,569 | $151,683 | (5,114) | (3.4)% | | Net unrealized loss on AFS | $(73,000) | $(74,100) | 1,100 | (1.5)% | | Unrealized loss on HTM | $(22,100) | $(19,300) | (2,800) | 14.5% | - The securities AFS portfolio tax-equivalent yield increased to 1.85% for the six months ended June 30, 2023, from 1.72% in the prior year, driven by higher-yielding purchases and repricing of floating-rate securities[183] - As of June 30, 2023, the average life of the securities portfolio was 7.0 years with an estimated effective duration of 5.0 years[184] Loan Portfolio This section provides a detailed overview of the Company's loan portfolio, its largest earning asset category, including composition by type, industry concentrations, geographic markets, and the transition away from LIBOR-based loans Loans Held for Investment (HFI) by Category (in thousands) | Loan Category | June 30, 2023 Amount | June 30, 2023 Percent | December 31, 2022 Amount | December 31, 2022 Percent | | :-------------------------- | :------------------- | :-------------------- | :----------------------- | :------------------------ | | Commercial real estate | $819,260 | 42.1% | $794,723 | 41.5% | | One-to-four family residential | $565,725 | 29.1% | $543,511 | 28.4% | | Construction and development | $138,450 | 7.1% | $157,364 | 8.2% | | Commercial and industrial | $320,257 | 16.4% | $310,053 | 16.2% | | Tax-exempt | $75,697 | 3.9% | $83,166 | 4.3% | | Consumer | $28,229 | 1.4% | $27,436 | 1.4% | | Total loans HFI | $1,947,631 | 100.0% | $1,916,267 | 100.0% | - Health care loans are the largest industry concentration, totaling $159.6 million (8.2% of loans HFI) as of June 30, 2023[194] - Energy loans were 1.9% of loans HFI[195] Loans HFI by Market of Origin (June 30, 2023, in thousands) | Market | Amount | Percent | | :----------- | :------- | :------ | | Central | $603,201 | 31.0% | | Capital | $518,568 | 26.6% | | Northwest | $371,926 | 19.1% | | Southwest | $156,365 | 8.0% | | Northshore | $144,076 | 7.4% | | New Orleans | $91,273 | 4.7% | | Acadiana | $62,222 | 3.2% | | Total loans HFI | $1,947,631 | 100.0% | - As of June 30, 2023, 1.2% of loans HFI were LIBOR-based[197] - Effective July 1, 2023, these loans were converted to an alternative reference rate[197] Nonperforming Assets This section provides an overview of the Company's nonperforming assets (NPAs), including nonaccrual and past due loans, and foreclosed assets, along with relevant ratios Nonperforming Assets (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Nonaccrual loans | $1,840 | $2,364 | (524) | (22.2)% | | Accruing loans 90+ days past due | $118 | $2 | 116 | 5800.0% | | Total nonperforming loans | $1,958 | $2,366 | (408) | (17.2)% | | Foreclosed assets | $22 | $— | 22 | N/A | | Total NPAs | $1,980 | $2,366 | (386) | (16.3)% | | NPAs to assets | 0.07% | 0.08% | (0.01)% | (12.5)% | | Nonperforming loans to loans HFI | 0.10% | 0.12% | (0.02)% | (16.7)% | Potential Problem Loans This section outlines the Company's loan classification system based on credit risk, categorizing loans into pass, special mention, substandard, doubtful, or loss, and summarizes the distribution of loans across these risk ratings Loans Held for Investment by Risk Rating (in thousands) | Risk Rating | June 30, 2023 Amount | June 30, 2023 Percent | December 31, 2022 Amount | December 31, 2022 Percent | | :---------------- | :------------------- | :-------------------- | :----------------------- | :------------------------ | | Pass | $1,926,920 | 98.9% | $1,893,491 | 98.8% | | Special Mention | $15,973 | 0.8% | $17,249 | 0.9% | | Substandard | $4,738 | 0.3% | $5,527 | 0.3% | | Doubtful | $— | 0.0% | $— | 0.0% | | Loss | $— | 0.0% | $— | 0.0% | | Total loans HFI | $1,947,631 | 100.0% | $1,916,267 | 100.0% | Allowance for Credit Losses This section details the Allowance for Credit Losses (ACL) methodology under CECL, its balance, and activity, emphasizing the factors influencing the provision for credit losses - As of June 30, 2023, the ACL was $21.1 million, or 1.08% of loans HFI, an increase of $457,000 from December 31, 2022, primarily due to the CECL adoption adjustment and provision for credit losses, offset by net charge-offs[208] Allowance for Credit Losses Activity (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Allowance at beginning of period | $20,628 | $19,176 | | Impact of adopting ASC 326 | $278 | $— | | Provision expense | $300 | $400 | | Net (charge-offs)/recoveries | $(121) | $(181) | | Allowance at end of period | $21,085 | $19,395 | | ACL to loans HFI | 1.08% | 1.05% | | Net charge-offs to average loans | 0.01% | 0.01% | - The provision for credit losses decreased by $100,000 (25.0%) for the six months ended June 30, 2023, compared to the same period in 2022, influenced by the inflationary environment, monetary policy, economic forecasts, and slower loan growth[209] Deposits This section analyzes the Company's deposit base, its primary funding source, detailing changes in composition by account type and customer, the impact of interest rate environment, and the management of uninsured deposits Deposit Composition (in thousands) | Deposit Type | June 30, 2023 Balance | June 30, 2023 % of Total | December 31, 2022 Balance | December 31, 2022 % of Total | | :------------------------------------ | :-------------------- | :----------------------- | :------------------------ | :------------------------- | | Noninterest-bearing demand deposits | $989,509 | 37.1% | $1,090,539 | 39.0% | | Interest-bearing demand deposits | $94,058 | 3.5% | $89,144 | 3.2% | | NOW accounts | $384,676 | 14.5% | $503,308 | 18.0% | | Money market accounts | $537,890 | 20.2% | $578,161 | 20.6% | | Savings accounts | $179,053 | 6.7% | $195,479 | 7.0% | | Time deposits ≤ $250,000 | $328,870 | 12.4% | $250,875 | 8.9% | | Time deposits > $250,000 | $150,127 | 5.6% | $91,430 | 3.3% | | Total Deposits | $2,664,183 | 100.0% | $2,798,936 | 100.0% | Deposits by Customer Type (in thousands) | Customer Type | June 30, 2023 Balance | June 30, 2023 % of Total | December 31, 2022 Balance | December 31, 2022 % of Total | | :-------------- | :-------------------- | :----------------------- | :------------------------ | :------------------------- | | Consumer | $1,296,827 | 48.7% | $1,341,312 | 47.9% | | Commercial | $1,196,156 | 44.9% | $1,231,949 | 44.0% | | Public | $171,200 | 6.4% | $225,675 | 8.1% | | Total Deposits | $2,664,183 | 100.0% | $2,798,936 | 100.0% | - Total deposits decreased by $134.8 million (4.8%) from December 31, 2022, to June 30, 2023, primarily due to the changing interest rate environment and customer movement from lower-yielding to higher-yielding accounts[213] - Estimated uninsured deposits were $805.0 million (30.2% of total deposits) as of June 30, 2023[219] - Liquid assets and available borrowing capacity totaled 185.4% of estimated uninsured deposits[219] Borrowings This section discusses the Company's use of borrowings as a funding source, specifically FHLB advances - As of June 30, 2023, the Company had $60.0 million in short-term FHLB advances at an interest rate of 5.49%[221] - This borrowing was repaid in July 2023[221] Equity and Regulatory Capital Requirements This section details the changes in stockholders' equity and the Company's adherence to regulatory capital requirements, including the impact of the Economic Growth Act and the CECL adoption Total Stockholders' Equity (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :-------------- | :---------------- | :--------- | :--------- | | Total Stockholders' Equity | $283,372 | $265,753 | 17,619 | 6.6% | - The increase in equity was driven by $18.6 million in net income, $1.5 million in other comprehensive income, and $244,000 in stock compensation, partially offset by cash dividends and stock repurchases[222] - Effective January 1, 2023, the Company became subject to consolidated capital requirements due to exceeding $3.0 billion in assets, no longer receiving benefits under the Small Bank Holding Company Policy Statement[226] Liquidity and Asset-Liability Management This section discusses the Company's liquidity position, asset-liability management strategies, and exposure to interest rate risk Liquidity This section discusses the Company's liquidity position, sources of funds, and available borrowing capacity to support operations and manage unexpected events - As of June 30, 2023, the Company had $222.1 million in liquid assets and $1.27 billion in available borrowing capacity[228] Liquid Assets (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :---------------- | :-------------- | :---------------- | :--------- | :--------- | | Liquid assets | $222,100 | $278,400 | (56,300) | (20.2)% | | Liquid assets to assets ratio | 7.34% | 9.03% | (1.69)% | (18.7)% | - Available-for-sale (AFS) securities totaled $588.5 million (19.4% of assets) as of June 30, 2023, with $189.4 million pledged to secure public entity deposits[234] - Total borrowing availability from the FHLB was $901.6 million as of June 30, 2023, with a net borrowing capacity of $830.7 million after accounting for letters of credit[235] - The Bank has access to the Federal Reserve's Bank Term Funding Program, with approximately $336.7 million in eligible securities as collateral as of June 30, 2023[237] Commitments to Extend Credit This section outlines the Company's off-balance sheet commitments, including unfunded loan commitments and standby letters of credit, and their associated risks Commitments to Extend Credit (in thousands) | Commitment Type | June 30, 2023 | December 31, 2022 | | :-------------------------- | :-------------- | :---------------- | | Unfunded loan commitments | $347,000 | $377,600 | | Standby letters of credit | $14,100 | $14,600 | Investment Commitments This section details the Company's outstanding commitments to various limited partnerships - As of June 30, 2023, the Company had outstanding commitments of $226,000 and $3.6 million to two SBIC limited partnerships, and $532,000 to a bank technology limited partnership[242][243] Interest Rate Sensitivity and Market Risk This section describes how the Company manages its exposure to interest rate risk through asset-liability management policies, simulation models, and monitoring of net interest income and fair value of equity under various rate scenarios - The Company's balance sheet is asset sensitive, meaning assets reprice faster than liabilities, as demonstrated by simulation results showing positive changes in net interest income for upward rate shifts[252] Simulated Change in Net Interest Income and Fair Value of Equity (June 30, 2023) | Change in Interest Rates (Bps) | % Change in Net Interest Income | % Change in Fair Value of Equity | | :----------------------------- | :------------------------------ | :------------------------------- | | +300 | 4.6% | (5.0)% | | +200 | 3.2% | (3.1)% | | +100 | 1.7% | (1.3)% | | Base | 0.0% | 0.0% | | -100 | (1.3)% | 1.1% | | -200 | (3.8)% | (0.7)% | - As of June 30, 2023, floating rate loans constituted 13.3% of loans HFI, and floating rate transaction deposits were 3.9% of interest-bearing transaction deposits, impacting interest rate sensitivity[254] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures used by management to evaluate operating performance, including tangible book value per share, tangible common equity to tangible assets, and realized book value per share - Tangible book value per share, tangible common equity to tangible assets, and realized book value per share are non-GAAP measures used to evaluate financial institutions, excluding the impact of intangible assets and accumulated other comprehensive income (loss)[258][260][262] Non-GAAP Financial Measures Reconciliation (June 30, 2023, in thousands, except per share data) | Metric | Amount | | :------------------------------------------ | :----- | | Total stockholders' equity | $283,372 | | Intangible assets | $(1,546) | | Total tangible common equity (non-GAAP) | $281,826 | | Accumulated other comprehensive (income) loss | $69,693 | | Total realized common equity (non-GAAP) | $353,065 | | Common shares outstanding | 7,175,056 | | Book value per share | $39.49 | | Tangible book value per share (non-GAAP) | $39.28 | | Realized book value per share (non-GAAP) | $49.21 | | Total assets | $3,027,194 | | Intangible assets | $(1,546) | | Total tangible assets (non-GAAP) | $3,025,648 | | Total stockholders' equity to assets | 9.36% | | Tangible common equity to tangible assets (non-GAAP) | 9.31% | Critical Accounting Estimates This section discusses the Company's critical accounting estimates, focusing on the Allowance for Credit Losses (ACL) under the CECL methodology, including the estimation process, individual and collective evaluation, and qualitative factors considered - The ACL is a valuation account for expected credit losses over the lifetime of loans HFI, estimated using internal and external information, past events, current conditions, and reasonable and supportable forecasts (currently one year, reverting to a two-year historical loss rate)[267] - The ACL is measured on a collective pool basis for loans with similar risk characteristics, using cohort loss rate and remaining life loss rate methodologies[268][269] - Individual evaluation is used for loans without similar risk characteristics, often based on collateral value[270] - Qualitative factors such as lending policies, economic conditions, portfolio mix, management experience, asset quality trends, collateral values, and credit concentrations are considered to adjust historical loss information[271] Recent Accounting Pronouncements This section refers to Note 1 for information on recent accounting pronouncements - There were no recent accounting pronouncements that were applicable and not adopted as of June 30, 2023[53] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section cross-references to the Management's Discussion and Analysis for detailed quantitative and qualitative disclosures about market risk, specifically interest rate sensitivity - Quantitative and qualitative disclosures about market risk, particularly interest rate sensitivity, are incorporated by reference from the 'Liquidity and Asset-Liability Management - Interest Rate Sensitivity and Market Risk' section of Item 2[274] Item 4. Controls and Procedures This section reports on the effectiveness of the Company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the second quarter of 2023 - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2023[275] - There were no changes in the Company's internal control over financial reporting during Q2 2023 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[276] PART II. Other Information This part provides additional information not included in the financial statements, such as legal proceedings and risk factors Item 1. Legal Proceedings This section provides an overview of the Company's involvement in legal matters arising in the ordinary course of business - Management believes that current legal proceedings are not expected to have a material adverse effect on the Company's consolidated results of operations, financial condition, or cash flows[278] - However, unfavorable outcomes or even the costs and diversion of management's attention from such matters could materially and adversely affect the Company's reputation or business[278] Item 1A. Risk Factors This section updates and highlights key risk factors, including liquidity concerns due to recent bank failures, the soundness of other financial institutions, potential increases in FDIC insurance premiums, and heightened cybersecurity threats, specifically mentioning the MOVEit Transfer vulnerability - A lack of liquidity, stemming from deposit withdrawals or inability to raise funds, could materially impair operations, especially given recent bank failures and customer sensitivity to alternative investments or financial market disruptions[280] - The Company's ability to engage in funding transactions could be adversely affected by the actions and soundness of other financial institutions, given the interrelated nature of the financial services industry and participation in syndicated loans[283] - The Company is subject to laws regarding privacy and information security[285] - Unauthorized access, cyber-crime, and other threats to data security, such as the MOVEit Transfer vulnerability, may require significant resources, harm reputation, and cause business harm[286] - Future additional assessments or increases in FDIC insurance premiums, potentially stemming from recent bank failures, could adversely impact operating expenses and earnings[284] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the Company's common stock repurchases made during the second quarter of 2023 under its publicly announced stock repurchase program Common Stock Repurchases (Q2 2023, in thousands, except per share data) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :----------------------- | :----------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | | April 1 - April 30, 2023 | — | $— | $4,654 | | May 1 - May 31, 2023 | 5,393 | $47.76 | $4,396 | | June 1 - June 30, 2023 | 6,501 | $52.76 | $4,053 | | Total | 11,894 | $50.49 | $4,053 | - The Company's 2023 stock repurchase program authorizes purchases up to $5.0 million of common stock from January 1, 2023, through December 31, 2023[287] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[288] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[289] Item 5. Other Information This section discloses the Company's involvement in the global MOVEit Transfer vulnerability incident, which resulted in the exfiltration of certain customer data through third-party vendors - The Company received notice that certain customer data was involved in the global MOVEit Transfer vulnerability incident, impacting several third-party financial institution vendors[290] - The incident did not impact the Company's internal network systems or ongoing operations[290] - Affected customers are being notified, and the majority of related costs are expected to be covered by the responsible third parties[290] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including articles of incorporation, bylaws, certifications, and XBRL financial information - The exhibits include Restated Articles of Incorporation, Amended and Restated Bylaws, certifications from executive officers (Sarbanes-Oxley Act), and Inline XBRL financial information[291] Signatures This section contains the official signatures of the Company's executive officers, certifying the accuracy of the report - The report is signed by R. Blake Chatelain, President and Chief Executive Officer, and Isabel V. Carriere, Executive Vice President, Chief Financial Officer, and Assistant Corporate Secretary, on August 9, 2023[295]