Red River Bancshares(RRBI) - 2022 Q1 - Quarterly Report

Glossary of Terms This section defines key abbreviations and acronyms used throughout the filing, including financial and regulatory terms - The section defines key abbreviations and acronyms used throughout the filing, including financial terms like AFS (Available-for-sale), AOCI (Accumulated other comprehensive income or loss), CECL (Current Expected Credit Losses), and regulatory terms such as Basel III and PPP (Paycheck Protection Program)[8][9][10] Cautionary Note Regarding Forward-Looking Statements This section advises readers that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - This section advises readers that the report contains forward-looking statements, which are not historical facts and are subject to risks, assumptions, and uncertainties that could cause actual results to differ materially from expectations. Key risk factors include general business and economic conditions, the impact of COVID-19, government and regulatory actions, increased competition, interest rate volatility, asset quality, cybersecurity threats, and natural disasters[13][14] PART I. Financial Information This part presents the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Red River Bancshares, Inc., including balance sheets, income statements, and cash flows, with detailed notes Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheets | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | ASSETS | | | | Total Cash and Cash Equivalents | $547,119 | $784,864 | | Securities available-for-sale, at fair value | $810,804 | $659,178 | | Loans held for investment | $1,741,026 | $1,683,832 | | Total Assets | $3,212,460 | $3,224,710 | | LIABILITIES | | | | Total Deposits | $2,927,728 | $2,910,348 | | Total Liabilities | $2,947,586 | $2,926,560 | | STOCKHOLDERS' EQUITY | | | | Total Stockholders' Equity | $264,874 | $298,150 | - Total Assets decreased slightly by 0.4% from $3,224,710 thousand at December 31, 2021, to $3,212,460 thousand at March 31, 2022, primarily driven by a significant decrease in Cash and Cash Equivalents, partially offset by increases in Securities available-for-sale and Loans held for investment[17] - Total Stockholders' Equity saw a notable decrease of 11.2% from $298,150 thousand to $264,874 thousand, largely due to a substantial increase in Accumulated other comprehensive loss[17] Consolidated Statements of Income This statement reports the company's revenues, expenses, and net income over a specific period Consolidated Statements of Income | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :----------------------------------------------------- | :----------------------------------------------------- | | Total Interest and Dividend Income | $20,009 | $19,178 | | Total Interest Expense | $1,281 | $1,587 | | Net Interest Income | $18,728 | $17,591 | | Provision for loan losses | $150 | $1,450 | | Total Noninterest Income | $4,402 | $6,775 | | Total Operating Expenses | $14,062 | $13,163 | | Income Before Income Tax Expense | $8,918 | $9,753 | | Income tax expense | $1,526 | $1,688 | | Net Income | $7,392 | $8,065 | | Basic Earnings Per Share | $1.03 | $1.10 | | Diluted Earnings Per Share | $1.03 | $1.10 | - Net Income decreased by $673 thousand (8.3%) to $7,392 thousand for the three months ended March 31, 2022, compared to $8,065 thousand for the same period in 2021, primarily due to a significant decrease in Total Noninterest Income and an increase in Total Operating Expenses, partially offset by higher Net Interest Income and a lower Provision for loan losses[20] Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income, reflecting changes in equity from non-owner sources Consolidated Statements of Comprehensive Income | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :----------------------------------------------------- | :----------------------------------------------------- | | Net income | $7,392 | $8,065 | | Unrealized net gain (loss) on securities arising during period | $(50,652) | $(9,021) | | Total other comprehensive income (loss) | $(40,046) | $(7,252) | | Comprehensive Income (Loss) | $(32,654) | $813 | - Comprehensive Income (Loss) significantly declined from $813 thousand in Q1 2021 to $(32,654) thousand in Q1 2022, primarily driven by a substantial increase in unrealized net loss on securities arising during the period[22] Consolidated Statements of Changes in Stockholders' Equity This statement details changes in each component of stockholders' equity over a period, including net income, dividends, and other comprehensive income Consolidated Statements of Changes in Stockholders' Equity | Metric | Balance as of December 31, 2021 (in thousands) | Net Income (in thousands) | Stock Incentive Plan (in thousands) | Board Compensation (in thousands) | Stock Repurchase (in thousands) | Cash Dividend (in thousands) | Other Comprehensive Income (Loss) (in thousands) | Balance as of March 31, 2022 (in thousands) | | :----------------------------------- | :------------------------------------- | :------------------------ | :-------------------------- | :------------------------------ | :-------------------------- | :----------------------- | :---------------------------------------------- | :------------------------------------ | | Total Stockholders' Equity | $298,150 | $7,392 | $63 | $35 | $(218) | $(502) | $(40,046) | $264,874 | - Total Stockholders' Equity decreased from $298,150 thousand at December 31, 2021, to $264,874 thousand at March 31, 2022, primarily due to a significant other comprehensive loss of $40,046 thousand and cash dividends, partially offset by net income[24] Consolidated Statements of Cash Flows This statement reports cash inflows and outflows from operating, investing, and financing activities over a period Consolidated Statements of Cash Flows | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------- | :----------------------------------------------------- | :----------------------------------------------------- | | Net cash provided by (used in) operating activities | $8,827 | $24,055 | | Net cash provided by (used in) investing activities | $(263,232) | $(41,642) | | Net cash provided by (used in) financing activities | $16,660 | $173,386 | | Net change in cash and cash equivalents | $(237,745) | $155,799 | | Cash and cash equivalents - end of period | $547,119 | $603,000 | - Net change in cash and cash equivalents shifted from a positive $155,799 thousand in Q1 2021 to a negative $(237,745) thousand in Q1 2022, largely driven by a substantial increase in net cash used in investing activities, primarily due to increased purchases of securities AFS and loans HFI[27] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and additional information about the figures presented in the financial statements Note 1. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information. Management confirms all necessary adjustments for fair presentation have been included and that there were no material changes to critical accounting policies or estimates during the reporting period[29][31] - ASU No. 2021-05, Leases (Topic 842), was adopted on January 1, 2022, with no material impact. The CECL model (ASU No. 2016-13) is effective January 1, 2023, and the Company is actively evaluating its impact and implementing a third-party vendor solution[32][33] - ASU No. 2021-08 (Business Combinations) and ASU No. 2022-02 (Troubled Debt Restructurings and Vintage Disclosures) are also effective January 1, 2023, and are not expected to have a material impact[34][36] Note 2. Securities This note provides details on the company's investment securities, including available-for-sale securities and their fair values - Securities available-for-sale (AFS) increased by $151,600 thousand to $810,804 thousand as of March 31, 2022. Investment activity included $232,700 thousand in purchases and $29,800 thousand in maturities/repayments[37][38] - The net unrealized loss on the AFS portfolio significantly increased by $50,700 thousand, resulting in a total unrealized loss of $55,500 thousand as of March 31, 2022, primarily due to rising interest rates[37][40] Securities AFS: Amortized Cost and Fair Value | (in thousands) | Amortized Cost (March 31, 2022) | Fair Value (March 31, 2022) | Amortized Cost (December 31, 2021) | Fair Value (December 31, 2021) | | :------------------------ | :------------------------------ | :-------------------------- | :--------------------------------- | :----------------------------- | | Mortgage-backed securities | $496,302 | $461,488 | $386,874 | $379,526 | | Municipal bonds | $231,198 | $213,270 | $227,248 | $229,971 | | U.S. Treasury securities | $131,508 | $129,123 | $41,770 | $41,616 | | U.S. agency securities | $7,263 | $6,923 | $8,062 | $8,065 | | Total Securities AFS | $866,271 | $810,804 | $663,954 | $659,178 | Note 3. Loans and Asset Quality This note details the composition of the loan portfolio, allowance for loan losses, and asset quality metrics Loans Held for Investment by Category | (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Commercial real estate | $723,418 | $670,293 | | One-to-four family residential | $484,871 | $474,420 | | Construction and development | $117,526 | $106,339 | | Commercial and industrial | $303,556 | $311,373 | | SBA PPP, net of deferred income | $6,397 | $17,550 | | Tax-exempt | $81,000 | $80,726 | | Consumer | $24,258 | $23,131 | | Total loans HFI | $1,741,026 | $1,683,832 | - Total loans held for investment increased by $57,200 thousand (3.4%) to $1,741,026 thousand as of March 31, 2022, primarily driven by growth in commercial real estate, one-to-four family residential, and construction and development loans[43] Allowance for Loan Losses Activity | (in thousands) | Beginning Balance Dec 31, 2021 | Provision for Loan Losses | Charge-offs | Recoveries | Ending Balance Mar 31, 2022 | | :-------------------------- | :----------------------------- | :------------------------ | :---------- | :--------- | :---------------------------- | | Total allowance for loan losses | $19,176 | $150 | $(129) | $47 | $19,244 | - The allowance for loan losses increased slightly to $19,244 thousand as of March 31, 2022, with a provision of $150 thousand, partially offset by net charge-offs[44] Past Due and Nonaccrual Loans | (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Nonaccrual loans | $269 | $280 | | Accruing loans 90 or more days past due | $44 | $39 | | Total nonperforming loans | $313 | $319 | - Total impaired loans decreased from $6,149 thousand at December 31, 2021, to $4,992 thousand at March 31, 2022. The interest income recognized on impaired loans decreased from $65 thousand in Q1 2021 to $54 thousand in Q1 2022[47][48] - Loans classified as 'Pass' constituted 99.4% of loans HFI as of March 31, 2022, indicating strong credit quality. There were no loans classified as 'Doubtful' or 'Loss'[54] Note 4. Deposits This note provides a breakdown of the company's deposit liabilities by type and customer segment Deposits by Type | (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Noninterest-bearing deposits | $1,181,136 | $1,149,672 | | Interest-bearing deposits | $1,746,592 | $1,760,676 | | Total Deposits | $2,927,728 | $2,910,348 | - Total deposits increased by $17,400 thousand (0.6%) to $2,927,728 thousand as of March 31, 2022, primarily due to customers maintaining higher deposit balances, partially offset by seasonal drawdowns from public entity customers[58] Note 5. Contingencies This note discusses legal matters and other contingent liabilities that may affect the company's financial position - The Company and the Bank are involved in various legal matters in the ordinary course of business, but management believes that the resolution of these proceedings is not expected to have a material adverse effect on the consolidated results of operations, financial condition, or cash flows[59] Note 6. Fair Value This note explains the company's fair value measurements for assets and liabilities, categorized by input observability - The Company uses fair value measurements for certain assets and liabilities, categorizing them into a three-level hierarchy based on the observability of inputs. Securities AFS, loans HFS, and equity securities are measured at fair value on a recurring basis, primarily using Level 2 inputs[60][61][62][63] Fair Value of Assets Measured on a Recurring Basis | (in thousands) | Fair Value (March 31, 2022) | Level 1 | Level 2 | Level 3 | | :------------------------ | :-------------------------- | :------ | :------ | :------ | | Loans HFS | $6,641 | $— | $6,641 | $— | | Securities AFS | $810,804 | $— | $810,804 | $— | | Equity securities | $7,481 | $7,481 | $— | $— | - Impaired loans and foreclosed assets are measured at fair value on a nonrecurring basis, often using Level 3 inputs based on discounted appraisals and collateral discounts[68][70][72] Note 7. Regulatory Capital Requirements This note outlines the company's compliance with Basel III capital adequacy requirements and its 'well capitalized' status - Red River Bank met all Basel III capital adequacy requirements as of March 31, 2022, and was categorized as 'well capitalized' by the FDIC as of June 30, 2021[75] Red River Bank Capital Ratios | (dollars in thousands) | Actual Amount (Mar 31, 2022) | Actual Ratio (Mar 31, 2022) | Minimum Ratio | Minimum Plus CCB Ratio | | :-------------------------- | :--------------------------- | :-------------------------- | :------------ | :--------------------- | | Total Risk-Based Capital | $313,342 | 16.59 % | 8.00 % | 10.50 % | | Tier I Risk-Based Capital | $294,098 | 15.57 % | 6.00 % | 8.50 % | | Common Equity Tier I Capital | $294,098 | 15.57 % | 4.50 % | 7.00 % | | Tier I Leverage Capital | $294,098 | 9.10 % | 4.00 % | 4.00 % | - Red River Bancshares, Inc. qualifies as a 'small bank holding company' and is exempt from consolidated capital adequacy guidelines, though it calculates these ratios for internal planning. The Company and Bank qualify for the CBLR framework but do not intend to utilize it[77][81] Note 8. Earnings Per Common Share This note provides details on the calculation of basic and diluted earnings per common share Earnings Per Common Share | (in thousands, except share amounts) | For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income - basic | $7,392 | $8,065 | | Weighted average shares outstanding - basic | 7,179,624 | 7,317,995 | | Basic Earnings Per Share | $1.03 | $1.10 | | Diluted Earnings Per Share | $1.03 | $1.10 | - Basic and diluted EPS for Q1 2022 were $1.03, a decrease from $1.10 in Q1 2021, reflecting the lower net income[84] Note 9. Stock Repurchase Program This note describes the company's stock repurchase program, including authorization and activity - The Board of Directors approved the renewal of the stock repurchase program on February 4, 2022, authorizing the purchase of up to $5,000 thousand of common stock through December 31, 2022. In Q1 2022, the Company repurchased 4,465 shares for $218 thousand, leaving $4,800 thousand available[85] Note 10. Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - In April 2022, all shares invested in the CRA mutual fund (equity securities) were liquidated following a recognized loss of $365 thousand in Q1 2022 due to increased interest rates[86] - During Q2 2022, the Company decided to reclassify a portion of its securities portfolio from AFS to HTM, with unrealized gains or losses retained in AOCI and amortized over the remaining life of the HTM securities[87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting key trends and strategic initiatives Corporate Summary This section provides an overview of Red River Bancshares, Inc., its operations, and strategic focus - Red River Bancshares, Inc. is the bank holding company for Red River Bank, a Louisiana state-chartered bank established in 1999, operating 27 banking centers and two loan and deposit production offices across Louisiana[92] - The Company's strategy focuses on driving shareholder value through organic market share expansion in existing and new markets, supplemented by strategic acquisitions of compatible financial institutions[93] First Quarter 2022 Financial and Operational Highlights This section summarizes key financial and operational achievements and trends for the first quarter of 2022 - Net income for Q1 2022 was $7,400 thousand ($1.03 diluted EPS), a decrease of 13.1% from Q4 2021 and 8.3% from Q1 2021, primarily due to lower PPP loan income, reduced mortgage loan income, and a loss on equity securities[95] Selected Period End Balance Sheet Data Changes (QoQ) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | $ Change | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :--------- | :--------- | | Total assets | $3,212,460 | $3,224,710 | $(12,250) | (0.4)% | | Interest-bearing deposits in other banks | $506,982 | $761,721 | $(254,739) | (33.4)% | | Securities available-for-sale | $810,804 | $659,178 | $151,626 | 23.0 % | | Loans held for investment | $1,741,026 | $1,683,832 | $57,194 | 3.4 % | | Total deposits | $2,927,728 | $2,910,348 | $17,380 | 0.6 % | | Total stockholders' equity | $264,874 | $298,150 | $(33,276) | (11.2)% | - Non-PPP loans HFI increased by $68,300 thousand (4.1%) to $1,730,000 thousand, driven by new customer activity and expansion markets. Securities AFS increased by $151,600 thousand (23.0%) to $810,800 thousand, improving the asset mix[98] - The stock repurchase program was renewed for up to $5,000 thousand, and the Company continued its organic expansion plan by opening a full-service banking center in Lafayette and leasing a new location in New Orleans[98] Results of Operations This section analyzes the company's financial performance, including net interest income, noninterest income, and operating expenses Net Interest Income and Net Interest Margin This section examines the primary source of bank revenue and its profitability metric - Net interest income for Q1 2022 was $18,700 thousand, a slight decrease of $47 thousand (0.3%) from Q4 2021, primarily due to a $727 thousand decrease in PPP loan income, partially offset by a $550 thousand increase in securities income[104] - The net interest margin FTE decreased six basis points to 2.46% in Q1 2022 from 2.52% in Q4 2021, mainly due to a 16 bp decrease in loan yield from lower PPP loan income, partially offset by an 8 bp increase in taxable securities yield[105] - Compared to Q1 2021, net interest income increased by $1,100 thousand (6.5%) in Q1 2022, driven by higher non-PPP loan income and securities income, despite a $1,600 thousand decrease in PPP loan income[112][113] - The net interest margin FTE decreased 30 bps to 2.46% in Q1 2022 from 2.76% in Q1 2021, mainly due to a 34 bp decrease in loan yield (including PPP and non-PPP loans), partially offset by an 18 bp increase in taxable securities yield and a 9 bp decrease in the cost of deposits[115][116] Rate/Volume Analysis This analysis breaks down changes in net interest income into components attributable to changes in interest rates and volumes Change in Net Interest Income (QoQ) | (in thousands) | Increase (Decrease) Due to Change in Volume | Increase (Decrease) Due to Change in Rate | Total Increase (Decrease) | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------------ | | Total interest-earning assets | $807 | $(873) | $(66) | | Total interest-bearing liabilities | $4 | $(23) | $(19) | | Increase (decrease) in net interest income | $803 | $(850) | $(47) | Change in Net Interest Income (YoY) | (in thousands) | Increase (Decrease) Due to Change in Volume | Increase (Decrease) Due to Change in Rate | Total Increase (Decrease) | | :----------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------------ | | Total interest-earning assets | $1,930 | $(1,099) | $831 | | Total interest-bearing liabilities | $102 | $(408) | $(306) | | Increase (decrease) in net interest income | $1,828 | $(691) | $1,137 | Provision for Loan Losses This section discusses the amount set aside to cover potential loan defaults, reflecting asset quality - The provision for loan losses for Q1 2022 was $150 thousand, consistent with the prior quarter, reflecting stable economic activity and favorable asset quality metrics[123] - Compared to Q1 2021, the provision decreased significantly by $1,300 thousand (89.7%) from $1,500 thousand, as the higher provision in 2021 was due to anticipated adverse effects of the COVID-19 pandemic[125] Noninterest Income This section analyzes income generated from sources other than interest, such as service charges and fees - Noninterest income decreased by $1,300 thousand (22.4%) to $4,400 thousand in Q1 2022 compared to Q4 2021, primarily due to lower mortgage loan income, a $365 thousand loss on equity securities (vs. $75 thousand loss in Q4 2021), and lower net debit card income[127][128][129] - Compared to Q1 2021, noninterest income decreased by $2,400 thousand (35.0%) to $4,400 thousand in Q1 2022, mainly driven by a $1,800 thousand decrease in mortgage loan income and a $295 thousand larger loss on equity securities[130][131][132] - Service charges on deposit accounts increased by $249 thousand (23.5%) in Q1 2022 compared to Q1 2021, mainly due to more non-sufficient fund transactions[135] Operating Expenses This section reviews the company's operational costs, including personnel, occupancy, and technology expenses - Operating expenses increased slightly by $46 thousand (0.3%) to $14,100 thousand in Q1 2022 compared to Q4 2021, driven by higher other taxes and technology expenses, partially offset by lower data processing and loan and deposit expenses[137] - Other taxes increased by $138 thousand due to higher Louisiana bank stock tax from increased deposit balances and net income. Technology expenses rose by $104 thousand, including $59 thousand for nonrecurring computer hardware/software for new locations[139][140] - Compared to Q1 2021, operating expenses increased by $899 thousand (6.8%) to $14,100 thousand in Q1 2022, primarily due to higher personnel expenses ($431 thousand increase from expansion in newer markets) and occupancy and equipment expenses ($214 thousand increase, including $124 thousand for new locations)[144][146][147] Income Tax Expense This section analyzes the company's income tax expense and effective tax rate - Income tax expense decreased by $245 thousand (13.8%) to $1,500 thousand in Q1 2022 compared to Q4 2021, primarily due to a decrease in pre-tax income. The effective income tax rate remained stable at 17.1% in Q1 2022 (vs. 17.2% in Q4 2021)[152][153] - Compared to Q1 2021, income tax expense decreased by $162 thousand (9.6%) to $1,500 thousand in Q1 2022, also driven by lower pre-tax income. The effective tax rate was 17.1% in Q1 2022 (vs. 17.3% in Q1 2021)[153] Financial Condition This section reviews the company's balance sheet, including assets, liabilities, and equity, and their changes General This overview summarizes the overall changes in the company's total assets and stockholders' equity - Total assets as of March 31, 2022, were $3,210,000 thousand, a slight decrease of $12,300 thousand (0.4%) from December 31, 2021, due to deploying short-term liquid assets into the securities AFS portfolio and non-PPP loan growth[154] - Stockholders' equity decreased by $33,300 thousand (11.2%) to $264,900 thousand, primarily due to a $40,000 thousand net unrealized loss on securities AFS, partially offset by net income[154] Interest-bearing Deposits in Other Banks This section details changes in the company's interest-bearing deposits held at other financial institutions - Interest-bearing deposits in other banks decreased by $254,700 thousand (33.4%) to $507,000 thousand as of March 31, 2022, as excess liquidity was deployed into loans and securities AFS[155] Securities This section discusses the company's investment securities portfolio, including available-for-sale and equity securities - Securities AFS increased by $151,600 thousand (23.0%) to $810,800 thousand as of March 31, 2022. The portfolio's net unrealized loss grew to $55,500 thousand from $4,800 thousand due to rising market interest rates[157][163] - The Company reallocated $193,100 thousand from lower-yielding overnight funds to higher-yielding securities AFS, expecting improved future interest income. The average life of the securities portfolio increased to 6.5 years with an effective duration of 5.6 years[159][162] - Equity securities, an investment in a CRA mutual fund, had a recognized loss of $365 thousand in Q1 2022 due to increased interest rates. All shares in this fund were liquidated in April 2022[169] Loan Portfolio This section analyzes the composition and growth of the company's loan portfolio, including PPP loans - The loan portfolio, the largest earning asset, increased by $57,200 thousand (3.4%) to $1,740,000 thousand as of March 31, 2022. Non-PPP loans HFI grew by $68,300 thousand (4.1%) to $1,730,000 thousand, driven by new customer activity and expansion markets[170][172] - PPP loans decreased to $6,400 thousand (0.4% of loans HFI) as of March 31, 2022, with 97.5% of originated PPP loans having received SBA forgiveness or borrower payments[171] Loans Held for Investment by Category | (dollars in thousands) | March 31, 2022 | Percent of Total | | :-------------------------- | :------------- | :--------------- | | Commercial real estate | $723,418 | 41.6 % | | One-to-four family residential | $484,871 | 27.8 % | | Construction and development | $117,526 | 6.8 % | | Commercial and industrial | $303,556 | 17.4 % | | SBA PPP, net of deferred income | $6,397 | 0.4 % | | Tax-exempt | $81,000 | 4.6 % | | Consumer | $24,258 | 1.4 % | | Total loans HFI | $1,741,026 | 100.0 % | - Health care loans are the largest industry concentration at $155,500 thousand (9.0% of non-PPP loans HFI), with energy loans at 1.2%. The Central Louisiana market holds the largest share of non-PPP loans HFI at 35.4%[175][176][177] Nonperforming Assets This section reports on assets that are not generating income due to borrower default or other issues - Nonperforming assets (NPAs) totaled $973 thousand as of March 31, 2022, a slight decrease of $6 thousand (0.6%) from December 31, 2021, primarily due to payments on nonaccrual loans. The ratio of NPAs to total assets remained low at 0.03%[182] Nonperforming Loans and Assets | (dollars in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Nonaccrual loans | $269 | $280 | | Accruing loans 90 or more days past due | $44 | $39 | | Total nonperforming loans | $313 | $319 | | Total foreclosed assets | $660 | $660 | | Total NPAs | $973 | $979 | | Nonperforming loans to loans HFI | 0.02% | 0.02% | | NPAs to total assets | 0.03% | 0.03% | Potential Problem Loans This section assesses the credit quality of the loan portfolio by classifying loans based on risk - As of March 31, 2022, 99.4% of loans HFI were classified as 'Pass,' with 0.2% as 'Special Mention' and 0.4% as 'Substandard.' No loans were classified as 'Doubtful' or 'Loss,' indicating strong credit quality[186] Allowance for Loan Losses This section details the reserve established to absorb potential losses from the loan portfolio - The allowance for loan losses was $19,200 thousand, or 1.11% of loans HFI, as of March 31, 2022, an increase of $68 thousand from December 31, 2021, mainly due to a $150 thousand provision for loan losses, partially offset by net charge-offs[189] - The provision for loan losses decreased by $1,300 thousand (89.7%) compared to Q1 2021, reflecting continued favorable asset quality metrics, contrasting with the higher provision in 2021 due to anticipated COVID-19 effects[191] - The Company believes the allowance for loan losses is adequate, but future provisions are subject to ongoing evaluations of economic conditions, asset quality, and portfolio growth[192] Deposits This section provides an analysis of the company's deposit base, categorized by type and customer - Total deposits increased by $17,400 thousand (0.6%) to $2,930,000 thousand as of March 31, 2022, driven by higher customer balances, despite seasonal public entity drawdowns[195] - Noninterest-bearing deposits increased by $31,500 thousand (2.7%) to $1,180,000 thousand, representing 40.34% of total deposits. Interest-bearing deposits decreased by $14,100 thousand (0.8%) to $1,750,000 thousand[195] Deposits by Customer Type | (dollars in thousands) | March 31, 2022 Balance | March 31, 2022 % of Total | December 31, 2021 Balance | December 31, 2021 % of Total | | :-------------------------- | :--------------------- | :------------------------ | :------------------------ | :--------------------------- | | Consumer | $1,452,427 | 49.6 % | $1,400,369 | 48.1 % | | Commercial | $1,288,921 | 44.0 % | $1,283,992 | 44.1 % | | Public | $186,380 | 6.4 % | $225,987 | 7.8 % | | Total deposits | $2,927,728 | 100.0 % | $2,910,348 | 100.0 % | Borrowings This section reports on the company's outstanding debt and its reliance on other funding sources - The Company had no outstanding borrowings as of March 31, 2022, or December 31, 2021, indicating reliance on deposits as the primary funding source[198] Equity and Regulatory Capital Requirements This section discusses changes in stockholders' equity and compliance with regulatory capital standards - Total stockholders' equity decreased by $33,300 thousand (11.2%) to $264,900 thousand as of March 31, 2022, primarily due to a $40,000 thousand net market adjustment to AOCI related to securities AFS[199] - The stock repurchase program was renewed, authorizing up to $5,000 thousand in common stock repurchases through December 31, 2022. The Company and Bank qualify for the CBLR framework but do not intend to use it[200][202] Liquidity and Asset-Liability Management This section addresses the company's ability to meet financial obligations and manage interest rate risk Liquidity This section describes how the company meets its short-term and long-term cash needs - Liquidity needs are primarily met by core deposits, security and loan maturities, and cash flows from amortizing portfolios. Excess deposits are invested in interest-earning deposits, federal funds sold, or securities[203][205] - Securities AFS totaled $810,800 thousand (25.2% of assets) as of March 31, 2022, serving as a significant liquidity source, though $133,600 thousand were pledged to secure public entity deposits[206] - Interest-bearing deposits in other banks decreased by $254,700 thousand (33.4%) to $507,000 thousand, as funds were deployed into securities AFS and loans[207] - Total borrowing availability from the FHLB was $789,000 thousand, with a net borrowing capacity of $697,200 thousand as of March 31, 2022. The Company also maintains $101,000 thousand in federal funds lines of credit and other lines, with no outstanding balances[208][209] Commitments to Extend Credit This section outlines the company's obligations to provide future funding to customers - As of March 31, 2022, unfunded loan commitments totaled $356,400 thousand, and commitments under standby letters of credit were $13,900 thousand. These commitments expose the Company to credit, interest rate, and liquidity risks[212] Investment Commitments This section details the company's outstanding obligations for future investments - The Company has outstanding investment commitments totaling $226 thousand to an SBIC limited partnership (from 2014), $5,000 thousand to another SBIC limited partnership (from 2020), and $827 thousand to a bank technology limited partnership (from 2021)[213][214] Interest Rate Sensitivity and Market Risk This section describes how the company manages its exposure to fluctuations in interest rates - The Company's primary market risk is interest rate volatility, managed by the Asset-Liability Management Committee through guidelines for funds management and monitoring net interest rate sensitivity[215][219] - The balance sheet is asset sensitive, meaning assets reprice faster than liabilities. As of March 31, 2022, floating rate loans were 14.5% of loans HFI, and floating rate transaction deposits were 4.4% of interest-bearing transaction deposits[224][226] Simulated Change in Net Interest Income and Fair Value of Equity (12-month horizon) | Change in Interest Rates (Bps) | % Change in Net Interest Income (Mar 31, 2022) | % Change in Fair Value of Equity (Mar 31, 2022) | | :----------------------------- | :--------------------------------------------- | :-------------------------------------------- | | +300 | 29.2 % | 1.8 % | | +200 | 19.6 % | 1.8 % | | +100 | 10.0 % | 1.4 % | | Base | 0.0 % | 0.0 % | | -100 | (3.3)% | (3.8)% | | -200 | (7.6)% | (12.6)% | - The simulated results show that for an instantaneous parallel shift of +100 bps, net interest income is estimated to increase by 10.0%, and for a -100 bps shift, it is estimated to decrease by 3.3%. The fair value of equity in the down 200 bp scenario was back within the policy threshold as of March 31, 2022[224][225] Non-GAAP Financial Measures This section presents financial metrics not prepared in accordance with GAAP, used by management for performance evaluation Tangible Assets, Tangible Equity, Tangible Book Value, and Realized Book Value This section defines and presents non-GAAP measures that exclude intangible assets and accumulated other comprehensive income (loss) - Management uses non-GAAP measures like tangible book value per share, tangible common equity to tangible assets, and realized book value per share to evaluate operating performance, as they exclude intangible assets and accumulated other comprehensive income (loss) which can be volatile[229][230][231][233] Non-GAAP Equity and Asset Metrics | (dollars in thousands, except per share data) | March 31, 2022 | December 31, 2021 | | :-------------------------------------------- | :------------- | :---------------- | | Total tangible common equity (non-GAAP) | $263,328 | $296,604 | | Total realized common equity (non-GAAP) | $308,693 | $301,923 | | Tangible book value per share (non-GAAP) | $36.69 | $41.31 | | Realized book value per share (non-GAAP) | $43.02 | $42.05 | | Total tangible assets (non-GAAP) | $3,210,914 | $3,223,164 | | Tangible common equity to tangible assets (non-GAAP) | 8.20 % | 9.20 % | PPP-Adjusted Metrics This section presents financial metrics adjusted for PPP loans to provide a clearer view of core performance - PPP-adjusted metrics are used to provide a more accurate portrayal of the Company's financial condition and performance, as PPP loans have unique, short-term characteristics different from the rest of the loan portfolio[237] Non-PPP Loans HFI and Related Ratios | (dollars in thousands) | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :---------------- | | Loans HFI | $1,741,026 | $1,683,832 | | PPP loans, net | $(6,397) | $(17,550) | | Non-PPP loans HFI (non-GAAP) | $1,734,629 | $1,666,282 | | Non-PPP loans HFI to deposits ratio (non-GAAP) | 59.25 % | 57.25 % | | Allowance for loan losses to non-PPP loans HFI (non-GAAP) | 1.11 % | 1.15 % | | Nonperforming loans to non-PPP loans HFI | 0.02 % | 0.02 % | Critical Accounting Estimates This section confirms no material changes in the methodologies for critical accounting estimates during the period - There were no material changes or developments in the methodologies used for critical accounting estimates during the reporting period, as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021[239] Recent Accounting Pronouncements This section refers to Note 1 for details on recently adopted or upcoming accounting standards - This section refers to Note 1 of the financial statements for details on recent accounting pronouncements, including the upcoming CECL model, which is effective for the Company on January 1, 2023[241] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section provides disclosures on market risks, particularly interest rate sensitivity, referencing the Annual Report on Form 10-K - The Company's market risk disclosures, particularly concerning interest rate sensitivity, are detailed in the Annual Report on Form 10-K and further updated in Item 2 of this report[241] Item 4. Controls and Procedures This section details the evaluation of disclosure controls and procedures and reports on internal control changes - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022, providing reasonable assurance of achieving control objectives[242][243] - There were no material changes in the Company's internal control over financial reporting during the first quarter of 2022[244] PART II. Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, and other miscellaneous information Item 1. Legal Proceedings This section addresses 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[245] Item 1A. Risk Factors This section refers to the Company's Annual Report on Form 10-K for a comprehensive discussion of risk factors - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021[246] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's IPO proceeds and details of common stock repurchases - All net proceeds from the Company's IPO in May 2019 were expended as of March 31, 2022, with no material change in the planned use of proceeds[247] Common Stock Repurchases (Q1 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) | | :-------------------------- | :----------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | | March 1 - March 31, 2022 | 4,465 | $48.84 | $4,782 | | Total | 4,465 | $48.84 | $4,782 | - The Company repurchased 4,465 shares of common stock for $218 thousand in Q1 2022 under its renewed stock repurchase program, which authorizes up to $5,000 thousand in repurchases through December 31, 2022[248] Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the period[249] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to Red River Bancshares, Inc.[250] Item 5. Other Information This section indicates that there is no other information to report - No other information is reported in this section[251] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate documents and certifications - Exhibits include Restated Articles of Incorporation, Amended and Restated Bylaws, the 401(k) Profit Sharing Plan, certifications from the Principal Executive Officer and Principal Financial Officer (Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL financial information[252] Signatures This section contains the required signatures for the Form 10-Q filing - The report is duly signed by R. Blake Chatelain, President and Chief Executive Officer, and Isabel V. Carriere, Executive Vice President and Chief Financial Officer, on May 13, 2022[254][256][257]