What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-19 compared with 2020-03-27 · 409 added, 291 removed, 881 unchanged (44% of the section changed)

27 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(in thousands, except share amounts) December 31,

Cash and due from banks $ 29,537 $ 25,937

12 unchanged sentences

Right-of-use assets 4,154 4,553

Other assets 8,231 9,059

$ 2,642,634 $ 1,988,225

Noninterest-bearing deposits $ 943,615 $ 584,915

1 unchanged sentence

Total Deposits 2,340,360 1,721,120

Junior subordinated debentures

Accrued interest payable 1,774 2,222

10 unchanged sentences

Issued and Outstanding - 7,325,333 and 7,306,221 shares

68,055 68,082

Additional paid-in capital 1,545 1,269

3 unchanged sentences

Total Liabilities and Stockholders' Equity

$ 2,642,634 $ 1,988,225

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Years Ended December 31,

(in thousands, except per share data) Years Ended December 31,

INTEREST AND DIVIDEND INCOME

22 unchanged sentences

Gain (Loss) on sale of securities 1,441 18

SBIC income 775 819

Other income 126 158

Total Noninterest Income 23,167 15,970

3 unchanged sentences

Technology expenses 2,542 2,293

Advertising 933 1,025

Other business development expenses 1,020 1,107

Data processing expense 1,905 1,882

Other taxes 1,733 1,579

Loan and deposit expenses 1,052 1,148

Legal and professional expenses 2,141 1,541

Regulatory assessment expense

Regulatory assessment expenses 538 351

Other operating expenses 3,276 3,633

2 unchanged sentences

Income tax expense 6,323 5,640

Net Income $ 28,145 $ 24,824

EARNINGS PER SHARE

$ 3.84 $ 3.51

$ 3.83 $ 3.49

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Years Ended December 31,

(in thousands) Years Ended December 31,

Net income $ 28,145 $ 24,824

Other comprehensive income (loss):

Unrealized net gains (loss) on securities arising during period

Unrealized net gain (loss) on securities arising during period 10,232 9,489

Tax effect ( 2,149 ) ( 1,993 )

(Gain) loss on sale of securities included in net income ( 1,441 ) ( 18 )

Tax effect 303 4

Total change in other comprehensive income (loss) 6,945 7,482

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

Common Shares Issued

(in thousands, except share amounts) Common Shares Issued Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Income (Loss) Total

Stockholders'

Balance as of December 31, 2018 6,627,358 $ 41,094 $ 1,042 $ 159,073 $ ( 7,506 ) $ 193,703

Net income — — — 24,824 — 24,824

Stock incentive plan — — 227 — — 227

Issuance of shares of common stock through IPO 663,320 26,812 — — — 26,812

Issuance of restricted shares of common stock through stock incentive plan, net 5,975 — — — — —

1 unchanged sentence

Issuance of shares of common stock as board compensation 2,368 96 — — — 96

Repurchase of shares of common stock

Cash dividend - $ 0.20 per share

Reclassification for adoption of accounting standard

— — — ( 1,326 ) — ( 1,326 )

Other comprehensive income (loss) — — — — 7,482 7,482

Balance as of December 31, 2019 7,306,221 68,082 1,269 182,571 ( 24 ) 251,898

Net income — — — 28,145 — 28,145

Stock incentive plan — — 276 — — 276

Issuance of shares of common stock through IPO

Issuance of restricted shares of common stock through stock incentive plan, net 5,625 — — — — —

1 unchanged sentence

Issuance of shares of common stock as board compensation 1,591 87 — — — 87

Purchase of common stock under stock repurchase program ( 2,824 ) ( 122 ) — — — ( 122 )

Cash dividend - $ 0.24 per share

— — — ( 1,759 ) — ( 1,759 )

Other comprehensive income (loss) — — — — 6,945 6,945

Balance as of December 31, 2020 7,325,333 $ 68,055 $ 1,545 $ 208,957 $ 6,921 $ 285,478

(1) Adjusted to give effect to the 2018 2 -for-1 stock split

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

(in thousands) Years Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 28,145 $ 24,824

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation 1,861 1,733

Amortization 553 619

Share-based compensation earned 276 227

2 unchanged sentences

Net (accretion) amortization on securities AFS 3,144 1,380

Net (accretion) amortization on securities HTM

Gain on sale of securities AFS ( 1,441 ) ( 18 )

5 unchanged sentences

Net increase (decrease) in accrued interest payable ( 448 ) 465

Net increase (decrease) in accrued income taxes payable ( 4 ) ( 114 )

Other operating activities, net 429 ( 1,029 )

2 unchanged sentences

Activity in securities AFS:

Maturities, prepayments, and calls

Activity in securities HTM:

Maturities, prepayments, and calls

Sales 151,253 58,859

Maturities, principal repayments, and calls 112,605 67,144

Purchases ( 419,403 ) ( 145,589 )

Purchase of nonmarketable equity securities ( 2,097 ) ( 51 )

Net (increase) decrease in loans HFI ( 151,909 ) ( 112,574 )

Proceeds from the settlement of insurance claims

Proceeds from sales of foreclosed assets 330 1,164

Purchases of premises and equipment ( 7,035 ) ( 3,772 )

Net cash used in investing activities

Net cash provided by (used in) investing activities ( 316,256 ) ( 134,819 )

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in deposits 619,240 75,537

Proceeds from other borrowed funds 50,000 —

Repayments of other borrowed funds ( 50,000 ) —

Redemption of junior subordinated debentures — ( 11,341 )

Payment to repurchase common stock

Repurchase of common stock ( 122 ) —

Proceeds from exercise of stock options 8 80

1 unchanged sentence

Cash dividends ( 1,759 ) ( 1,326 )

Net cash provided by financing activities

Net cash provided by (used in) financing activities 617,367 89,762

Net change in cash and cash equivalents 313,909 ( 18,614 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Years Ended December 31,

(in thousands) Years Ended December 31,

SUPPLEMENTAL DISCLOSURES

Cash paid during the year for:

Initial measurement and recognition of operating lease assets

in exchange for lease liabilities

SUPPLEMENTAL INFORMATION FOR NON-CASH

INVESTING AND FINANCING ACTIVITIES

Interest $ 8,826 $ 9,621

Income taxes 6,182 6,286

Initial measurement and recognition of operating lease assets in exchange for lease liabilities — 4,954

SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES

Assets acquired in settlement of loans 108 1,691

Transfers of investment securities between HTM and AFS

Unsettled securities AFS purchases at year-end

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

6 unchanged sentences

The Company's wholly owned bank subsidiary, Red River Bank, is a Louisiana state-chartered bank that provides a fully integrated suite of banking products and services tailored to the needs of commercial and retail customers.

Red River Bank operates from a network of 25 banking centers throughout Louisiana.

Red River Bank operates from a network of 25 banking centers throughout Louisiana and one combined loan and deposit production office in Lafayette, Louisiana.

Banking centers are located in the following Louisiana markets:

Central Louisiana, which includes the Alexandria MSA;

Northwest Louisiana, which includes the Shreveport-Bossier City MSA;

Southeast Louisiana, which includes the Baton Rouge MSA;

Southwest Louisiana, which includes the Lake Charles MSA;

Central, which includes the Alexandria MSA;

Northwest, which includes the Shreveport-Bossier City MSA;

Capital, which includes the Baton Rouge MSA;

Southwest, which includes the Lake Charles MSA;

and the Northshore, which includes Covington.

3 unchanged sentences

Non-Bank Subsidiaries

Red River Bank's consolidated financial statements include its wholly owned subsidiaries Rivermark Properties, LLC and Source BIDCO.

The Company's consolidated financial statements include Red River Bank's wholly owned subsidiaries Rivermark Properties, LLC and Source BIDCO.

The Bank dissolved Source BIDCO in the first quarter of 2020.

2 unchanged sentences

The three trusts were terminated during 2019.

For more information on these trusts, see "Note 7.

Junior Subordinated Debentures."

Operating Segments

3 unchanged sentences

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities.

These estimates also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

4 unchanged sentences

Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurements and Disclosures.

The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of expected principal, interest, and other cash flows.

The fair value estimates associated with acquired loans include estimates related to expected prepayments and the amount and timing of expected principal, interest, and other cash flows.

Acquired loans, for which all contractual cash flows are expected to be received, are accounted for under the accounting guidance found in ASC Topic 310-20, Receivables - Nonrefundable Fees and Other Costs.

1 unchanged sentence

There is no carryover of related allowance for loan losses at the acquisition date as assumptions regarding credit risk are incorporated in the valuation process.

However, subsequent to acquisition, the acquired loan portfolio is periodically reviewed, and an allowance for loan losses may be established for probable losses incurred after the acquisition date.

However, subsequent to acquisition, the acquired loan portfolio is reviewed, and an allowance for loan losses is established for probable losses incurred after the acquisition date.

Interest-Bearing Deposits in Other Banks

Interest-bearing deposits in other banks consist of money market and checking accounts and are carried at cost.

All debt securities of the Company as of December 31, 2019 , were classified as AFS and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, net of tax.

All debt securities of the Company as of December 31, 2020 and 2019, were classified as AFS and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, net of tax.

Realized gains and losses on the sale of securities are determined using the specific-identification method.

Purchased premiums and discounts are recognized in interest income using the interest method over the term of the securities.

Equity securities include a CRA mutual fund owned by the Company, which subsequent to the adoption of ASU No.

2016-01, Financial Instruments - Overall (Subtopic 825-10) on January 1, 2018, is carried at fair value with any periodic changes in value recorded through the statements of income.

Prior to the adoption of this standard, equity securities were included in AFS securities.

Equity securities include a CRA mutual fund owned by the Company, which is carried at fair value with any periodic changes in value recorded through the statements of income.

Declines in the fair value of HTM and AFS debt securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the losses are credit related.

5 unchanged sentences

Nonmarketable Equity Securities

Nonmarketable equity securities include investments in the FHLB and First National Banker’s Bank and are carried at cost.

Nonmarketable equity securities, which include investments in the FHLB and First National Banker’s Bank, are carried at cost.

Loans Held for Sale

1 unchanged sentence

These mortgage loans are pre-sold prior to funding.

Therefore, management believes there to be minimal risk of loss associated with these assets.

Loans Held for Investment

1 unchanged sentence

Interest income on loans is accrued on the principal amount outstanding except for those loans that are classified as nonaccrual.

Loan origination fees, net of certain direct costs, of $ 24,000 and $ 8,000 as of December 31, 2019 and 2018 , respectively, were deferred and recognized over the estimated lives of the related loans as an adjustment to the loans’ effective yield.

Loan origination fees, net of certain direct costs, are deferred and recognized over the estimated lives of the related loans as an adjustment to the loans’ effective yield.

Loans are placed on nonaccrual when management determines that a borrower may be unable to meet future contractual payments as they become due or when such loans become 90 days past due, unless they are well secured and in the process of collection.

9 unchanged sentences

Allowance for Loan Losses

The allowance for loan losses provides for known and inherent losses in the loan portfolio based upon management’s best assessment of the loan portfolio at each balance sheet date.

It is maintained at a level estimated to be adequate to absorb potential losses through periodic charges to the provision for loan losses.

The allowance for loan losses is established for known and inherent losses in the loan portfolio based upon management’s best assessment of the loan portfolio at each balance sheet date.

It is maintained at a level estimated to be adequate to absorb potential losses through periodic changes to loan losses.

The allowance for loan losses consists of specific and general reserves.

8 unchanged sentences

The determination of the allowance for loan losses is, in a large part, based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

In situations where the repayment of a loan is dependent on the value of the underlying collateral, an independent appraisal of the collateral’s current market value is customarily obtained and used in the determination of the allowance for loan loss.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in economic conditions.

5 unchanged sentences

Foreclosed assets are included in other assets on the consolidated balance sheets.

The balance of foreclosed assets was $ 1.1 million and $ 646,000 as of December 31, 2019 and 2018 , respectively.

The balance of foreclosed assets was $ 896,000 and $ 1.1 million as of December 31, 2020 and 2019, respectively.

Credit Related Financial Information

14 unchanged sentences

The options granted under these plans are to purchase common stock at an exercise price not less than the fair market value of the common stock at the date of the grant.

The options vest and become exercisable in twenty percent increments over a

five -year period.

The options vest and become exercisable in twenty percent increments over a five-year period.

No options were outstanding as of December 31, 2020.

The restricted stock granted under these plans provide common stock to recipients at the grant date.

3 unchanged sentences

Board compensation expense is recorded when board service is rendered.

The provision for income tax is based on taxes payable or receivable for the current year and deferred taxes on temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements.

The provision for income tax is based on taxes payable or receivable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.

Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

4 unchanged sentences

The effect on deferred tax assets of a change in tax rate is recognized in income as part of income tax expense for the period that includes the enactment date.

As a result of the enactment in 2017 of the Tax Reform Act, deferred tax assets and liabilities have been measured as of December 31, 2019 and 2018 , using the 21.0% corporate tax rate.

For the impact on net income, see "Note 9.

Deferred tax assets and liabilities have been measured as of December 31, 2020 and 2019, using the 21.0% corporate tax rate.

For more information, see "Note 8.

Income Tax Expense."

1 unchanged sentence

Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock splits.

Diluted EPS includes accrued but unissued shares relating to the Directors’ Compensation Program, stock options, and restricted stock determined using the treasury stock method.

Diluted EPS includes accrued but unissued shares relating to the Director Compensation Program, stock options, and restricted stock determined using the treasury stock method.

A reconciliation of the weighted-average shares used in calculating basic EPS and diluted EPS for the reported periods is provided in "Note 16.

1 unchanged sentence

Treasury Stock

On January 1, 2015, the Louisiana Business Corporation Act (“the Act”) became effective.

Under provisions of the Act, there is no concept of “Treasury Shares.” Rather, shares purchased by the Company constitute authorized but unissued shares.

On January 1, 2015, the Louisiana Business Corporation Act ("the LBCA") became effective.

Under provisions of the LBCA, there is no concept of “Treasury Shares.” Rather, shares purchased by the Company constitute authorized but unissued shares.

Accordingly, the Company’s consolidated balance sheets reflect the cost of shares purchased by the Company within common stock.

1 unchanged sentence

Comprehensive income is the change in stockholders’ equity during the period from transactions and other events and circumstances from non-owner sources.

Other comprehensive income includes unrealized net gains (losses), net of taxes, on AFS securities.

Other comprehensive income includes net gains (losses), net of taxes, on AFS securities.

Cash and Cash Equivalents

3 unchanged sentences

Revenue Recognition

Effective January 1, 2018, the Company adopted ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified Topic 606 .

As the standard does not apply to revenue associated with receivables or financial instruments, net interest income, gains and losses from securities, and income from BOLI are not impacted by the standard.

The Company has identified certain recurring revenue streams related to noninterest income which are within the scope of Topic 606 .

The Company has identified certain recurring revenue streams related to noninterest income which are within the scope of Topic 606, Revenue from Contracts with Customers .

In-scope revenue streams are summarized based on the timing of revenue recognition as follows:

Revenue earned at a point in time - Fee income (including wire transfer, check ordering, and other transactional fees), NSF/OD Charges, ATM/Card Fee Income (including ATM transaction fees and credit and debit card interchange income), and brokerage income.

• Revenue earned at a point in time - Fee income (including wire transfer, check ordering, and other transactional fees), NSF/OD Charges, ATM/Card Fee Income (including ATM transaction fees and credit and debit card interchange income), and brokerage transaction income.

Revenue is recorded as transactions occur or services are provided to customers.

Revenue recognized under these contracts totaled approximately $ 12.3 million and $ 12.5 million for the years ended December 31, 2020 and 2019, respectively.

The Company is

the principal in each of these contracts with the exception of credit and debit card interchange fees, online transaction interchange fees, sweep income, and brokerage services income, in which case the Company is acting as the agent and records revenue net of expenses paid.

Revenue earned over time (generally under a monthly contract) - Debit card agreement and safe deposit box fees.

The Company is the principal in each of these contracts with the exception of credit and debit card interchange fees, online transaction interchange fees, sweep income, and brokerage services income, in which case the Company is acting as the agent and records revenue net of expenses paid.

• Revenue earned over time (generally under a monthly contract) - Debit card agreement, safe deposit box fees, and brokerage agreement income.

Revenue is recorded in the period transactions occur or services are rendered to the customer.

1 unchanged sentence

Revenue recognized under these contracts totaled approximately $ 542,000 and $ 319,000 for the period ended December 31, 2020 and 2019, respectively.

There are no significant judgments relating to the amount and timing of revenue recognition for revenue streams within the scope of Topic 606 .

There are no significant judgments relating to the amount and timing of revenue recognition for revenue streams within the scope of Topic 606, Revenue from Contracts with Customers .

Due to the nature of the services we provide to our customers, we do not incur costs to obtain contracts, and there are no material incremental costs to fulfill these contracts that should be capitalized.

Additionally, there are no material contract assets or receivables as the Company does not typically enter into long-term revenue contracts with customers.

As of December 31, 2019 and 2018, the Bank had a $ 845,000 and $ 1.0 million , respectively, of contract liability which is reported in accrued expenses and other liabilities.

During the years ended December 31, 2019 and 2018, the Bank recognized $ 175,000 of revenue relating to this contract liability and expects to recognize the remaining liability as revenue ratably through October 2024.

The implementation of the new standard did not have a material impact on the measurement or recognition of revenue for any of the identified in-scope revenue streams, and a cumulative effect adjustment to opening retained earnings was not necessary.

Results for reporting periods beginning after January 1, 2018, are presented under Topic 606 , using the modified retrospective transition method.

During 2020, the Bank entered into a contract which resulted in an additional contract liability.

As of December 31, 2020 and 2019, the Bank had $ 2.6 million and $ 845,000 , respectively, of contract liabilities which are reported in accrued expenses and other liabilities.

During the years ended December 31, 2020 and 2019, the Bank recognized $ 390,000 and $ 175,000 , respectively, of revenue relating to these contract liabilities and expects to recognize the remaining liabilities as revenue ratably through June 2025.

Accounting Standards Adopted in 2020

2016-02, Leases (Topic 842) .

The primary purpose of this ASU was to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet requiring more disclosures related to leasing transactions.

ASU 2016-02 (Topic 842) and the related amendments using the modified retrospective approach was adopted as of January 1, 2019.

The Company recorded right-of-use assets and corresponding lease liabilities of $ 4.9 million at the time of adoption.

The required disclosures are included in "Note 8.

Leases" of these audited consolidated financial statements.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities.

ASU 2017-12 amends the guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.

These amendments will improve the transparency of information about an entity's risk management activities and simplify the application of hedge accounting.

ASU 2017-12 became effective for the Company on January 1, 2019, and did not have a material impact on the Company's financial statements.

Issued but Not Adopted Accounting Standards

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test.

Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment based on that difference.

The impairment will be limited to the amount of goodwill allocated to that reporting unit.

The standard eliminates the requirement to calculate a goodwill impairment using Step 2, which requires an entity to calculate any impairment by comparing the implied fair value of goodwill with its carrying amount.

This standard was effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.

ASU 2017-04 was adopted as of January 1, 2020, and did not have a material impact on the Company's financial statements .

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

This ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project.

This standard was effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.

ASU 2018-13 was adopted as of January 1, 2020, and did not have a material impact on the Company's financial statements .

2019-12, Income Taxes (Topic 740):

3 unchanged sentences

ASU 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted.

The adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

This ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project.

The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption is permitted.

The adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairmen t.

This ASU simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test.

Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment based on that difference.

The impairment will be limited to the amount of goodwill allocated to that reporting unit.

The standard eliminates the requirement to calculate a goodwill impairment using

Step 2, which requires an entity to calculate any impairment by comparing the implied fair value of goodwill with its carrying amount.

For public business entities, this ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.

The adoption of ASU 2017-04 is not expected to have a material impact on the amounts or disclosures in the consolidated financial statements.

ASU 2019-12 was adopted as of December 31, 2020, and did not have a material impact on the Company's financial statements .

2020-08, Codification Improvements (Subtopic 310-20):

Receivables - Nonrefundable Fees and Other Costs.

The amendments in this update clarify that an entity should reevaluate whether a callable debt security is within the scope of ASU 2017-08, Receivables Nonrefundable Fees and Other Costs (Subtopic 310-20):

Premium Amortization on Purchased Callable Debt Securities .

ASU 2020-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

ASU 2020-08 was adopted as of December 31, 2020, and did not have a material impact on the Company's financial statements.

2020-10, Codification Improvements.

This ASU contains amendments that improve the consistency of the Accounting Standards Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50) which is expected to reduce the likelihood that the disclosure requirement would be missed.

It also contains various improvements to the codification.

These amendments are not expected to change current practice.

ASU 2020-10 is effective for annual periods beginning after December 15, 2020, with early adoption permitted.

ASU 2020-10 was adopted as of December 31, 2020, and did not have a material impact on the Company's financial statements .

Issued but Not Adopted Accounting Standards

2016-13, Financial Instruments - Credit Losses (Topic 326):

3 unchanged sentences

In addition, the update amends the accounting for credit losses on AFS securities.

As an SEC registrant with smaller reporting company filing status, CECL is effective for the Company January 1, 2023.

As an SEC registrant with smaller reporting company filing status as determined on June 30, 2019, CECL is effective for the Company January 1, 2023.

The Company continues to evaluate the impact of this ASU on the consolidated financial statements and disclosures.

In that regard, the Company has formed a cross-functional working group and is currently working through an implementation plan.

In that regard, the Company has formed a cross-functional working group and is currently

working through an implementation plan.

The implementation plan includes an assessment of data, model development and documentation, documentation of processes, and implementation of a third-party vendor solution to assist in the adoption of ASU 2016-13 .

3 unchanged sentences

Securities held for indefinite periods of time are classified as AFS and carried at estimated fair value.

The Company did not have any HTM securities for the years ended December 31, 2019 and 2018.

Investment activity for the twelve months ended December 31, 2019, included $ 145.6 million of securities purchased, partially offset by $ 58.9 million in sales, and $ 67.1 million in maturities, payments, and calls.

The investment portfolio had an increase of $ 9.5 million in market value for the year ended December 31, 2019, compared to December 31, 2018.

Investment activity for the twelve months ended December 31, 2020, included $ 419.4 million of securities purchased, partially offset by $ 151.3 million in sales and $ 112.6 million in maturities, principal repayments, and calls.

The net unrealized gain on the securities AFS portfolio increased $ 8.8 million for the twelve months ended December 31, 2020.

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

December 31, 2020

(in thousands)

(in thousands) Amortized

Securities AFS:

4 unchanged sentences

December 31, 2019

(in thousands)

(in thousands) Amortized

Securities AFS:

2 unchanged sentences

agency securities 7,102 46 ( 4 ) 7,144

Treasury securities

Total Securities AFS $ 335,603 $ 1,453 $ ( 1,483 ) $ 335,573

The amortized costs and estimated market values of debt securities as of December 31, 2019 , by contractual maturity, are shown below.

The amortized costs and estimated fair value of debt securities as of December 31, 2020, by contractual maturity, are shown below.

Expected maturities may differ from contractual maturities because issuers have the right to call or repay obligations with or without call or prepayment penalties.

(in thousands)

(in thousands) Amortized

Within one year $ 5,353 $ 5,372

2 unchanged sentences

After ten years 390,642 396,903

Total $ 489,445 $ 498,206

Information pertaining to securities with gross unrealized losses as of December 31, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position is described as follows:

Less than twelve months

Twelve months or more

(in thousands)

Less than twelve months Twelve months or more

(in thousands) Gross

December 31, 2020

10 unchanged sentences

Total Securities AFS $ ( 650 ) $ 129,171 $ ( 833 ) $ 79,748

As of December 31, 2019 , the Company held 84 securities that were in continuous loss positions 12 months or longer and 92 securities that were in continuous loss positions less than 12 months.

The aggregate unrealized losses of these securities as of December 31, 2019 , was 0.44 % of the amortized cost basis of the total AFS securities portfolio.

Management and the Asset-Liability Committee continually monitor the securities portfolio and are able to effectively measure and monitor the unrealized loss positions on these securities.

As of December 31, 2020, the Company held 29 securities that were in continuous loss positions less than 12 months.

The aggregate unrealized losses of these securities as of December 31, 2020, was 0.08 % of the amortized cost basis of the total securities AFS portfolio.

Management and the Asset-Liability Management Committee continually monitor the securities portfolio and are able to effectively measure and monitor the unrealized loss positions on these securities.

Management does not intend to sell these securities prior to recovery, and it is more likely than not that the Company will have the ability to hold them, primarily due to adequate liquidity, until each security has recovered its cost basis.

The unrealized losses of these securities have been determined by management to be a function of the movement of interest rates since the time of purchase.

Based on a review of available information, including recent changes in interest rates and credit rating information, management believes the declines in fair value of these securities are temporary.

The unrealized losses on these securities have been determined by management to be a function of the movement of interest rates since the time of purchase.

Based on a review of available information, including recent changes in interest rates and credit rating information, management believes the decline in fair value of these securities is temporary.

The Company does not consider these securities to have OTTI.

4 unchanged sentences

Additionally, the Company annually performs a detailed credit review of the municipal securities owned to identify any potential credit concerns.

There were no OTTI losses on securities recognized during the years ended December 31, 2019 and December 31, 2018 .

The proceeds from sales of securities AFS and gross gain (loss) for the years ended December 31, 2019 and 2018, are shown below:

There were no OTTI losses on debt securities related to credit losses recognized during the years ended December 31, 2020 and December 31, 2019.

The proceeds from sales of securities AFS and their gross gain (loss) for the years ended December 31, 2020 and 2019, are shown below:

Years Ended December 31,

(in thousands) 2020 2019

The proceeds include the gross gains and losses.

$ 151,253 $ 58,859

Gross gain 1,723 309

Gross loss ( 282 ) ( 291 )

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

Pledged Securities

Securities with carrying values of approximately $ 89.8 million and $ 93.5 million were pledged to secure public deposits, as of December 31, 2019 and December 31, 2018 , respectively.

Securities with carrying values of approximately $ 105.1 million and $ 89.8 million were pledged to secure public entity deposits, as of December 31, 2020 and December 31, 2019, respectively.

Loans and Asset Quality

Total loans HFI by category and loans HFS are summarized below:

Loans HFI by category and loans HFS are summarized below:

(in thousands) 2020 2019

3 unchanged sentences

Commercial and industrial 250,428 267,940

SBA PPP, net of deferred income 118,447 —

Tax-exempt 68,666 56,494

Consumer 23,926 30,019

Total loans HFI $ 1,588,446 $ 1,438,924

Total loans HFS $ 29,116 $ 5,089

Deferred loan origination fees, including PPP loan fees, net of certain direct costs, were $ 3.1 million and $ 24,000 as of December 31, 2020 and 2019, respectively.

Deferred PPP loan fees were $ 2.8 million as of December 31, 2020.

Related Party Transactions

8 unchanged sentences

Concentrations of Credit Risk

The majority of the Bank’s lending activity occurs within Louisiana, primarily in the Central, Southeast, and Northwest market areas.

The majority of the Bank’s lending activity occurs within Louisiana, primarily in the Central, Capital, and Northwest market areas.

The Bank maintains a diversified loan portfolio with a focus on commercial real estate, one-to-four family residential real estate, and commercial and industrial loans.

2 unchanged sentences

The following table summarizes the activity in the allowance for loan losses by category for the year ended December 31, 2020:

(in thousands)

(in thousands) Beginning

Balance Provision

Charged-off Recoveries Ending

Commercial real estate $ 3,454 $ 2,344 $ — $ — $ 5,798

2 unchanged sentences

Commercial and industrial 5,175 551 ( 2,184 ) 89 3,631

SBA PPP, net of deferred income — 318 — — 318

Tax-exempt 334 346 — — 680

Consumer 440 176 ( 355 ) 174 435

Total allowance for loan losses $ 13,937 $ 6,293 $ ( 2,553 ) $ 274 $ 17,951

The following table summarizes the activity in the allowance for loan losses by category for the year ended December 31, 2019:

(in thousands)

(in thousands) Beginning

Balance Provision

Charged-off Recoveries Ending

Commercial real estate $ 3,081 $ 373 $ — $ — $ 3,454

2 unchanged sentences

Commercial and industrial 4,604 850 ( 864 ) 585 5,175

SBA PPP, net of deferred income — — — — —

Tax-exempt 372 ( 38 ) — — 334

Consumer 370 237 ( 311 ) 144 440

Total allowance for loan losses $ 12,524 $ 1,810 $ ( 1,219 ) $ 822 $ 13,937

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2020, are as follows:

(in thousands)

Acquired with

(in thousands) Individually

Impairment Collectively

Impairment Acquired with

Quality Total

Allowance for loan losses:

3 unchanged sentences

Commercial and industrial 540 3,091 — 3,631

SBA PPP, net of deferred income — 318 — 318

Tax-exempt — 680 — 680

Consumer 111 324 — 435

Total allowance for loan losses $ 964 $ 16,987 $ — $ 17,951

3 unchanged sentences

Commercial and industrial 3,979 246,449 — 250,428

SBA PPP, net of deferred income — 118,447 — 118,447

Tax-exempt — 68,666 — 68,666

Consumer 114 23,812 — 23,926

Total loans HFI $ 8,836 $ 1,579,610 $ — $ 1,588,446

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2019, are as follows:

(in thousands)

Acquired with

(in thousands) Individually

Impairment Collectively

Impairment Acquired with

Quality Total

Allowance for loan losses:

3 unchanged sentences

Commercial and industrial 2,916 2,259 — 5,175

SBA PPP, net of deferred income — — — —

Tax-exempt — 334 — 334

Consumer 71 369 — 440

Total allowance for loan losses $ 3,288 $ 10,649 $ — $ 13,937

3 unchanged sentences

Commercial and industrial 8,797 259,143 — 267,940

SBA PPP, net of deferred income — — — —

Tax-exempt — 56,494 — 56,494

Consumer 75 29,944 — 30,019

Total loans HFI $ 12,742 $ 1,426,182 $ — $ 1,438,924

1 unchanged sentence

A summary of current, past due, and nonaccrual loans as of December 31, 2020, is as follows:

(in thousands)

(in thousands) Current 30-89 Days

Past Due 90 Days

Past Due Nonaccrual Total

Commercial real estate $ 554,861 $ 62 $ — $ 1,846 $ 556,769

2 unchanged sentences

Commercial and industrial 249,453 93 — 882 250,428

SBA PPP, net of deferred income 118,447 — — — 118,447

Tax-exempt 68,666 — — — 68,666

Consumer 23,891 27 3 5 23,926

Total loans HFI $ 1,584,672 $ 464 $ 3 $ 3,307 $ 1,588,446

A summary of current, past due, and nonaccrual loans as of December 31, 2019, is as follows:

(in thousands)

(in thousands) Current 30-89 Days

Past Due 90 Days

Past Due Nonaccrual Total

Commercial real estate $ 530,712 $ — $ — $ 1,278 $ 531,990

2 unchanged sentences

Commercial and industrial 264,427 143 — 3,370 267,940

SBA PPP, net of deferred income — — — — —

Tax-exempt 56,494 — — — 56,494

Consumer 29,973 20 — 26 30,019

Total loans HFI $ 1,433,258 $ 347 $ — $ 5,319 $ 1,438,924

2 unchanged sentences

Information pertaining to impaired loans as of December 31, 2020, is as follows:

(in thousands)

(in thousands) Unpaid

Balance Recorded

Investment Related

Allowance Average

Investment Interest

With no related allowance recorded:

3 unchanged sentences

Commercial and industrial 92 92 — 1,173 5

SBA PPP, net of deferred income — — — — —

Tax-exempt — — — — —

Consumer 1 1 — 2 —

Total with no related allowance 2,443 2,348 — 3,579 106

4 unchanged sentences

Commercial and industrial 4,854 3,887 540 6,521 139

SBA PPP, net of deferred income — — — — —

Tax-exempt — — — — —

Consumer 114 113 111 103 5

Total with related allowance 7,676 6,488 964 8,399 171

1 unchanged sentence

Information pertaining to impaired loans as of December 31, 2019, is as follows:

(in thousands)

(in thousands) Unpaid

Balance Recorded

Investment Related

Allowance Average

Investment Interest

With no related allowance recorded:

3 unchanged sentences

Commercial and industrial 1,805 1,474 — 3,685 3

SBA PPP, net of deferred income — — — — —

Tax-exempt — — — — —

Consumer 2 2 — 9 —

Total with no related allowance 4,407 3,997 — 7,611 121

4 unchanged sentences

Commercial and industrial 8,544 7,323 2,916 7,746 299

SBA PPP, net of deferred income — — — — —

Tax-exempt — — — — —

Consumer 76 73 71 76 4

Total with related allowance 10,150 8,745 3,288 9,326 303

4 unchanged sentences

Concessions typically include interest rate reductions or below market interest rates, revising amortization schedules to defer principal and interest payments, and other changes necessary to provide payment relief to the borrower and minimize the risk of loss.

As of December 31, 2019 and 2018 , the recorded investments in TDRs were $ 4.9 million and $ 5.1 million , respectively.

There were no unfunded commitments to extend credit related to these loans.

A summary of current, past due, and nonaccrual TDR loans as of December 31, 2020, is as follows:

(dollars in thousands)

(dollars in thousands) Current 30-89

Past Due 90 Days

Past Due Nonaccrual Total

Commercial real estate $ 1,151 $ — $ — $ 1,212 $ 2,363

2 unchanged sentences

Commercial and industrial — — — 5 5

SBA PPP, net of deferred income — — — — —

Tax-exempt — — — — —

Consumer — — — — —

Total $ 1,454 $ — $ — $ 1,217 $ 2,671

Number of TDR loans 8 — — 4 12

A summary of current, past due, and nonaccrual TDR loans as of December 31, 2019, is as follows:

(dollars in thousands)

(dollars in thousands) Current 30-89

Past Due 90 Days

Past Due Nonaccrual Total

Commercial real estate $ 1,361 $ — $ — $ 1,278 $ 2,639

2 unchanged sentences

Commercial and industrial 36 — — 1,869 1,905

SBA PPP, net of deferred income — — — — —

Tax-exempt — — — — —

Consumer 46 — — — 46

Total $ 1,695 $ — $ — $ 3,185 $ 4,880

Number of TDR loans 12 — — 6 18

A summary of loans modified as TDRs that occurred during the years ended December 31, 2020 and 2019, is as follows:

Recorded Investment

(dollars in thousands)

December 31, 2020 December 31, 2019

Recorded Investment Recorded Investment

(dollars in thousands) Loan

Modification Post

Modification Loan

Modification Post

Commercial real estate — $ — $ — 1 $ 166 $ 166

2 unchanged sentences

Commercial and industrial — — — 1 4 4

SBA PPP, net of deferred income — — — — — —

Tax-exempt — — — — — —

Consumer — — — — — —

Total 1 $ 90 $ 91 3 $ 230 $ 232

The TDRs described above increased the allowance for loan losses by $ 12,000 and $ 3,000 during the years ended December 31, 2020 and 2019, respectively.

Additionally, there was a partial charge-off totaling $ 250,000 for both 2019 and 2018.

Additionally, there were no charge-offs of TDRs in 2020.

There was a partial TDR charge-off of $ 250,000 in 2019.

There were no TDRs that subsequently defaulted in 2020 or 2019.

Short-term loan modifications on loans HFI were made to provide temporary relief to borrowers that have been adversely affected by the outbreak of COVID-19.

In accordance with interagency regulatory guidance issued in March 2020 and revised in April 2020, these short-term deferrals are not deemed to be TDRs to the extent they meet the terms of such guidance.

Credit Quality Indicators

1 unchanged sentence

A description of the general characteristics of the Bank’s risk rating grades follows:

Pass - These ratings are assigned to loans with a risk level ranging from very low to acceptable based on the borrower’s financial condition, financial trends, management strength, and collateral quality.

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

Special Mention - This category includes loans with potential weaknesses that deserve management’s close attention.

4 unchanged sentences

The following table summarizes loans by risk rating as of December 31, 2020:

(in thousands)

(in thousands) Pass Special

Mention Substandard Doubtful Loss Total

Commercial real estate $ 551,954 $ 555 $ 4,260 $ — $ — $ 556,769

2 unchanged sentences

Commercial and industrial 245,043 1,310 4,075 — — 250,428

SBA PPP, net of deferred income 118,447 — — — — 118,447

Tax-exempt 68,666 — — — — 68,666

Consumer 23,813 — 113 — — 23,926

Total loans HFI $ 1,575,839 $ 2,351 $ 10,256 $ — $ — $ 1,588,446

The following table summarizes loans by risk rating as of December 31, 2019:

(in thousands)

(in thousands) Pass Special

Mention Substandard Doubtful Loss Total

Commercial real estate $ 515,926 $ 14,118 $ 1,946 $ — $ — $ 531,990

2 unchanged sentences

Commercial and industrial 247,382 11,473 9,085 — — 267,940

SBA PPP, net of deferred income — — — — — —

Tax-exempt 56,494 — — — — 56,494

Consumer 29,876 5 138 — — 30,019

Total loans HFI $ 1,397,747 $ 28,182 $ 12,995 $ — $ — $ 1,438,924

2 unchanged sentences

Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not

necessarily represent future cash requirements.

The Company evaluates each customer’s creditworthiness on a case-by-case basis.

The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s evaluation of the customer’s ability to repay.

As of December 31, 2019 , unfunded loan

commitments totaled approximately $ 257.0 million .

As of December 31, 2020, unfunded loan commitments totaled approximately $ 283.3 million.

As of December 31, 2019, unfunded loan commitments totaled approximately $ 257.0 million.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

6 unchanged sentences

(in thousands) 2020 2019

Land $ 16,331 $ 14,495

Buildings 29,854 28,478

Leasehold improvements 2,725 2,720

Furniture and equipment 12,541 12,002

Vehicles 377 341

Computer equipment 3,287 3,185

1 unchanged sentence

Total premises and equipment

69,817 62,830

Accumulated depreciation ( 22,893 ) ( 21,086 )

Premises and equipment, net

Depreciation expense amounted to approximately $ 1.7 million for both years ended December 31, 2019 and 2018 .

$ 46,924 $ 41,744

Depreciation expense amounted to approximately $ 1.9 million and $ 1.7 million for the years ended December 31, 2020 and 2019, respectively.

Deposits were $ 2.34 billion and $ 1.72 billion as of December 31, 2020 and December 31, 2019, respectively.

This increase was a result of customers receiving funds from various government stimulus programs, customers depositing the proceeds from their PPP loans, strong deposit account opening activity, and customers maintaining larger deposit balances.

Deposits are summarized below:

2 unchanged sentences

Interest-bearing deposits:

Money market deposits

NOW accounts 402,572 331,374

Money market accounts 506,902 367,689

Savings accounts 146,264 103,984

5 unchanged sentences

As of December 31, 2020, the scheduled maturities of all outstanding certificates of deposit were as follows:

Years ending December 31,

Years ending December 31, Amount

(in thousands)

2021 $ 223,311

Thereafter 14,275

As of December 31, 2020 and December 31, 2019, deposits from directors, executive officers, their immediate family members, and related companies totaled approximately $ 81.0 million and $ 30.7 million, respectively.

1 unchanged sentence

The Company has established various lines of credit with the FHLB and other correspondent banks to provide additional sources of operating funds.

As of December 31, 2019, the Company can borrow up to approximately $ 639.1 million under these combined agreements.

As of December 31, 2020, the Company had a borrowing capacity of $ 611.8 million under these combined agreements.

As of December 31, 2020 and 2019, the Company had no borrowings under these agreements.

Junior Subordinated Debentures

The Company previously issued $ 6.2 million of floating rate junior subordinated debentures and has been the sponsor of three wholly owned business trusts:

Trust II, Trust III and FBT CT I.

On April 1, 2013, the Company assumed $ 5.2 million of floating rate junior subordinated debentures and FBT CT I in conjunction with its acquisition of Fidelity Bancorp, Inc.

Prior to redemption, these trusts issued a total of $ 11.0 million of floating rate capital securities (trust preferred securities) to investors and a total of $ 341,000 of common securities to the Company.

On June 17, 2019, the Company redeemed all of its floating rate junior subordinated debentures held by Trust III at a redemption price of 100 % of the outstanding principal amount of $ 3.1 million , plus accrued and unpaid interest thereon through the date of redemption.

On June 30, 2019, the Company redeemed all of its floating rate junior subordinated debentures held by Trust II at a redemption price of 100 % of the outstanding principal amount of $ 3.1 million , plus accrued and unpaid interest thereon through the date of redemption.

On August 8, 2019, the Company redeemed all of its floating rate junior subordinated debentures held by FBT CT I at a redemption price of 100 % of the outstanding principal amount of $ 5.2 million , plus accrued and unpaid interest thereon through the date of redemption.

As of December 31, 2019 and December 31, 2018, floating rate junior subordinated debentures were as follows:

(dollars in thousands)

December 31, 2019

Trust preferred securities

Common securities

Total junior subordinated debentures

December 31, 2018

Trust preferred securities

Common securities

Total junior subordinated debentures

April 20, 2005

September 4, 2003

June 15, 2010

August 8, 2008

Maturity date

June 15, 2035

August 8, 2033

Redemption date

June 30, 2019

June 17, 2019

August 8, 2019

Interest rate as of the redemption date

Interest rate as of December 31, 2018

The trust preferred securities represented an interest in the Company’s junior subordinated debentures, which were purchased by the business trust and had substantially the same payment terms as the trust preferred securities.

The junior subordinated debentures were the only assets of the trusts and interest payments from the debentures, payable quarterly, financed the distributions paid on the trust preferred securities.

The junior subordinated debentures were redeemable prior to the maturity date, at the option of the Company, in whole or in part, subject to the terms of the trust indentures.

On April 15, 2020, in order to fund PPP loans, the Company borrowed $ 50.0 million from the FHLB for 90 days at a rate of 0.35 % under its existing line of credit.

The Company's FHLB line of credit is collateralized by eligible Red River Bank loans.

Due to having adequate liquidity, the $ 50.0 million was paid off on May 19, 2020.

The Company determines if an arrangement is a lease at inception of the contract and assesses the appropriate classification as operating or financing.

7 unchanged sentences

Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities.

As of December 31, 2019 , the Company had right-of-use assets of $ 4.6 million and lease liabilities of $ 4.6 million .

ASC 842, Leases provides several practical expedients available for use in transition.

The Company elected to use the standard’s package of practical expedients, which allows the use of previous conclusions about lease identification, lease classification, and the accounting treatment for initial direct costs.

The Company also elected the short-term lease recognition exemption for all leases with lease terms of one year or less.

Therefore, the Company will not recognize right-of-use assets or lease liabilities on the consolidated balance sheets for such leases.

Operating lease expenses for operating leases accounted for under ASC 842, Leases for the years ended December 31, 2019 and 2018, were $ 549,000 and $ 592,000 , respectively and are included as a component of occupancy and

equipment expenses within the accompanying consolidated statements of income.

Accounting for leases in accordance with ASC 842, Leases has not had a material impact on the consolidated statements of income.

The table below summarizes other information related to the Company's operating leases:

The Company elects to recognize the lease payments on leases with terms of one year or less in its consolidated statements of income on a straight-line basis over the lease term.

For each of the years ended December 31, 2020 and 2019, operating lease expenses were $ 549,000 .

Operating lease expenses are included as a component of occupancy and equipment expenses within the accompanying consolidated statements of income.

Cash paid for amounts included in the measurement of lease liabilities for operating leases totaled $ 520,000 and $ 500,000 for the twelve months ended December 31, 2020 and 2019, respectively.

The table below summarizes other information related to the Company's operating leases as of and for the twelve months ended December 31, 2020:

As of and for the Year Ended

(dollars in thousands)

December 31, 2020

Cash paid for amounts included in measurement of lease liabilities for operating leases

Weighted average remaining operating lease term

Weighted average remaining operating lease term 9.3 years

Weighted average operating lease discount rate 3.4 %

Future obligations over the primary and renewal option terms of the Company’s long-term operating leases as of December 31, 2020, were as follows:

Years Ending December 31,

Years Ending December 31, Amount

(in thousands)

Thereafter 2,252

Total lease payments 4,959

9 unchanged sentences

Income tax expense $ 6,323 $ 5,640

The Tax Reform Act was effective January 1, 2018, and significantly revised the U.S.

corporate income tax law by, among other things, lowering the maximum U.S.

corporate income tax rate to 21.0% .

The source and tax effect of items reconciling income tax expense to the amount computed by applying the federal income tax rates in effect to income before income tax expense as of December 31, 2019 and 2018 , are as follows:

(dollars in thousands)

The source and tax effect of items reconciling income tax expense to the amount computed by applying the federal income tax rates in effect to income before income tax expense for the years ended December 31, 2020 and 2019, are as follows:

(dollars in thousands) Amount Percent Amount Percent

Income before income tax expense $ 34,468 100.0 % $ 30,464 100.0 %

2 unchanged sentences

Nondeductible expenses 45 0.1 % 22 0.1 %

Other 85 0.2 % 24 0.1 %

Income tax expense $ 6,323 18.3 % $ 5,640 18.5 %

3 unchanged sentences

(in thousands) 2020 2019

Depreciation $ ( 1,953 ) $ ( 1,467 )

Unrealized gain on securities ( 1,840 ) —

FHLB stock dividends ( 19 ) ( 16 )

8 unchanged sentences

Accrued bonus 220 139

Other 139 152

Gross deferred tax asset 4,759 4,424

12 unchanged sentences

Equity Incentive Plans

On April 17, 2008, the Company adopted its 2008 Equity Incentive Plan that provides for the granting of stock-based

arrangements for key employees and non-employee members of the Company’s Board of Directors.

On April 17, 2008, the Company adopted its 2008 Equity Incentive Plan that provides for the granting of stock-based arrangements for key employees and non-employee members of the Company’s Board of Directors.

The Compensation Committee of the Company’s Board of Directors administers the plan, makes determinations with respect to participation, and authorizes stock-based awards under the plan.

To date, the Committee has awarded stock options and restricted stock awards as detailed further below.

The 2008 plan expired on December 31, 2018, and no new awards were granted under this plan in 2019.

However, all outstanding and unexercised awards previously granted under the plan will continue to be governed by the terms and conditions thereof.

The 2008 plan expired on December 31, 2018, and no new awards were granted under this plan in 2019 or 2020.

As of December 31, 2020, all granted stock options under the 2008 plan were exercised.

On October 25, 2018, the Company adopted its 2018 Equity Incentive Plan, which was approved by the Company’s shareholders in April of 2019.

1 unchanged sentence

Similar to the 2008 plan, the Compensation Committee of the Company’s Board of Directors administers the 2018 plan, makes determinations with respect to participation, and authorizes stock-based awards under the plan.

As of December 31, 2018, no awards had been granted under the 2018 plan, and the maximum number of shares of the Company’s common stock available for issuance under the 2018 plan was 200,000 shares.

During 2019, 5,975 shares were granted under the 2018 plan.

As of December 31, 2019, the number of shares available for issuance was 194,025 .

The maximum number of shares of the

Company’s common stock available for issuance under the 2018 plan was 200,000 shares .

The status of the Company's 2018 Equity Incentive Plan is presented below:

2018 Equity Incentive Plan Number of Shares

Awards available for issuance- December 31, 2018 200,000

Awards granted ( 5,975 )

Awards available for issuance - December 31, 2019 194,025

Awards granted ( 5,625 )

Awards available for issuance - December 31, 2020 188,400

All disclosures for stock options and restricted stock shown below relate to outstanding awards under the 2008 and 2018 plans.

1 unchanged sentence

Stock Options

The options granted under the 2008 plan are to purchase common stock at an exercise price not less than the fair market value of the common stock at the date of the grant.

The granted options vested and became exercisable in twenty percent increments on the first through the fifth anniversaries of the date of the grant and shall expire and may not be exercised later than ten years following the date of the grant.

The options expire on various dates through 2022.

In 2020, all outstanding options granted under the 2008 plan were exercised.

The options granted under the 2008 plan were to purchase common stock at an exercise price not less than the fair market value of the common stock at the date of the grant.

The granted options vested and became exercisable in twenty percent increments on the first through the fifth anniversaries of the date of the grant and would have expired and may not have been exercised later than ten years following the date of the grant.

The options were set to expire on various dates through 2022.

No options have been granted under the 2018 plan.

4 unchanged sentences

Stock Options

Shares Exercise

Range Weighted

Outstanding - December 31, 2018 28,000 $ 12.32 - $ 17.33

$12.32 - $17.33

Exercised (1)

1 unchanged sentence

Outstanding - December 31, 2019 20,500 $ 14.31 - $ 17.33

$12.32 - $17.33

Exercised (2)

Outstanding - December 31, 2019

( 20,500 ) $ 14.31 - $ 17.33

Outstanding - December 31, 2020 — $ —

(1) A total of 300 shares of the Company’s common stock were surrendered in lieu of payment of a portion of the cash exercise price for options exercised during 2019, resulting in the net issuance upon exercise of an aggregate of 7,200 shares of the Company’s common stock.

(2) A total of 5,780 shares of the Company’s common stock were surrendered in lieu of payment of a portion of the cash exercise price for options exercised during 2020, resulting in the net issuance upon exercise of an aggregate of 14,720 shares of the Company’s common stock.

As of December 31, 2019 , 20,500 of the outstanding options were fully vested and exercisable with an intrinsic value of approximately $ 826,000 .

The weighted average remaining term for vested options was 1.32 years .

No shares vested during the year ended December 31, 2019 .

As of December 31, 2020, all options were fully vested and exercised.

There were no outstanding options as of December 31, 2020.

As of December 31, 2019, 20,500 of the outstanding options were fully vested and exercisable with an intrinsic value of approximately $ 826,000 .

4 unchanged sentences

The restrictions vest in twenty percent increments on the first through fifth anniversaries of the grant date.

Compensation expense for these grants is recognized ratably over the vesting period of the awards based on the fair value of the stock at the grant date.

During 2020, the Committee granted 5,625 restricted stock awards with a weighted average fair value of $ 42.35 .

9 unchanged sentences

Nonvested Restricted Stock

Number of Shares

Weighted Average Grant Date Fair Value

Number of Shares Weighted Average Grant Date Fair Value

Nonvested - December 31, 2018 21,190 $ 32.10

Granted 5,975 $ 48.15

Vested ( 6,560 ) $ 30.26

Nonvested - December 31, 2019 20,605 $ 37.34

Granted 5,625 $ 42.35

Vested ( 8,575 ) $ 33.65

Nonvested - December 31, 2020 17,655 $ 40.73

14 unchanged sentences

The Company has reflected its estimated liability for known and incurred but not reported claims in the accompanying financial statements.

Off-Balance Sheet Contractual Obligations

Off-Balance Sheet Contractual Obligations and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business.

1 unchanged sentence

The Company’s exposure is represented by the contractual amount of these commitments.

Purchase Commitments

The Company has committed to an agreement to buy real estate for administrative use for approximately $ 2.5 million as of December 31, 2019 .

Investment Commitment

In 2014, the Company committed to an investment into an SBIC limited partnership.

As of December 31, 2019 , there is a $ 226,000 outstanding commitment to this partnership.

As of December 31, 2020, there was a $ 226,000 outstanding commitment to this partnership.

In 2020, the Company committed to an additional investment into an SBIC limited partnership.

As of December 31, 2020, there was a $ 5.0 million outstanding commitment to this partnership.

Contingencies

The Company and the Bank are involved, from time to time, in various legal matters arising in the ordinary course of business.

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

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

1 unchanged sentence

Fair Value Disclosure

AFS securities and loans HFS are recorded at fair value on a recurring basis.

Securities AFS, loans HFS, and equity securities are recorded at fair value on a recurring basis.

Additionally, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, foreclosed assets, and other certain assets.

30 unchanged sentences

factors, including changes in absorption rates, length of time the property has been on the market, and anticipated sales values, which have resulted in adjustments to the collateral value estimates indicated in certain appraisals.

Fair Value of Assets Measured on a Recurring Basis

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

(in thousands)

(in thousands) Fair Value Level 1 Level 2 Level 3

December 31, 2020

Loans HFS $ 29,116 $ — $ 29,116 $ —

Securities AFS:

Mortgage-backed securities 274,827 — 274,827 —

agency securities

Municipal bonds 213,281 — 213,281 —

Treasury securities

agency securities 10,098 — 10,098 —

Equity securities 4,021 4,021 — —

December 31, 2019

Loans HFS $ 5,089 $ — $ 5,089 $ —

Securities AFS:

Mortgage-backed securities 235,671 — 235,671 —

agency securities

Municipal bonds 92,758 — 92,758 —

Treasury securities

agency securities 7,144 — 7,144 —

Equity securities 3,936 3,936 — —

There were no transfers between Level 1, 2, or 3 during the years ended December 31, 2020 or 2019.

The following table presents the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis:

Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis

Financial Assets and Financial Liabilities :

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances.

Financial assets measured at fair value on a nonrecurring basis during the reported periods include certain collateral dependent loans reported at fair value of the underlying collateral if repayment is expected solely from the collateral.

Prior to foreclosure of these loans, fair value of the collateral is estimated using Level 3 inputs based on customized discounting criteria.

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

Years Ended December 31,

(in thousands) 2020 2019

Carrying value of impaired loans before allowance for loan losses $ 6,776 $ 656

Specific allowance for loan losses ( 856 ) ( 67 )

Fair value of impaired loans $ 5,920 $ 589

There were no financial liabilities measured at fair value on a nonrecurring basis.

Nonfinancial Assets and Liabilities :

Certain nonfinancial assets and nonfinancial liabilities are measured at fair value on a nonrecurring basis.

These include certain foreclosed assets, which are remeasured and reported at fair value through a charge-off to allowance for loan losses upon initial recognition.

Subsequent to their initial recognition, certain foreclosed assets are remeasured at fair value through a write-down included in other noninterest income.

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

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

Years Ended December 31,

(in thousands) 2020 2019

Foreclosed assets remeasured at initial recognition:

Carrying value of foreclosed assets prior to remeasurement $ 85 $ 969

Charge-offs — ( 29 )

Fair value of foreclosed assets $ 85 $ 940

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

Years Ended December 31,

(in thousands) 2020 2019

Foreclosed assets remeasured subsequent to initial recognition:

Carrying value of foreclosed assets prior to remeasurement $ 150 $ —

Charge-offs ( 17 ) —

Fair value of foreclosed assets $ 133 $ —

There were no nonfinancial liabilities measured at fair value on a nonrecurring basis.

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

(dollars in thousands) Fair Value Valuation Technique Unobservable Input Discount Ranges Weighted Average Discount

December 31, 2020

Impaired loans

Foreclosed assets

Impaired loans $ 7,872 Discounted appraisals Collateral discounts and costs to sell 0 % - 100 %

Foreclosed assets $ 896 Discounted appraisals Collateral discounts and costs to sell 0 % - 13 %

December 31, 2019

Impaired loans

Foreclosed assets

The Company had no liabilities measured at fair value on a nonrecurring basis.

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

Weighted Average Discount

Valuation Technique

Unobservable Input

Impaired loans

Discounted appraisals

Collateral discounts and costs to sell

Foreclosed assets

Discounted appraisals

Collateral discounts and costs to sell

Impaired loans $ 9,454 Discounted appraisals Collateral discounts and costs to sell 0 % - 100 %

Foreclosed assets $ 1,128 Discounted appraisals Collateral discounts and costs to sell 0 % - 36 %

Fair Value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments as of December 31, 2020 and 2019, were as follows:

(in thousands)

(in thousands) Carrying

Amount Fair Value Level 1 Level 2 Level 3

December 31, 2020

5 unchanged sentences

Nonmarketable equity securities 3,447 3,447 — 3,447 —

Loans HFS 29,116 29,116 — 29,116 —

Loans HFI, net of allowance 1,570,495 1,578,398 — — 1,578,398

1 unchanged sentence

Financial liabilities:

Deposits 2,340,360 2,344,969 — 2,344,969 —

Accrued interest payable 1,774 1,774 — 1,774 —

6 unchanged sentences

Nonmarketable equity securities 1,350 1,350 — 1,350 —

Loans HFS 5,089 5,089 — 5,089 —

Loans HFI, net of allowance 1,424,987 1,426,163 — — 1,426,163

1 unchanged sentence

Financial liabilities:

Junior subordinated debentures

Deposits 1,721,120 1,721,286 — 1,721,286 —

Accrued interest payable 2,222 2,222 — 2,222 —

7 unchanged sentences

Basel III requires the Bank to maintain certain minimum ratios to meet capital adequacy requirements.

In addition, a capital conservation buffer ("CCB") was established above the minimum regulatory capital requirements.

The CCB for 2018 was 1.875%.

Effective January 1, 2019, the final CCB was fully phased in at 2.500%.

In addition, a capital conservation buffer was established above the minimum regulatory capital requirements.

Effective January 1, 2019, the final capital conservation buffer was fully phased in at 2.500%.

It is management’s belief that, as of December 31, 2020, the Bank met all capital adequacy requirements under Basel III.

Management expects that the capital ratios for the Bank under Basel III will continue to exceed capital adequacy requirements.

The most recent notification from the FDIC (as of March 31, 2018) categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action.

The most recent notification from the FDIC (as of December 31, 2019) categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action.

Capital amounts and ratios for Red River Bank as of December 31, 2020 and 2019, are presented in the following table:

Regulatory Requirements

Actual Minimum

Minimum Plus CCB

(dollars in thousands)

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

December 31, 2020

16 unchanged sentences

as of December 31, 2020 and 2019, are presented in the following table:

(dollars in thousands)

(dollars in thousands) Amount Ratio

December 31, 2020

9 unchanged sentences

Community Bank Leverage Ratio Framework

As part of the directive under the Economic Growth Act, on September 17, 2019, the FDIC and other federal bank regulatory agencies approved the community bank leverage ratio ("CBLR") framework.

This optional framework became effective January 1, 2020, and will be available as an alternative to the Basel III risk-based capital framework.

As part of the directive under the Economic Growth Act, on September 17, 2019, the FDIC and other federal bank regulatory agencies approved the CBLR framework.

This optional framework became effective January 1, 2020, and is available as an alternative to the Basel III risk-based capital framework.

The CBLR framework provides for a simple measure of capital adequacy for certain community banking organizations.

community banking organizations and are eligible to opt into the CBLR framework and replace the applicable Basel III risk-based capital requirements.

Specifically, depository institutions and depository institution holding companies that have less than $10.0 billion in total consolidated assets and meet other qualifying criteria, including a Tier I leverage ratio of greater than 9.00% (subsequently temporarily reduced to 8.00% as a COVID-19 relief measure), are considered qualifying community banking organizations and are eligible to opt into the CBLR framework and replace the applicable Basel III risk-based capital requirements.

As of December 31, 2020, the Company and the Bank qualify for the CBLR framework.

Management does not intend to utilize the CBLR framework effective January 1, 2020.

Management does not intend to utilize the CBLR framework .

Equity Events

24 unchanged sentences

Taking into consideration the Company's performance and capital levels, dividends were paid in both 2019 and 2020.

In May 2018, the Company paid a cash dividend of $ 0.15 per share, adjusted for the 2018 2 -for-1 stock split, to shareholders of record as of March 31, 2018.

In February 2019, the Company paid a cash dividend of $ 0.20 per share to shareholders of record as of January 31, 2019.

In 2018, the Board of Directors authorized a 2 -for-1 stock split, which was accomplished by a stock dividend with a record date of October 1, 2018, whereby each holder of record of our common stock received one additional share of common stock for each share owned as of such date.

This transaction is referred to in this report as the 2018 2 -for-1 stock split.

In February 2019, the Company paid an annual cash dividend of $ 0.20 per share.

During 2020, a quarterly cash dividend of $ 0.06 per share was paid each quarter, resulting in $ 0.24 per share in cash dividends for the year ended December 31, 2020.

Stock Repurchase Program

On August 27, 2020, the Company's Board of Directors approved a stock repurchase program.

The repurchase program authorizes the Company to purchase up to $ 3.0 million of its outstanding shares of common stock through August 27, 2021.

Repurchases may be made from time to time in the open market at prevailing prices and based on market conditions, or in privately negotiated transactions.

For the year ended December 31, 2020, the Company repurchased 2,824 shares, at an aggregate cost of $ 122,000 .

Earnings Per Common Share

Diluted EPS includes accrued but unissued shares relating to the Directors’ Compensation Program, stock options, and restricted stock determined using the treasury stock method.

Diluted EPS includes accrued but unissued shares relating to the Director Compensation Program, stock options, and restricted stock determined using the treasury stock method.

The dilutive EPS calculation assumes all outstanding stock options to purchase common stock have been exercised at the beginning of the year and the pro forma proceeds from the exercised options and restricted stock are used to purchase common stock at the average fair market valuation price.

The computations of basic and diluted earnings per common share for the Company were as follows:

For the Years Ended

(in thousands, except share amounts) 2020 2019

2 unchanged sentences

Weighted average shares outstanding - basic 7,322,158 7,072,689

Effect of Directors Stock Compensation Program

Effect of Director Compensation Program 1,259 1,554

Effect of stock options and restricted stock 21,628 41,271

1 unchanged sentence

Earnings per common share:

Basic $ 3.84 $ 3.51

Diluted $ 3.83 $ 3.49

Quarterly Results of Operations (Unaudited)

1 unchanged sentence

This information is derived from unaudited consolidated financial statements that include, in our opinion, all adjustments necessary for a fair presentation when read in conjunction with the Company's consolidated financial statements and notes thereto as of and for the years ended December 31, 2020 and 2019.

(in thousands, except per share data)

(in thousands, except per share data) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

Interest and dividend income $ 20,526 $ 19,249 $ 19,023 $ 18,580

6 unchanged sentences

Income tax expense 1,582 1,589 1,531 1,621

Net income $ 7,261 $ 7,285 $ 6,854 $ 6,745

Earnings per share

(in thousands, except per share data)

Basic $ 0.99 $ 0.99 $ 0.94 $ 0.92

Diluted $ 0.99 $ 0.99 $ 0.93 $ 0.92

(in thousands, except per share data) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

Interest and dividend income $ 18,784 $ 18,781 $ 18,256 $ 17,904

6 unchanged sentences

Income tax expense 1,523 1,470 1,279 1,368

Net income $ 6,743 $ 6,847 $ 5,538 $ 5,696

Earnings per share

Subsequent Events

Management has evaluated subsequent events and transactions through March 27, 2020 , the date that the financial statements were available to be issued.

As a result of the spread of the novel coronavirus and the falling interest rate environment, economic uncertainties have arisen which are likely to negatively impact net income.

Other financial impact could occur, though such potential impact is unknown at this time.

Basic $ 0.92 $ 0.94 $ 0.79 $ 0.86

Diluted $ 0.92 $ 0.93 $ 0.78 $ 0.85

Parent Company Financial Statements

1 unchanged sentence

BALANCE SHEETS

(dollars in thousands, except share amounts)

(dollars in thousands, except share amounts) December 31,

Cash and cash equivalents

Interest-bearing deposits in subsidiary bank

$ 23,868 $ 26,264

Investment in subsidiary bank

Investment in Red River Statutory Trust II

Investment in Red River Statutory Trust III

Investment in FBT Capital Trust I

Debentures payable to Red River Statutory Trust II

Debentures payable to Red River Statutory Trust III

Debentures payable to FBT Capital Trust I

261,577 225,606

$ 285,478 $ 251,898

Total Liabilities

6 unchanged sentences

Issued and Outstanding - 7,325,333 and 7,306,221 shares

68,055 68,082

Additional paid-in capital

Retained earnings

208,957 182,571

Accumulated other comprehensive income (loss)

Total Stockholders' Equity

285,478 251,898

Total Liabilities and Stockholders' Equity

$ 285,478 $ 251,898

PARENT COMPANY

STATEMENTS OF INCOME

(in thousands)

Years ended December 31,

(in thousands) Years ended December 31,

Interest and dividend income from subsidiaries $ — $ 428

Total income — 428

Interest on junior subordinated debentures — 385

5 unchanged sentences

Income (Loss) Before Equity in Undistributed Earnings of Subsidiaries

( 881 ) ( 544 )

Equity in undistributed earnings of subsidiaries

29,026 25,368

Net Income $ 28,145 $ 24,824

PARENT COMPANY

STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

(in thousands) Years Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 28,145 $ 24,824

Adjustments to reconcile net income to net cash

9 unchanged sentences

Redemption of junior subordinated debentures — ( 11,341 )

Repurchase of common stock ( 122 ) —

Proceeds from exercise of stock options 8 80

Payment to repurchase common stock

Proceeds from initial public offering, net — 26,812

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data