What changed in this filing

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Item 1. Business

2022-03-18 compared with 2021-03-19 · 101 added, 89 removed, 366 unchanged (34% of the section changed)

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As of December 31, 2021, we were the third largest financial institution headquartered in Louisiana based on assets, with total assets of $3.22 billion, loans HFI of $1.68 billion, total deposits of $2.91 billion, and total stockholders’ equity of $298.2 million.

We operate from a network of 25 banking centers throughout Louisiana and one combined loan and deposit production office in Lafayette, Louisiana.

We operate from a network of 27 banking centers throughout Louisiana and two combined LDPOs, one each in Lafayette, Louisiana and New Orleans, Louisiana.

Banking centers are located in the following Louisiana markets:

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Southwest, which includes the Lake Charles MSA;

and the Northshore, which includes Covington.

the Northshore, which includes Covington;

and Acadiana, which includes the Lafayette MSA.

We believe our markets offer us an attractive combination of growth opportunities and core deposit stability, as well as loan diversity.

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In our Capital market, which we define to include East Baton Rouge and Ascension Parishes, we operate six banking centers.

We also operate two banking centers in our Southwest Louisiana market, which we define to include Calcasieu Parish.

We also operate three banking centers in our Southwest Louisiana market, which we define to include Calcasieu Parish.

In our Northshore Louisiana market, which we define to include St.

Tammany Parish, we operate one banking center.

We operate one combined loan and deposit production office in our Acadiana market, which we define to include Lafayette Parish.

We operate one banking center and one combined LDPO in our Acadiana market, which we define to include Lafayette Parish.

In our New Orleans market, which we define to include Orleans Parish, we operate one combined LDPO.

We believe our current markets provide ample opportunities for the continued growth of our customer base, loans, and deposits, as well as the expansion of our overall market share in each area.

Our goal is to replicate this growth in new markets as we continue to expand and implement our growth and expansion strategy.

Our current markets, which are in diverse parts of Louisiana, are economic centers that provide for natural credit diversification and a hedge against industry downturns.

We believe our current markets, which are in diverse parts of Louisiana, are economic centers that provide for natural credit diversification and a hedge against industry downturns.

We are purposeful in choosing banking center locations and have sought out key locations in Louisiana through de novo development, as well as through two whole-bank acquisitions.

Our emphasis on having a strategic network of banking centers, staffed by experienced bankers, differentiates us from our national and regional bank competitors, who are increasingly moving their customers to digital banking only platforms with limited personal service.

Our emphasis on having a strategic network of banking centers, staffed by experienced bankers, differentiates us from our national and regional bank competitors, who are increasingly moving their customers to digital-only banking platforms with limited personal service.

GROWTH AND EXPANSION STRATEGY

We have concentrated our efforts on building our market presence in key metropolitan markets within the state of Louisiana where our target customers are underserved and well-suited for the commercial, retail, and private banking products and services that we provide.

We serve our customers’ needs within the markets we have operations and in other areas where our customers operate.

We also promote our business to potential customers in markets contiguous to Louisiana.

We intend to leverage our competitive strengths to take advantage of what we believe are significant growth opportunities within our existing footprint and other strategic market areas that we believe complement our strategic plan.

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We then strengthen those relationships by offering personalized products and services.

We attract new customers through personal outreach by our bankers, targeted marketing campaigns, advertising in a variety of traditional and social media, and by filling the void left by competitors who are closing banking offices.

We attract new customers through

personal outreach by our bankers, targeted marketing campaigns, advertising in a variety of traditional and social media, and by filling the void left by competitors who are closing banking offices.

Other outreach activities include helping our communities during times of need and having a presence at community events.

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When evaluating potential new market opportunities, our standard due diligence includes both an assessment of the local economy as well as analysis of the local banking landscape.

As part of our new market expansion plan, we expanded operations to three new markets between 2017 and 2020.

As part of our new market expansion plan, we expanded operations to four new markets between 2017 and 2021.

In 2017, we began operations in the Southwest Louisiana market, which includes the Lake Charles, Louisiana MSA.

During 2018 and 2019, we entered the Northshore market, located on the north shore of Lake Pontchartrain, near New Orleans, Louisiana.

We most recently entered the Acadiana Louisiana market, which includes the Lafayette, Louisiana MSA.

In 2020, we opened a combined loan and deposit production office in Lafayette and purchased banking center locations in Lafayette and Lake Charles, Louisiana.

In 2020, we entered the Acadiana Louisiana market, which includes the Lafayette, Louisiana MSA by opening a combined LDPO in Lafayette.

In 2021, we opened a banking center that we purchased in 2020 in Lake Charles, Louisiana, as our third banking center in the Southwest Louisiana market.

We also entered the New Orleans market in 2021 by opening a combined LDPO in downtown New Orleans, Louisiana.

In Lafayette, Louisiana, we opened our first full-service banking center, which we purchased in 2020, on January 26, 2022.

Disciplined Acquisition Strategy

Our primary focus continues to be on organic expansion;

however, we will identify and evaluate opportunities for strategic business acquisitions as they arise.

however, we will identify and evaluate acquisition opportunities that we believe are consistent with our mission and can provide opportunities for improved profitability and increased market share.

Our historic approach to potential acquisitions has been strategic and disciplined.

Since inception, we completed two whole-bank acquisitions of institutions with customer-oriented, compatible philosophies and in desirable geographic areas.

Since inception, we completed two whole-bank acquisitions of institutions with customer-oriented, compatible philosophies in desirable geographic areas.

These acquisitions provided us the opportunity to expand the delivery of our relationship-driven brand of banking.

We will continue to emphasize organic expansion going forward, and we are not currently a party to any formal or informal acquisition arrangements.

We will, however, carefully consider acquisition opportunities, primarily within the state of Louisiana, that we believe are consistent with our mission and which can provide opportunities for improved profitability and to gain market share.

BANKING SERVICES

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We offer each of these customers sophisticated products and services similar to those of much larger banks but delivered by bankers who can provide local and responsive decision-making, personal assistance, and an interest in their personal goals and the success of their businesses.

Lending activities originate from the efforts of our bankers, with an emphasis on lending to individuals, professionals, small and medium-sized businesses, and commercial companies located in our market areas.

Lending activities originate from the efforts of our bankers, with an emphasis on lending to individuals, professionals, small and medium-sized businesses, and commercial companies.

Real Estate Loans

Commercial Real Estate Loans (Owner Occupied) .

Given our strategy of focusing on the banking needs of established operating companies within our geographic footprint, 20.1% of loans HFI as of December 31, 2020, consisted of owner occupied office and industrial real estate loans.

We focus on the banking needs of established operating companies, which includes owner occupied office and industrial real estate loans.

Risks associated with owner occupied commercial real estate include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, environmental contamination, and the quality of the borrower’s management.

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We believe this portfolio segment is well diversified by industry type.

As of December 31, 2021, our owner occupied commercial real estate loans were 19.7% of loans HFI.

Commercial Real Estate Loans (Non-Owner Occupied) .

Our pursuit of non-owner occupied commercial real estate properties is reserved primarily for developers and other persons or entities of influence in our local markets who present additional business and personal relationship opportunities.

Our pursuit of non-owner occupied commercial real estate properties is reserved primarily for developers and other persons or entities of influence who present additional business and personal relationship opportunities.

This strategy is evidenced by our modest level of these loans relative to our capital, which has been consistent for many years.

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We offer first and second lien one-to-four family mortgage loans, as well as home equity lines of credit, in each case primarily on owner occupied primary residences.

Our retail consumer real estate lending products are offered primarily to consumer customers within our geographic markets.

collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship.

Our retail consumer real estate lending products are offered primarily to consumer customers.

Although our consumer real estate loan portfolio presents lower levels of risk than our commercial and industrial, commercial real estate, and construction and development loan portfolios, we are exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship.

As of December 31, 2021, our one-to-four family residential loans were 28.2% of loans HFI.

Construction and Development Loans.

Our construction and development portfolio includes loans to small and medium-sized businesses to construct owner occupied facilities, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single-family homes in our market areas.

Risks associated with construction loans include fluctuations in the value of real estate, project completion risk, and change in market trends.

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We have expertise in meeting the financing needs of commercial operating companies.

Our specialists in these areas understand the cash cycle, working capital, and the fixed asset acquisition needs of businesses, and this allows us to deliver customizable and effective financing solutions.

Our specialists in these areas understand the cash cycle, working capital, and the fixed asset acquisition needs of businesses, which allows us to deliver customizable and effective financing solutions.

The risks associated with commercial and industrial loans are derived from the expectation that the loans are generally serviced from the operations of the business, and those operations may not be successful.

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SBA PPP loans are made to small businesses and other entities and individuals according to the criteria set forth by the CARES Act in March 2020.

These loans are guaranteed by the SBA, have a 24-month term at an interest rate of 1.0%, and are subject to forgiveness by the SBA dependent upon meeting eligibility requirements.

This program ended on May 31, 2021.

The loans originated during this program are guaranteed by the SBA, have a 24- or 60-month term at an interest rate of 1.0%, and are subject to forgiveness by the SBA dependent upon meeting eligibility requirements.

As of December 31, 2021, our SBA PPP loans were 1.0% of loans HFI.

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We obtain most of our deposits from individuals, partnerships, corporations, and public entities primarily in our market areas.

We do not have brokered deposits.

Our bankers are experienced business developers with extensive contacts and connections with targeted clients and centers of influence throughout our communities.

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Brokerage Services

We offer a broad range of products and services designed to meet the investment needs of all of our customers through our investment group.

For the past 13 years, Cetera Investment Services LLC served as our registered broker-dealer.

During the second quarter of 2020, we converted from Cetera Investment Services LLC to LPL Financial LLC as our registered broker-dealer.

Our investment group executives, who are located in each of our markets, strive to fully understand each client’s unique financial situation, deliver a comprehensive plan, and provide the appropriate products to meet their needs.

We offer a broad range of products and services designed to meet the investment needs of all of our customers through our investment group and LPL Financial LLC, our registered broker-dealer.

Our investment group executives, who are available to serve clients in each of our markets, strive to fully understand each client’s unique financial situation, deliver a comprehensive plan, and provide the appropriate products to meet their needs.

Our investment products include stocks, bonds, mutual funds, alternative investments, annuities, and insurance products.

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We continue to make investments in our information technology systems supporting our deposit and lending operations and treasury management initiatives.

In 2021, we invested in the JAM FINTOP Banktech, L.P.

fund to strategically develop technology partnerships as we expand the Bank’s digital offerings.

We believe these investments are essential to enhancing our capabilities for offering new products and services, improving the overall customer experience, providing scale for future growth and acquisitions, and increasing controls and efficiencies in corporate support areas.

We utilize a core data processing platform from a nationally recognized bank software vendor providing us with capabilities to support the continued growth of the Bank.

While we operate and manage our internal network infrastructure, we leverage the capabilities of third-party service providers to provide technical expertise around network design, architecture, and cybersecurity services required for us to operate as an effective and efficient organization.

While we operate and manage our internal network infrastructure, we leverage the

capabilities of third-party service providers to provide technical expertise around network design, architecture, and cybersecurity services required for us to operate as an effective and efficient organization.

The majority of our systems used to conduct day-to-day banking operations are operated by a third-party service provider.

Also, certain key transaction processing platforms, such as debit card processing, credit card processing, mobile banking, online banking, telephone banking, and web-site services, are outsourced to third-party service providers.

These third-party providers provide the scalability, infrastructure, and disaster recovery capabilities to support our operating strategy.

As of December 31, 2020, we had 336 full-time equivalent employees.

We believe that we maintain employment and benefit programs which are appropriate with respect to position responsibilities, competitive with the external market, and capable of attracting, retaining, and motivating competent employees.

Also, certain key transaction processing platforms, such as debit card processing, credit card processing, mobile banking, online banking, telephone banking, and website services, are outsourced to third-party service providers.

We believe these third-party providers provide the scalability, infrastructure, and disaster recovery capabilities to support our operating strategy.

As of December 31, 2021, we had 358 employees, including 342 full-time employees.

We believe that we maintain employment and benefit programs that are appropriate with respect to position responsibilities, competitive with the external market, and capable of attracting, retaining, and motivating competent employees.

We seek to engage personnel at all levels by offering opportunities for learning, growth, and the achievement of career objectives, and we encourage our employees to volunteer in community service activities in the markets that we serve.

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Employee Benefits” and “ - Note.

10 Stock-Based Compensation Plans," respectively, in this Annual Report on Form 10-K.

Beginning in March 2020, in response to the COVID-19 pandemic, we continued our commitment to the safety of our employees and the communities we serve by taking precautions to protect both employees and customers.

We continue to carefully monitor local health conditions and follow recommended health and safety protocols.

10 Stock-Based Compensation Plans,” respectively, in this Report.

We continue to carefully monitor local health conditions and follow recommended health and safety protocols arising due to COVID-19.

None of our employees are represented by any collective bargaining unit or are parties to a collective bargaining agreement.

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These documents are also available on the SEC’s website at www.sec.gov.

The information contained on or accessible from our website does not constitute a part of this Annual Report on Form 10-K and is not incorporated by reference herein.

The information contained on or accessible from our website does not constitute a part of this Report and is not incorporated by reference herein.

SUPERVISION AND REGULATION

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Consequently, our growth and earnings performance will be affected not only by management decisions and general and local economic conditions, but also by the statutes administered by, and the regulations and policies of, various governmental regulatory authorities.

These authorities include the Federal Reserve, FDIC, Louisiana OFI, CFPB, Internal Revenue Service, and state taxing authorities.

These authorities include the Federal Reserve, FDIC, OFI, CFPB, Internal Revenue Service, and state taxing authorities.

The effect of these statutes, regulations, and policies and any changes to such statutes, regulations, and policies can be significant and cannot be predicted.

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Bank Holding Company Regulation

As a bank holding company, we are subject to regulation under the Bank Holding Company Act of 1956, as amended, and to supervision, examination, and enforcement by the Federal Reserve.

The Bank Holding Company Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

As a bank holding company, we are subject to regulation under the Bank Holding Company Act of 1956, as amended, and to supervision, examination, and enforcement by the Federal Reserve as well as the OFI.

The Bank Holding Company Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they

may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

The Federal Reserve’s jurisdiction also extends to any company that we directly or indirectly control, such as any nonbank subsidiaries and other companies in which we own a controlling investment.

Financial Services Industry Reform

As final rules and regulations implementing the Dodd-Frank Act have been adopted, and may continue to be adopted, this law has changed the bank regulatory framework and has affected the lending, deposit, investment, trading, and operating activities of banks and their holding companies.

As final rules and regulations implementing the Dodd-Frank Act have been adopted, and may continue to be adopted and/or modified, this law has changed the bank regulatory framework and has affected the lending, deposit, investment, trading, and operating activities of banks and their holding companies.

A number of the effects of the Dodd-Frank Act are described or otherwise accounted for in various parts of this “Supervision and Regulation” section.

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and (4) authorizes the SEC to promulgate rules that would allow shareholders to nominate their own director candidates using a company’s proxy materials.

While much of the Dodd-Frank Act has been implemented in the form of final rules from the banking agencies, the full extent of its impact on our operations is not yet determined.

It is possible that existing rules may still be modified or repealed or that new rules may be implemented.

While much of the Dodd-Frank Act has been implemented in the form of final rules from the banking agencies, certain aspects of the Dodd-Frank Act remain in proposed form or have not been implemented.

Accordingly, it is possible that existing rules may still be modified or repealed or that new rules may be implemented that may impact our operations.

The Economic Growth Act, which was signed into law in May 2018, provides certain limited amendments to the Dodd-Frank Act, as well as certain targeted modifications to prior financial services reform regulatory requirements.

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and protections for student borrowers.

One of the Economic Growth Act’s highlights with potential implications for us is its increase in the asset threshold under the Federal Reserve’s Small Bank Holding Company Policy Statement from $1.0 billion to $3.0 billion.

Another significant provision is the Economic Growth Act’s directive that federal bank regulatory agencies adopt a threshold for a CBLR framework.

One of the Economic Growth Act’s highlights with implications for us was the asset threshold under the Federal Reserve’s Small Bank Holding Company Policy Statement (“the Policy Statement”) being increased from $1.0 billion to $3.0 billion, which benefits bank holding companies by, among various other items, allowing for an 18-month safety and soundness examination cycle as opposed to a 12-month examination cycle, scaled biannual regulatory reporting requirements as opposed to quarterly regulatory reporting requirements, and not being subject to capital adequacy guidelines on a consolidated basis.

Because we had less than $3.0 billion in assets as of June 30, 2020, the last applicable measurement date, we received the benefits of the Policy Statement for 2021.

We also had less than $3.0 billion in assets as of June 30, 2021, which will allow us to benefit from the Policy Statement during 2022.

However, we expect to exceed the $3.0 billion asset threshold as of June 30, 2022, the next measurement date.

Therefore, beginning in 2023, we expect to not receive the Policy Statement’s benefits.

Another significant provision was the Economic Growth Act’s directive that federal bank regulatory agencies adopt a threshold for a CBLR framework.

The CBLR framework and its implications for us are discussed in more detail below under the heading “ - Bank Regulation - Capital Adequacy Requirements.”

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Federal banking regulations require FDIC-insured banks that become undercapitalized to submit a capital restoration plan.

The capital restoration plan of a bank controlled by a bank holding company will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount.

The capital restoration plan of a bank controlled by a bank holding company will not be accepted by the regulators unless such bank holding company guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount.

Any such guarantee from a bank holding company is entitled to a priority of payment in bankruptcy.

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Acquisitions by Bank Holding Companies

We must obtain the prior approval of the Federal Reserve before (1) acquiring more than 5.0% of the voting stock of any bank or other bank holding company, (2) acquiring all or substantially all of the assets of any bank or bank holding company, or (3) merging or consolidating with any other bank holding company.

company, or (3) merging or consolidating with any other bank holding company.

In evaluating applications with respect to these transactions, the Federal Reserve is required to consider, among other things, the effect of the acquisition on competition;

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Control of a bank holding company is rebuttably presumed to exist under the Change in Bank Control Act if the acquiring person or entity will own 10.0% or more of any class of voting securities immediately following the transaction and either no other person will hold a greater percentage of that class of voting securities after the acquisition or the bank holding company has publicly registered securities.

The Bank Holding Company Act’s definition of “control” can also be triggered when a company acquires 5.0% or more of any class of voting securities and certain other factors are present.

Regulatory Restrictions on Dividends;

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Failure to comply with the supervisory letter could result in a supervisory finding that the bank holding company is operating in an unsafe and unsound manner.

In addition, our ability to pay dividends may also be limited as a result of the capital conservation buffer under the Basel III regulatory capital framework to the extent it becomes applicable to us.

In addition, our ability to pay dividends may also be limited as a result of the CCB under the Basel III regulatory capital framework.

In the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.

The Federal Reserve may further restrict the payment of dividends by engaging in supervisory action to restrict dividends or by requiring us to maintain a higher level of capital than would otherwise be required under any applicable minimum capital requirements.

Our ability to pay dividends and make other distributions depends in part upon the receipt of dividends from our subsidiary bank, which is subject to certain restrictions on dividends as discussed in more detail below.

Under longstanding Federal Reserve policy, which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial strength to, and to commit resources to support, Red River Bank.

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A bank holding company may also make an investment of up to 5.0% of any class of voting securities of any company that is otherwise a non-controlling investment.

If a bank holding company has elected to become a financial holding company, it may engage in activities that are (1) financial in nature or incidental to such financial activity, or (2) complementary to a financial activity and which do not pose a substantial risk to the safety and soundness of a depository institution or to the financial system generally.

pose a substantial risk to the safety and soundness of a depository institution or to the financial system generally.

These activities include securities dealing, underwriting and market making, insurance underwriting and agency activities, merchant banking, and insurance company portfolio investments.

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The Volcker Rule also places restrictions on proprietary trading.

The Economic Growth Act exempts insured depository institutions with $10.0 billion or less in total consolidated assets from the Volcker Rule, and the Federal Reserve has effectively extended the exemption to bank holding companies with $10.0 billion or less in total consolidated assets.

The Economic Growth Act exempts insured depository institutions with $10.0 billion or less in total consolidated assets and whose total trading assets and trading liabilities are 5.0% or less of total consolidated assets from the Volcker Rule, and the Federal Reserve has effectively extended the exemption to bank holding companies with $10.0 billion or less in total consolidated assets.

Safe and Sound Banking Practices

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In certain circumstances, the Federal Reserve could take the position that paying a dividend would constitute an unsafe or unsound banking practice.

The Federal Reserve has broad authority to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices, result in breaches of fiduciary duty, or which constitute violations of laws or regulations, and can assess civil money penalties or impose enforcement action for such activities.

Bank Regulation

Red River Bank is a commercial bank chartered under the laws of the State of Louisiana.

As such, Red River Bank is subject to extensive regulation, supervision, and examination by the Louisiana OFI and the FDIC.

As such, Red River Bank is subject to extensive regulation, supervision, and examination by the OFI and the FDIC.

In addition, Red River Bank’s deposits are insured to the maximum extent permitted by law by the FDIC.

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Capital Adequacy Requirements

The FDIC and Louisiana OFI monitor the capital adequacy of Red River Bank by using a combination of risk-based guidelines and leverage ratios.

The FDIC and OFI monitor the capital adequacy of Red River Bank by using a combination of risk-based guidelines and leverage ratios.

These agencies consider the Bank’s capital levels when taking action on various types of applications and when conducting supervisory activities related to the safety and soundness of the Bank and the banking system.

Under the Basel III capital rules, Red River Bank is required to maintain four minimum capital standards:

(1) a leverage ratio of at least 4.0%, (2) a common equity Tier I risk-based capital ratio of 4.5%, (3) a Tier I risk-based capital ratio of at least 6.0%, and (4) a total risk-based capital ratio of at least 8.0%.

The Basel III capital rules also require the Bank to establish a capital conservation buffer equal to 2.500% of total risk-weighted assets.

The capital conservation buffer is designed to ensure that banks build up capital buffers outside periods of stress, which can be drawn down as losses are incurred.

An institution that does not satisfy the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases, and discretionary bonuses to executive officers.

(1) a leverage ratio of at least 4.00%, (2) a common equity Tier I risk-based capital ratio of at least 4.50%, (3) a Tier I risk-based capital ratio of at least 6.00%, and (4) a total risk-based capital ratio of at least 8.00%.

The Basel III capital rules also require the Bank to establish a CCB equal to 2.50% of total risk-weighted assets.

The CCB is designed to ensure that banks build up capital buffers outside periods of stress, which can be drawn down as losses are incurred.

An institution that does not satisfy the CCB will be subject to restrictions on certain activities including payment of dividends, stock repurchases, and discretionary bonuses to executive officers.

When the 2.50% CCB is factored in, the minimum common equity Tier I risk-based capital ratio is 7.00%, the minimum Tier I risk-based capital ratio is 8.50%, and the minimum total risk-based capital ratio is 10.50%.

These capital requirements are minimum requirements.

The FDIC or Louisiana OFI may also set higher capital requirements if warranted by the risk profile of Red River Bank, economic conditions impacting its markets, or other circumstances particular to the Bank.

The FDIC or OFI may also set higher capital requirements if warranted by the risk profile of Red River Bank, economic conditions impacting its markets, or other circumstances particular to the Bank.

For example, FDIC guidance provides that higher capital may be required to take adequate account of, among other things, interest rate risk and the risks posed by concentrations of credit, nontraditional activities, or securities trading activities.

In addition, the FDIC’s prompt corrective action regulations discussed below, in effect, increase the minimum regulatory capital ratios for banking organizations.

Failure to meet capital guidelines could subject Red River Bank to a variety of enforcement remedies, including issuance of a capital directive, restrictions on business activities, and other measures under the FDIC’s prompt corrective action regulations.

In addition, the FDIC’s prompt corrective action regulations discussed below also apply to the Bank.

Failure to meet capital guidelines could subject Red River Bank to a variety of enforcement remedies, including

issuance of a capital directive, restrictions on business activities, and other measures under the FDIC’s prompt corrective action regulations.

In September 2019, the FDIC and other federal bank regulatory agencies approved the CBLR framework.

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

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.

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% for 2020 and 8.50% for 2021 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, 2021, the Company and the Bank qualify for the CBLR framework.

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To be well capitalized, a bank must have a total risk-based capital ratio of at least 10.00%, a Tier I risk-based capital ratio of at least 8.00%, a common equity Tier I risk-based capital ratio of at least 6.50%, and a leverage ratio of at least 5.00%, and must not be subject to any written agreement, order, or directive requiring it to maintain a specific capital level for any capital measure.

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.

The most recent notification from the FDIC (as of June 30, 2021) categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.

Banks that are adequately, but not well, capitalized may not accept, renew, or rollover brokered deposits without a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on deposits.

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In every proposed merger transaction, the reviewing agency must also consider the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the community to be served, the bank’s CRA performance, and the effectiveness of each insured depository institution involved in the proposed merger transaction in combating money-laundering activities.

Under Louisiana law, Red River Bank is permitted to establish additional branch offices within Louisiana, subject to the approval of the Louisiana OFI.

In addition to FDIC approval, the Bank must also obtain the prior approval of the OFI before acquiring or merging with another bank.

The OFI will consider similar criteria when reviewing an application.

Under Louisiana law, Red River Bank is permitted to establish additional branch offices within Louisiana, subject to the approval of the OFI.

As a result of the Dodd-Frank Act, the Bank may also establish additional branch offices outside of Louisiana, subject to prior regulatory approval, so long as the laws of the state where the branch is to be located would permit a state bank chartered in that state to establish a branch.

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Restrictions on Transactions with Affiliates and Insiders

Federal law strictly limits the ability of banks to engage in transactions with their affiliates, including their bank holding companies.

Federal law strictly limits the ability of banks to engage in transactions with their affiliates, including their parent bank holding companies.

Sections 23A and 23B of the Federal Reserve Act, and Federal Reserve’s Regulation W, impose quantitative limits, qualitative standards, and collateral requirements on certain transactions by a bank with, or for the benefit of, its affiliates.

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The Dodd-Frank Act expanded the coverage and scope of the limitations on affiliate transactions within a banking organization, including an expansion of what types of transactions are covered transactions to include credit exposures related to derivatives, repurchase agreements, and securities lending arrangements, and an increase in the amount of time for which collateral requirements regarding covered transactions must be satisfied.

Federal law also limits a bank’s authority to extend credit to its directors, executive officers, and 10.0% shareholders, as well as to entities controlled by such persons.

Federal law also limits a bank’s authority to extend credit to its directors, executive officers, and 10.0% or greater shareholders, as well as to entities controlled by such persons.

Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons.

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In general, Louisiana law provides that Red River Bank may not pay any dividends to the Company unless the Bank has surplus at least equal to 50.0% of its capital stock and such surplus will not be reduced below 50.0% following payment of the dividend.

Prior approval of the Louisiana OFI is required for Red River Bank to pay any dividend that would exceed its net profits earned during the current year combined with its retained net profits of the immediately preceding year.

Prior approval of the OFI is required for Red River Bank to pay any dividend that would exceed its net profits earned during the current year combined with its retained net profits of the immediately preceding year.

In addition, under federal law, Red River Bank may not pay any dividend to the Company if it is undercapitalized or the payment of the dividend would cause it to become undercapitalized.

The FDIC may further restrict the payment of dividends by engaging in supervisory action to restrict dividends or by requiring the Bank to maintain a higher level of capital than would otherwise be required to be adequately capitalized for regulatory purposes.

Under the Basel III regulatory capital framework, the failure to maintain an adequate capital conservation buffer, as discussed above, may also result in dividend restrictions.

Under the Basel III regulatory capital framework, the failure to maintain an adequate CCB, as discussed above, may also result in dividend restrictions.

Moreover, if, in the opinion of the FDIC, Red River Bank is engaged in an unsound practice (which could include the payment of dividends), the FDIC may require, generally after notice and hearing, the Bank to cease such practice.

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In addition, under the incentive compensation guidance, a banking organization’s primary federal regulator may initiate enforcement action if the organization’s incentive compensation arrangements pose a risk to the safety and soundness of the organization.

Further, the capital conservation buffer described above would limit discretionary bonus payments to bank executives if the institution’s regulatory capital ratios failed to exceed certain thresholds.

Further, the CCB described above would limit discretionary bonus payments to bank executives if the institution’s regulatory capital ratios failed to exceed certain thresholds.

The scope and content of the U.S.

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If there are additional bank or financial institution failures or if the FDIC otherwise determines to increase assessment rates, Red River Bank may be required to pay higher FDIC insurance premiums.

Financial Modernization

Under the Gramm-Leach-Bliley Act, banks may establish financial subsidiaries to engage, subject to limitations on investment, in activities that are financial in nature, other than insurance underwriting as principal, insurance company portfolio investment, real estate development, real estate investment, annuity issuance, and merchant banking activities.

To do so, a bank must be well capitalized, well managed, and have a CRA rating from its primary federal regulator of "Satisfactory" or better.

Subsidiary banks of financial holding companies or banks with financial subsidiaries must remain well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions.

Such actions or restrictions could include divestiture of the financial subsidiary or subsidiaries.

In addition, a financial holding company or a bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a CRA rating of Satisfactory or better.

Concentrated Commercial Real Estate Lending Regulations

The federal banking regulatory agencies have promulgated guidance governing financial institutions with concentrations in commercial real estate lending.

The guidance provides that a bank may have a concentration in commercial real estate lending if (1) total reported loans for construction, land development, and other land represent 100.0% or more of total risk-based capital, or (2) total commercial real estate loans represent 300.0% or more of the bank’s total risk-based capital and the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50.0% or more during the prior 36 months.

The guidance provides that a bank may have a concentration in commercial real estate lending if (1) total reported loans for construction, land development, and other land represent 100.0% or more of total risk-based capital, or (2) total non-owner occupied commercial real estate loans, excluding owner occupied properties, represent 300.0% or more of the bank’s total risk-based capital and the outstanding balance of the bank’s commercial real estate loan portfolio has increased 50.0% or more during the prior 36 months.

If a concentration is present, the bank will be subject to further regulatory scrutiny with respect to its risk management practices for commercial real estate lending.

As of December 31, 2020, Red River Bank’s total reported loans for construction, land development, and other land represented less than 100.0% of the Bank’s total risk-based capital, and its total commercial real estate loans represented less than 300.0% of the Bank’s total risk-based capital.

As of December 31, 2021, Red River Bank’s total reported loans for construction, land development, and other land represented less than 100.0% of the Bank’s total risk-based capital, and its total commercial real estate loans, excluding owner occupied properties, represented less than 300.0% of the Bank’s total risk-based capital.

Community Reinvestment Act

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An unsatisfactory CRA record could substantially delay approval or result in denial of an application.

In December 2019, the OCC and the FDIC issued a notice of proposed rulemaking intended to (1) clarify which activities qualify for CRA credit;

(2) update which areas are eligible for activity that qualifies for CRA credit;

(3) create a more transparent and objective method for measuring CRA performance;

and (4) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and reporting.

In May 2020, the OCC issued its final CRA rule, which became effective for national banks on October 1, 2020.

The FDIC has not yet finalized the corresponding revisions to its CRA rule that would apply to Red River Bank as a state-chartered institution.

The federal banking agencies are considering changes to modernize the CRA regulations, but at present such changes have not been finalized.

Red River Bank received a “Satisfactory” rating in its most recent CRA examination in 2019.

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These laws include, among others, laws regarding unfair, deceptive, and abusive acts and practices, and other federal consumer protection statutes.

These federal laws include the Electronic Fund Transfer Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Real Estate Procedures Act of 1974 (“RESPA”), the S.A.F.E.

These federal laws include the Electronic Fund Transfer Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Real Estate Procedures Act of 1974 (“RESPA”), the S.A.F.E.

Mortgage Licensing Act of 2008, the Truth in Lending Act (“TILA”), and the Truth in Savings Act, among others.

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Federal Home Loan Bank System

Red River Bank is a member of the Federal Home Loan Bank of Dallas, which is one of the 12 regional Federal Home Loan Banks composing the Federal Home Loan Bank system.

The Federal Home Loan Banks make loans to their member banks in accordance with policies and procedures established by the Federal Home Loan Bank system and the board of directors of each regional Federal Home Loan Bank.

Any advances from a Federal Home Loan Bank must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for the financing of residential housing.

As a member of the Federal Home Loan Bank of Dallas, Red River Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of Dallas.

All loans, advances, letters of credit and other extensions of credit made by the Federal Home Loan Bank of Dallas to Red River Bank are secured by a portion of Red River Bank's loan portfolio, as well as capital stock of the Federal Home Loan Bank of Dallas held by Red River Bank.

Red River Bank is a member of the FHLB of Dallas, which is one of the 11 regional FHLBs composing the FHLB system.

The Federal Housing Finance Agency regulates the FHLBs.

It is responsible for ensuring that the FHLBs operate in a safe and sound manner, are adequately capitalized, and are held accountable to the FHLBs’ mission.

The FHLBs make loans to their member banks in accordance with policies and procedures established by the FHLB system and the board of directors of each regional FHLB.

Any advances from a FHLB must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for the financing of residential housing.

As a member of the FHLB of Dallas, Red River Bank is required to acquire and hold shares of capital stock in the FHLB of Dallas.

All loans, advances, letters of credit, and other extensions of credit made by the FHLB of Dallas to Red River Bank are secured by a portion of Red River Bank’s loan portfolio, as well as capital stock of the FHLB of Dallas held by Red River Bank.

Additionally, in the event that a member financial institution defaults on its debt, the right of the FHLB to seek repayment of this debt will take priority over the rights of all other creditors.

Enforcement Powers

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fiscal policy and the monetary policies of the Federal Reserve.

Some of the instruments of monetary policy available to the Federal Reserve include changes in the discount rate on member bank borrowings, the fluctuating availability of borrowings at the “discount window,” open market operations, the imposition of, and changes in reserve requirements against, member banks’ deposits and certain borrowings by banks and their affiliates and assets of foreign branches.

Some of the instruments of monetary policy available to the Federal Reserve include changes in the discount rate on member bank borrowings, the fluctuating availability of borrowings at the “discount window,” open market operations and the imposition of, and changes in reserve requirements against member banks’ deposits and certain borrowings by banks and their affiliates and assets of foreign branches.

These policies have a significant influence on the overall growth of bank loans, investments, and deposits, and the interest rates charged on loans or paid on deposits.

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Future Legislation and Regulatory Reform

In light of current conditions and the market outlook, regulators may increase their focus on the regulation of financial institutions.

In light of current economic conditions and the market outlook, regulators may increase their focus on the regulation of financial institutions.

From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures.

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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 1. Business