What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-18 compared with 2021-03-19 · 154 added, 169 removed, 1121 unchanged (22% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Red River Bancshares, Inc.

Board of Directors and Stockholders

Red River Bancshares, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Red River Bancshares, Inc.

and its subsidiaries (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Authorized - 30,000,000 shares;

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

Issued and Outstanding - 7,180,155 and 7,325,333 shares, respectively

60,233 68,055

19 unchanged sentences

Interest on other borrowed funds — 16

Interest on junior subordinated debentures — 385

Total Interest Expense 5,617 8,378

10 unchanged sentences

Gain (Loss) on equity securities ( 175 ) 85

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

Gain (Loss) on sale and call of securities 194 1,441

SBIC income 654 775

Other income 126 158

Other income (loss) 271 126

Total Noninterest Income 24,493 23,167

26 unchanged sentences

Tax effect 2,802 ( 2,149 )

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

(Gain) loss on sale and call of securities included in net income ( 194 ) ( 1,441 )

Tax effect 41 303

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

Total other comprehensive income (loss) ( 10,694 ) 6,945

Comprehensive Income $ 22,258 $ 35,090

12 unchanged sentences

Stock incentive plan — — 276 — — 276

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 5,625 — — — — —

1 unchanged sentence

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

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

Cash dividend - $ 0.24 per share

5 unchanged sentences

Issuance of restricted shares of common stock through stock incentive plan, net 7,400 — — — — —

Issuance of shares of common stock through exercise of stock options 14,720 8 — — — 8

Forfeiture of restricted shares of common stock ( 100 ) — — — —

Issuance of shares of common stock as board compensation 1,075 56 — — — 56

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

Repurchase of common stock under stock repurchase program ( 153,553 ) ( 7,878 ) — — — ( 7,878 )

Cash dividend - $ 0.28 per share

15 unchanged sentences

Net (accretion) amortization on securities AFS 2,479 3,144

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

(Gain) Loss on sale and call of securities ( 194 ) ( 1,441 )

Provision for loan losses 1,900 6,293

12 unchanged sentences

Purchases ( 389,493 ) ( 419,403 )

Purchase of equity securities ( 4,000 ) —

Purchase of nonmarketable equity securities ( 3 ) ( 2,097 )

Capital contribution in partnerships ( 173 ) —

Net (increase) decrease in loans HFI ( 96,327 ) ( 151,909 )

Purchase of bank-owned life insurance ( 5,000 ) —

Proceeds from sales of foreclosed assets 563 330

Proceeds from sales of premises and equipment 483 —

Purchases of premises and equipment ( 3,427 ) ( 7,035 )

4 unchanged sentences

Repayments of other borrowed funds — ( 50,000 )

Redemption of junior subordinated debentures — ( 11,341 )

Repurchase of common stock ( 7,878 ) ( 122 )

Proceeds from exercise of stock options — 8

Proceeds from initial public offering, net — 26,812

Cash dividends ( 2,033 ) ( 1,759 )

11 unchanged sentences

Income taxes 7,989 6,182

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

SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES

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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 and one combined loan and deposit production office in Lafayette, Louisiana.

Red River Bank operates 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.

Basis of Presentation

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

The Company sponsored three trusts that were not consolidated.

These trusts were utilized for the issuance of trust preferred securities.

The three trusts were terminated during 2019.

Operating Segments

While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a company-wide basis.

Operating segments are aggregated into one as operating results for all segments are similar.

Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

6 unchanged sentences

Purchased assets, including loans, and assumed liabilities are recorded at their respective acquisition date fair values.

Fair values are subject to refinement up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

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

4 unchanged sentences

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

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and due from banks and 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, 2021 and 2020, 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.

Realized gains and losses on the sale and call 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.

2 unchanged sentences

FASB issued accounting guidance related to the recognition and presentation of OTTI.

The accounting guidance specifies that if (a) a company does not have the intent to sell a debt security prior to recovery;

and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss.

The accounting guidance specifies that if (1) a company does not have the intent to sell a debt security prior to recovery;

and (2) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss.

When an entity does not intend to sell the security, and it is more likely than not that the entity will not have to sell the security before recovery of its cost basis, the entity will recognize the credit component of an OTTI of a debt security in earnings and the remaining portion in other comprehensive income.

1 unchanged sentence

Nonmarketable Equity Securities

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

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

Loans Held for Sale

2 unchanged sentences

Loans Held for Investment

Loans that management has the intent and ability to hold, for the foreseeable future or until maturity or payoff, are held for investment and carried at their principal amount outstanding, net of deferred loan fees.

Loans that management has the intent and ability to hold, for the foreseeable future or until maturity or payoff, are HFI and carried at their principal amount outstanding, net of deferred loan fees.

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

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Impaired loans are reviewed individually, and a specific allowance is allocated, if necessary, based on evaluation of either the fair value of the collateral underlying the loan or the present value of future cash flows calculated using the loan’s existing interest rate.

General reserves relate to the remainder of the loan portfolio, including overdrawn deposit accounts, and are based on evaluation of a number of factors, such as current economic conditions, the quality and composition of the loan portfolio, loss history, and other relevant factors.

General reserves relate to the remainder of the loan portfolio, including overdrawn deposit accounts, and are based on an evaluation of a number of factors, such as current economic conditions, the quality and composition of the loan portfolio, loss history, and other relevant factors.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets.

7 unchanged sentences

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis.

Assets acquired through, or in lieu of, loan foreclosure are HFS and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis.

Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell.

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

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

The balance of foreclosed assets was $ 660,000 and $ 896,000 as of December 31, 2021 and 2020, respectively.

Credit Related Financial Information

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Premises and equipment are stated at cost less accumulated depreciation, which is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years.

Bank-Owned Life Insurance

The Bank has purchased life insurance policies on certain key employees.

The Bank is the beneficiary of the BOLI policies, which may be on past or present employees.

BOLI policies have death benefits as well as a cash surrender value component, which is carried as an asset on the consolidated balance sheets.

Intangible Assets

5 unchanged sentences

Stock-Based Compensation Plans

The Company has adopted stock incentive plans that provide for the granting of stock-based payment arrangements for key employees and non-employee members of the Company’s Board of Directors.

The Company has adopted stock incentive plans that provide for the granting of stock-based awards to key employees, directors, and consultants.

The Company accounts for the stock incentive plans in accordance with applicable accounting guidance.

1 unchanged sentence

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.

No options were outstanding as of December 31, 2020.

The options vest and become exercisable in twenty percent increments on the first through fifth anniversaries of the grant date.

No options were

outstanding as of December 31, 2021.

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

The restrictions vest in twenty percent increments over a five-year period.

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

The Company recognizes forfeitures as they occur.

23 unchanged sentences

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

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and due from banks and interest-bearing deposits in other banks.

Advertising Costs

10 unchanged sentences

The Company is the principal in each of these contracts.

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

Revenue recognized

under these contracts totaled approximately $ 765,000 and $ 542,000 for the years ended December 31, 2021 and 2020, respectively.

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 .

1 unchanged sentence

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

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.

As of December 31, 2021 and 2020, the Bank had $ 2.0 million and $ 2.6 million, respectively, of contract liabilities which are reported in accrued expenses and other liabilities on the consolidated balance sheets.

During the years ended December 31, 2021 and 2020, the Bank recognized $ 605,000 and $ 390,000 , 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 2021

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):

Simplifying the Accounting for Income Taxes.

The guidance issued in this update simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition for deferred tax liabilities for outside basis differences.

ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted tax changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

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

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 .

2021-06, Presentation of Financial Statements (Topic 205), Financial Services - Depository and Lending (Topic 942), and Financial Services - Investment Companies (Topic 946):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants.

The guidance in this update amends various SEC paragraphs relating to financial disclosures.

This update is an alignment of SEC and GAAP reporting and was effective upon issuance.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Issued but Not Adopted Accounting Standards

6 unchanged sentences

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 .

2021-05, Leases (Topic 842):

Lessors - Certain Leases with Variable Lease Payments.

The guidance issued in this update addressed lessors’ concerns by amending the lease classification requirements.

The amendments in this update address an issue related to a lessor’s accounting for certain leases with variable lease payments.

Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if two criteria are met.

Those criteria are that the lease would have been classified as a sales-type lease or a direct financing lease in accordance with GAAP, and that the lessor would have otherwise recognized a day-one loss.

This update is effective for fiscal years beginning after December 15, 2021, and interim periods within those annual periods.

The Company adopted this standard on January 1, 2022.

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

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The amendments in this update address how to determine whether a contract liability is recognized by the acquirer in a business combination.

The amendment also resolves the inconsistency of post-acquisition revenue recognition by providing specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination.

This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

This standard will be adopted by the Company on January 1, 2023.

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

Reclassification

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

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:

Investment activity for the year ended December 31, 2021, included $ 389.5 million of securities purchased, partially offset by $ 113.5 million in sales and $ 99.2 million in maturities, principal repayments, and calls.

The net unrealized gain on the securities AFS portfolio decreased $ 13.5 million for the year ended December 31, 2021, resulting in an unrealized loss of $ 4.8 million as of December 31, 2021.

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

December 31, 2021

3 unchanged sentences

Municipal bonds 227,248 3,665 ( 942 ) 229,971

Treasury securities 41,770 — ( 154 ) 41,616

agency securities 8,062 61 ( 58 ) 8,065

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Municipal bonds 207,834 5,498 ( 51 ) 213,281

Treasury securities — — — —

agency securities 9,902 200 ( 4 ) 10,098

Total Securities AFS $ 489,445 $ 9,148 $ ( 387 ) $ 498,206

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

The amortized cost and estimated fair value of debt securities as of December 31, 2021, 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.

12 unchanged sentences

Municipal bonds ( 918 ) 51,333 ( 24 ) 2,577

Treasury securities ( 154 ) 41,616 — —

agency securities ( 58 ) 4,913 — —

4 unchanged sentences

Municipal bonds ( 51 ) 9,466 — —

Treasury securities — — — —

agency securities ( 4 ) 4,996 — —

Total Securities AFS $ ( 387 ) $ 86,829 $ — $ —

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.

As of December 31, 2021, the Company held 185 securities that were in unrealized loss positions.

The aggregate unrealized loss of these securities as of December 31, 2021, was 1.45 % 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.

9 unchanged sentences

There were no OTTI losses on debt securities related to credit losses recognized during the years ended December 31, 2021 and December 31, 2020.

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

The proceeds from sales and calls of securities AFS and their gross gain (loss) for the years ended December 31, 2021 and 2020, are shown below:

Years Ended December 31,

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Total loans HFS $ 4,290 $ 29,116

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.

Deferred loan origination fees, including PPP loan fees, net of certain direct costs, were $ 1.6 million and $ 3.1 million as of December 31, 2021 and 2020, respectively.

Deferred PPP loan fees were $ 626,000 and $ 2.8 million as of December 31, 2021 and 2020, respectively.

Related Party Transactions

In the ordinary course of business, certain officers, directors, and principal shareholders, as well as their immediate family members and affiliates in which they have 10% or more beneficial ownership (“related parties”), maintain a variety of banking relationships with the Company.

In the ordinary course of business, certain officers, directors, and principal shareholders, as well as their immediate family members and their affiliates, maintain a variety of banking relationships with the Company.

An analysis of loan activity to these related parties is as follows:

6 unchanged sentences

Concentrations of Credit Risk

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

The majority of the lending activity occurs within the Bank’s Louisiana markets.

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.

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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.

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

There were no unfunded commitments to extend credit related to these loans during the years ended December 31, 2021 and 2020.

A summary of current, past due, and nonaccrual TDR loans as of December 31, 2021, is as follows:

1 unchanged sentence

Past Due 90 Days

Past Due Nonaccrual Total

Past Due Nonaccrual (1)

Commercial real estate $ 3,634 $ — $ — $ — $ 3,634

7 unchanged sentences

Number of TDR loans 11 — — 1 12

(1) This loan has a contractual obligation to the Company despite carrying a zero balance.

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

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The TDRs described above increased the allowance for loan losses by $ 14,000 and $ 12,000 during the years ended December 31, 2021 and 2020, respectively.

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

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

Additionally, there were no charge-offs of TDRs in 2021 or 2020.

There were no TDRs that subsequently defaulted in 2021 or 2020.

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

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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, 2020, unfunded loan commitments totaled approximately $ 283.3 million.

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

Unfunded loan commitments totaled approximately $ 357.9 million and $ 283.3 million as of December 31, 2021 and 2020, respectively.

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

Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions.

As of December 31, 2020, commitments under standby letters of credit totaled approximately $ 10.5 million.

As of December 31, 2019, commitments under standby letters of credit totaled approximately $ 11.1 million.

Commitments under standby letters of credit totaled approximately $ 12.5 million and $ 10.5 million as of December 31, 2021 and 2020, respectively.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

14 unchanged sentences

$ 48,056 $ 46,924

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

Depreciation expense amounted to approximately $ 1.9 million for each of the years ended December 31, 2021 and 2020 .

Deposits were $ 2.91 billion and $ 2.34 billion as of December 31, 2021 and December 31, 2020, 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.

This increase was a result of customers receiving funds from government stimulus programs, customers depositing the proceeds from their PPP2 loans, and customers maintaining higher deposit balances.

Deposits are summarized below:

5 unchanged sentences

Savings accounts 191,076 146,264

Time deposits < $100,000 108,982 110,636

Time deposits $100,000 to $250,000 138,683 131,957

Time deposits > $250,000 93,342 90,565

Time deposits less than or equal to $250,000 243,596 247,665

Time deposits greater than $250,000 89,577 93,342

Total interest-bearing deposits 1,760,676 1,396,745

Total deposits $ 2,910,348 $ 2,340,360

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

As of December 31, 2021, the scheduled maturities of all outstanding time deposits were as follows:

Years ending December 31, Amount

2 unchanged sentences

Thereafter 13,717

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.

As of December 31, 2021 and December 31, 2020, deposits from directors, executive officers, their immediate family members, and their affiliates totaled approximately $ 71.8 million and $ 81.0 million, respectively.

Other Borrowed Funds

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

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

As of December 31, 2021, total borrowing capacity from these sources was $ 849.6 million.

As of December 31, 2021 and 2020, the Company had no borrowings under these agreements.

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.

11 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities for operating leases totaled $ 530,000 and $ 520,000 for the twelve months ended December 31, 2021 and 2020, 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:

The table below summarizes other information related to the Company’s operating leases as of and for the year ended December 31, 2021:

As of and for the Year Ended

31 unchanged sentences

Unrealized gain on securities — ( 1,840 )

FHLB stock dividends ( 19 ) ( 16 )

FHLB of Dallas stock dividends ( 20 ) ( 19 )

Gross deferred tax liability ( 1,984 ) ( 3,812 )

14 unchanged sentences

Discretionary employer contributions during the years ended December 31, 2021 and 2020, totaled approximately $ 721,000 and $ 625,000 , respectively.

The Bank has entered into nonqualified deferred compensation agreements with certain employees.

These agreements are funded by life insurance policies.

The Bank is the owner and beneficiary of all policy death benefits.

The BOLI policies are recorded as a separate line item at their cash surrender value in the accompanying consolidated balance sheets.

The agreements provide for transfer of a portion of the proceeds to certain employees.

The related liability recorded was $ 2.3 million and $ 2.0 million as of December 31, 2020 and 2019, respectively.

The Bank has purchased life insurance policies on certain key employees.

The Bank is the beneficiary of the BOLI policies, which have cash surrender value and death benefit components.

The Bank uses a portion of the income generated from the BOLI policies to fund the expenses for nonqualified, noncontributory deferred compensation agreements with certain employees.

The deferred compensation agreements provide post-retirement benefit payments to those employees.

The liability related to the deferred compensation agreements was $ 2.7 million and $ 2.3 million as of December 31, 2021 and 2020, respectively, and is recorded in accrued expenses and other liabilities on the consolidated balance sheets.

Stock-Based Compensation Plans

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 (“2008 Plan”), which provided for the grant 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 or 2020.

The 2008 Plan expired on December 31, 2018, and no new awards were granted under this plan after that date.

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.

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

The 2018 Plan was adopted in anticipation of the expiration of the 2008 Plan and provides for the granting of stock-based awards to key employees, directors, and consultants.

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.

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

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 Plan is presented below:

2018 Plan Number of Shares

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

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Awards granted ( 7,400 )

Awards forfeited 100

Awards available for issuance - December 31, 2021 181,100

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The Company funds the stock options from authorized, but unissued, shares.

The status of the Company’s stock option plan is presented below:

The status of the Company’s stock option awards is presented below:

Stock Options

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Outstanding - December 31, 2020 — $ —

Exercised (2)

( 20,500 ) $ 14.31 - $ 17.33

Outstanding - December 31, 2021 — $ —

(1) 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.

(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, 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 .

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

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

There were no outstanding options as of December 31, 2021 and 2020.

Restricted Stock Awards

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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 .

During 2021, the Committee granted 7,400 restricted stock awards with a weighted average fair value of $ 50.55 , and 100 restricted stock awards with a weighted average fair value of $ 42.35 were forfeited.

For the year ended December 31, 2021, the compensation expense for the vested restricted stock was $ 269,000 .

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Vested ( 6,820 ) $ 38.40

Forfeited ( 100 ) $ 42.35

Nonvested - December 31, 2021 18,135 $ 45.61

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This program allows directors the option of receiving a portion of their payment for director fees, for attendance at board meetings, in Company stock.

Under the program, board fees are earned and expensed in one year and the related stock is issued the following year.

Under the program, board fees are earned and expensed in the year board services are rendered, and the related stock is issued the following year.

The Director Compensation Program stock earned and the issuance of shares as board compensation for the years ended December 31, 2021 and 2020, are as follows:

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As of December 31, 2021, there was a $ 5.0 million outstanding commitment to this partnership.

In the second quarter of 2021, the Company committed to an investment into a bank technology limited partnership.

As of December 31, 2021, there was an $ 827,000 outstanding commitment to this partnership.

Purchase Commitment

The Company has committed to an agreement to buy real estate for approximately $ 2.3 million as of December 31, 2021.

Construction Commitment

The Company has committed to a construction contract for approximately $ 457,000 as of December 31, 2021.

Contingencies

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However, foreclosed assets are considered Level 3 in the fair value hierarchy because management has qualitatively applied a discount due to the size, supply of inventory, and the incremental discounts applied to the appraisals.

Management also considers other

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.

Management also considers other 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

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agency securities 8,065 — 8,065 —

Treasury securities 41,616 — 41,616 —

Equity securities 7,846 7,846 — —

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agency securities 10,098 — 10,098 —

Treasury securities — — — —

Equity securities 4,021 4,021 — —

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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.

Financial assets measured at fair value on a nonrecurring basis include certain impaired 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.

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Fair value of impaired loans $ 4,035 $ 5,920

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

The Company had no financial liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2021 and 2020.

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.

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 as a foreclosed asset.

Subsequent to their initial recognition, certain foreclosed assets are remeasured at fair value through an adjustment 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.

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Carrying value of foreclosed assets prior to remeasurement $ 133 $ 150

Charge-offs ( 17 ) —

Write-downs ( 34 ) ( 17 )

Fair value of foreclosed assets $ 99 $ 133

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

The Company had no nonfinancial liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2021 and 2020.

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

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Impaired loans $ 5,923 Discounted appraisals Collateral discounts and costs to sell 0 % - 100 %

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

Foreclosed assets $ 660 Discounted appraisals Collateral discounts and costs to sell N/A N/A

December 31, 2020

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

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%.

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

Effective January 1, 2019, the final CCB was fully phased in at 2.50%.

It is management’s belief that, as of December 31, 2021, 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 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.

Capital amounts and ratios for Red River Bank as of December 31, 2021 and 2020, are presented in the following table:

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Red River Bancshares, Inc.

As a general matter, bank holding companies are subject to capital adequacy requirements under applicable Federal Reserve regulations.

However, bank holding companies which qualify as "small bank holding companies" under the Federal Reserve's Small Bank Holding Company Policy Statement are exempt from the Federal Reserve's capital adequacy guidelines at the holding company level.

As a general matter, bank holding companies are subject to Basel III capital adequacy requirements under applicable Federal Reserve regulations on a consolidated basis.

However, bank holding companies that qualify as “small bank holding companies” under the Federal Reserve’s Small Bank Holding Company Policy Statement are exempt from the Federal Reserve’s consolidated capital adequacy guidelines at the holding company level and instead are evaluated at the bank level.

In May 2018, the Economic Growth Act was enacted, and it increased the asset threshold for “small bank holding companies” from $1.0 billion to $3.0 billion.

Because the Company has less than $3.0 billion in assets, it is no longer subject to capital adequacy guidelines on a consolidated basis.

Although the minimum regulatory capital requirements are no longer applicable to the Company, the Company calculates these ratios for its own planning and monitoring purposes.

Because the Company had less than $3.0 billion in assets as of June 30, 2020, the last applicable measurement date, it was not subject to capital adequacy guidelines on a consolidated basis as of December 31, 2021.

Although the minimum regulatory capital requirements are not currently applicable to the Company, the Company calculates these ratios for its own planning and monitoring purposes.

Capital amounts and ratios for Red River Bancshares, Inc.

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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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Equity Events

The Company's common stock began trading on May 3, 2019, on the Nasdaq Global Select Market under the symbol "RRBI." On May 7, 2019, the Company completed an IPO of its common stock at a public offering price of $ 45.00 per share.

A total of 690,000 shares of the Company's common stock were sold in the IPO, of which the Company sold 663,320 shares (including 90,000 shares sold pursuant to the exercise of the underwriters' option to purchase additional shares) and certain shareholders sold 26,680 shares.

The Company received net proceeds of $ 26.8 million in the offering.

Cash Dividends

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In general, the board of directors of a Louisiana state bank may, quarterly, semiannually, or annually, declare or pay dividends on its outstanding capital stock, provided that 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 Office of Financial Institutions is required for a Louisiana state 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 a Louisiana state 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 general terms, the FDIA and FDIC regulations restrict the payment of dividends when a bank is undercapitalized, when a bank has failed to pay insurance assessments, or when there are safety and soundness concerns regarding a bank.

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Taking into consideration the Company’s performance and capital levels, dividends were paid in both 2021 and 2020.

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

During 2021, a quarterly cash dividend of $ 0.07 per share was paid each quarter, resulting in $ 0.28 per share in cash dividends for the year ended December 31, 2021.

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 .

In the third quarter of 2021, the $ 3.0 million stock repurchase program that was approved in August 2020 was completed after reaching the purchase limit.

Also in the third quarter of 2021, the Company’s Board of Directors approved the renewal of its stock repurchase program.

The renewed repurchase program authorized the Company to purchase up to $ 5.0 million of its outstanding shares of common stock between September 1, 2021 and August 31, 2022, from time to time in the open market at prevailing prices and based on market conditions, or in privately negotiated transactions.

In the fourth quarter of 2021, the Company entered into a privately negotiated stock repurchase agreement and repurchased 96,245 shares of common stock for $ 4.9 million, resulting in the purchase of the full amount authorized by that repurchase program.

For the year ended December 31, 2021, the Company repurchased 153,553 shares of its common stock at an aggregate cost of $ 7.9 million.

Earnings Per Common Share

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 Director 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.

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The following tables present certain unaudited consolidated quarterly financial information regarding the Company’s results of operations for each of the eight consecutive quarters in the fiscal years of 2021 and 2020.

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.

This information is derived from unaudited consolidated financial statements that include, in the Company’s 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, 2021 and 2020.

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

33 unchanged sentences

$ 298,161 $ 285,478

Accrued expenses and other liabilities

Total Liabilities

5 unchanged sentences

Authorized - 30,000,000 shares;

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

Issued and Outstanding - 7,180,155 and 7,325,333 shares, respectively

60,233 68,055

3 unchanged sentences

Accumulated other comprehensive income (loss)

( 3,773 ) 6,921

Total Stockholders’ Equity

7 unchanged sentences

Total income — —

Interest on junior subordinated debentures — 385

Technology expenses 88 85

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provided by (used in) operating activities:

Amortization of debt issuance costs — 38

Undistributed earnings of subsidiaries ( 33,485 ) ( 29,026 )

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

(Increase) Decrease interest-bearing deposits in subsidiary bank — 8,000

Net cash provided by (used in) investing activities — —

CASH FLOWS FROM FINANCING ACTIVITIES

Redemption of junior subordinated debentures — ( 11,341 )

Repurchase of common stock ( 7,878 ) ( 122 )

Proceeds from exercise of stock options — 8

Proceeds from initial public offering, net — 26,812

Cash dividends ( 2,033 ) ( 1,759 )

5 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