What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-18 · 96 added, 76 removed, 391 unchanged (31% of the section changed)

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Our mission is to be the premier statewide banking organization in Louisiana.

We completed an IPO of our common stock in May 2019 as an emerging growth company under the JOBS Act.

We completed an initial public offering of our common stock in May 2019 as an emerging growth company under the JOBS Act.

Our common stock is listed on the Nasdaq Global Select Market under the symbol “RRBI.”

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 27 banking centers throughout Louisiana and two combined LDPOs, one each in Lafayette, Louisiana and New Orleans, Louisiana.

As of December 31, 2022, we were the fifth largest financial institution headquartered in Louisiana based on assets, with total assets of $3.08 billion, loans HFI of $1.92 billion, total deposits of $2.80 billion, and total stockholders’ equity of $265.8 million.

As of December 31, 2022, we operated from a network of 28 banking centers throughout Louisiana and one combined LDPO in New Orleans, Louisiana.

Banking centers are located in the following Louisiana markets:

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the Northshore, which includes Covington;

and Acadiana, which includes the Lafayette MSA.

Acadiana, which includes the Lafayette MSA;

and New Orleans.

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

As of December 31, 2022, we operated three banking centers in our Southwest Louisiana market, which we define to include Calcasieu Parish.

On March 1, 2023, we consolidated two of our Southwest Louisiana market banking centers into one location.

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

Tammany Parish, we operate one banking center.

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 operate one banking center 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 banking center and 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.

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

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

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Expand Market Share in Existing Markets

We want to be the market leader and have a significant market share in all the communities we serve.

We want to be the market leader and have a significant market share in all of the communities we serve.

Organic growth is our primary focus, which may be supplemented with strategic, targeted acquisitions when and if appropriate.

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

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

In 2020, we entered the Acadiana 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.

In Lafayette, Louisiana, in the first quarter of 2022, we opened our first full-service banking center, which we purchased in 2020.

In the second quarter of 2022, we relocated the staff and services from the Lafayette LDPO to the new banking center and closed the LDPO located there.

In the New Orleans market, we remodeled and received regulatory approval on a leased banking center location in downtown New Orleans, which we opened as the Bank’s first full-service banking center in New Orleans on August 1, 2022.

Disciplined Acquisition Strategy

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Our personal banking business supports our commercial banking focus, provides attractive customer diversification, and enhances our growing base of core deposits.

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.

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 our customers’ personal goals and the success of their businesses.

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

Real Estate Loans

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One-to-Four Family Residential Loans.

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.

We offer primary and secondary liens on 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.

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.

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, 2022, our one-to-four family residential loans were 28.4% of loans HFI.

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SBA PPP Loans

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.

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

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.

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

As of December 31, 2022, our participation in the SBA PPP was materially complete, and PPP loans were less than 0.1% of loans HFI.

Tax-Exempt Loans

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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.

Our bankers are experienced business developers with extensive contacts and connections with targeted clients and centers

of influence throughout our communities.

Our team is focused on driving relationships and noninterest-bearing accounts.

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Our full array of commercial treasury services is designed to be competitive with banks of all sizes.

Treasury management services include ACH, sweep, balance reporting, transfers between accounts, and stop payments.

Cash management deposit products consist of remote deposit capture, merchant services, positive pay and automated fraud detection tools, account reconciliation services, zero balance accounts, and sweep accounts, including loan sweep accounts.

We have a dedicated team of Treasury Management Officers (“TMOs”) who partner with our commercial and private bankers to meet those needs.

Treasury management services include ways to help our business customers manage accounts payable, accounts receivable, account fraud risk, and information reporting.

Cash management deposit products consist of remote deposit capture, automated clearing house origination, merchant services, positive pay and automated fraud detection tools, account reconciliation services, zero balance accounts, and sweep accounts, including loan and investment sweep accounts.

We have a dedicated team of TMOs who partner with our commercial and private bankers to meet those needs.

Our TMOs analyze clients’ account activity and cash utilization and then recommend and implement solutions that enhance our clients’ efficiency, mitigate risks to their businesses, and maximize their earnings on available liquidity.

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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.

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

HUMAN CAPITAL

As of December 31, 2022, we had 351 employees, including 340 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.

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.

We are an Equal Opportunity Employer committed to workplace diversity and inclusion.

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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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Our website is www.redriverbank.net.

We make available at this address, free of charge, our annual reports on Form 10-K, our annual reports to shareholders, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

All of our periodic reports filed with the SEC pursuant to Section 13(a) and 15(d) of the Exchange Act are available through our website free of charge, including our annual reports on Form 10-K, our annual reports to shareholders, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

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

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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, OFI, CFPB, Internal Revenue Service, and state taxing authorities.

These authorities include the Federal Reserve, FDIC, OFI, CFPB, SEC, 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.

The primary goals of the bank regulatory plan are to maintain a safe and sound banking system, facilitate the conduct of sound monetary policy, and promote fairness and transparency for financial products and services.

The primary goals of the U.S.

bank regulatory framework are to maintain a safe and sound banking system, facilitate the conduct of sound monetary policy, and promote fairness and transparency for financial products and services.

The system of supervision and regulation applicable to us and the Bank establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s Deposit Insurance Fund, the Bank’s depositors, and the public, rather than our shareholders or creditors.

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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 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.

As a bank holding company, we are subject to regulation under the BHCA and to supervision, examination, and enforcement by the Federal Reserve as well as the OFI.

The BHCA 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 interest.

Financial Services Industry Reform

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(3) requires national securities exchanges to require listed companies to adopt incentive-based compensation clawback policies for executive officers;

(4) requires certain publicly traded companies to disclose the relationship between the executive compensation actually paid by the company and the financial performance of the company;

and (5) 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, certain aspects of the Dodd-Frank Act remain in proposed form or have not been 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.

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and protections for student borrowers.

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.

One of the Economic Growth Act’s highlights, with implications for us, was the asset threshold under 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, changing to scaled biannual regulatory reporting requirements as opposed to quarterly regulatory reporting requirements, and not subjecting bank holding companies to capital adequacy guidelines on a consolidated basis.

Because we had less than $3.0 billion in assets as of each of the June 30th measurement dates starting with the Economic Growth Act’s enactment and going through June 30, 2021, we have received benefits under the Policy Statement through 2022, except with regard to the timing of the Red River Bank safety and soundness exam by the FDIC and the OFI.

Due to the timing of the asset balance determination for the Red River Bank safety and soundness examination, a 12-month examination cycle began in the second half of 2022.

As of June 30, 2022, the last applicable measurement date, we had more than $3.0 billion in assets.

Therefore, effective January 1, 2023, we expect to no longer receive any benefits under the Policy Statement and will be subject to the same Basel III minimum capital requirements on a consolidated basis that Red River Bank is subject to.

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

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Failure to comply with any new requirements may negatively impact our results of operations and financial condition.

Holding Company Capital Requirements

As previously referenced, effective January 1, 2023, we are no longer subject to the Policy Statement.

As a result, we are now subject, on a consolidated basis, to the same minimum capital ratios under Basel III as Red River Bank.

These minimum capital requirements are set forth below under the heading “- Bank Regulation - Capital Adequacy Requirements.”

Imposition of Liability for Undercapitalized Subsidiaries

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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.

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;

the financial condition, managerial resources, and future prospects of the bank holding company and the banks concerned;

the financial condition, managerial resources, and future prospects of the bank holding company and the bank(s) concerned;

the convenience and needs of the communities to be served (including the record of performance under the CRA);

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Control Acquisitions

Subject to various exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval or non-objection prior to any person or company acquiring “control” of a bank holding company.

Subject to various exceptions, the BHCA and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval or non-objection prior to any person or company acquiring “control” of a bank holding company.

Although “control” is based on all of the facts and circumstances surrounding the investment, control is conclusively presumed to exist if a person or company acquires 25.0% or more of any class of voting securities of the bank holding company.

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.

The BHCA’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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Scope of Permissible Activities

In general, the Bank Holding Company Act limits the activities permissible for bank holding companies to the business of banking, managing, or controlling banks, and such other activities as the Federal Reserve has determined to be so closely related to banking as to be properly incident thereto.

In general, the BHCA limits the activities permissible for bank holding companies to the business of banking, managing, or controlling banks, and such other activities as the Federal Reserve has determined to be so closely related to banking as to be properly incidental thereto.

Permissible activities for a bank holding company include, among others, operating a mortgage, finance, credit card, or factoring company;

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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.

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

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.

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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banking activities by banking regulators, securities activities by securities regulators, and insurance activities by insurance regulators.

A bank holding company may elect to be treated as a financial holding company if all of its depository institution subsidiaries are “well capitalized” and “well managed,” and have received a rating of not less than Satisfactory on each such institution’s most recent examination under the CRA.

A bank holding company may elect to be treated as a financial holding company if all of its depository institution subsidiaries are “well capitalized” and “well managed,” and have received a rating of not less than “Satisfactory” on its most recent examination under the CRA.

We currently have no plans to make a financial holding company election, although we may make a financial holding company election in the future if we engage in any lines of business that are impermissible for bank holding companies but permissible for financial holding companies.

Section 13 of the Bank Holding Company Act of 1956, commonly known as the “Volcker Rule,” has generally prohibited insured depository institutions and their affiliates from sponsoring or acquiring an ownership interest in certain investment funds, including hedge funds and private equity funds.

Section 13 of the BHCA, commonly known as the “Volcker Rule,” has generally prohibited insured depository institutions and their affiliates from sponsoring or acquiring an ownership interest in certain investment funds, including hedge funds and private equity funds.

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 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.

The Economic Growth Act exempts from the Volcker Rule insured depository institutions with (1) $10.0 billion or less in total consolidated assets and (2) whose total trading assets and trading liabilities are 5.0% or less of total consolidated assets.

The Federal Reserve has effectively extended the exemption to bank holding companies with $10.0 billion or less in total consolidated assets.

Since we meet the criteria listed above, we are exempt from the Volcker Rule.

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 actions for such activities.

The Federal Reserve has broad authority to prohibit activities of bank holding companies and their nonbanking subsidiaries that 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 actions for such activities.

Bank Regulation

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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.

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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For this purpose, a bank is placed in one of the following five capital tiers:

“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A bank’s capital tier depends upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation.

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 June 30, 2021) categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.

The most recent notification from the FDIC (as of September 30, 2022) 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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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.

As a result of the Dodd-Frank Act, the Bank may also establish additional branch offices outside of Louisiana, subject to prior regulatory approval, provided that 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.

Any new branch, whether located inside or outside of Louisiana, must also be approved by the FDIC, as the Bank’s primary federal regulator.

Red River Bank may also establish offices in other states by merging with banks or by purchasing branches of other banks in other states, subject to certain restrictions.

Red River Bank may also establish offices in other states by merging with banks or by purchasing branches of banks in other states, subject to certain restrictions.

Restrictions on Transactions with Affiliates and Insiders

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.

Sections 23A and 23B of the Federal Reserve Act, and the 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.

Generally, Sections 23A and 23B (1) limit the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of such bank’s capital stock and surplus, and limit the aggregate of all such transactions with all affiliates to an amount equal to 20.0% of such capital stock and surplus, and (2) require that all such transactions be on terms substantially the same, or at least as favorable, to the bank or subsidiary as those that would be provided to a non-affiliate.

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Also, the terms of such extensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the bank’s capital.

Insiders may be subject to enforcement actions for accepting loans in violation of applicable restrictions.

Insiders, as well as the Bank, may be subject to enforcement actions, including civil money penalties, for loans in violation of applicable restrictions.

Regulatory Restrictions on Dividends

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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.

The FDIC and the OFI 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 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.

Moreover, if, in the opinion of the FDIC and the OFI, 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.

The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe banking 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 CCB 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 fail to exceed certain thresholds.

The scope and content of the U.S.

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An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern that the institution poses to the regulators.

At least semi-annually, the FDIC updates its loss and income projections for the Deposit Insurance Fund and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required.

At least semi-annually, the FDIC updates its loss and income projections for the Deposit Insurance Fund and, if needed, increases or decreases assessment rates, following notice-and-comment rulemaking, if required.

The FDIC issued a final rule in October 2022 increasing deposit insurance assessments beginning in the first quarterly assessment period of 2023.

The FDIC can also impose special assessments in certain instances.

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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 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.

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, 2022, 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.

As a result, the Bank does not have a concentration in commercial real estate lending.

Community Reinvestment Act

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

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

The federal banking agencies have proposed 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 2022.

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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 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.

Mortgage Licensing Act of 2008, TILA, and the Truth in Savings Act, among others.

Many states and local jurisdictions have consumer protection laws analogous, and in addition, to those enacted under federal law.

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Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneys general, and civil or criminal liability.

There has been an enhanced focus by certain bank regulatory agencies with respect to industry practices relating to overdraft fees and non-sufficient funds fees.

For example, the CFPB issued a Request for Information in January 2022 seeking public input with respect to financial institution practices relating to, among other areas, credit card fees, overdraft fees and non-sufficient funds fees and stated its intent to reduce these types of fees through crafting rules, issuing industry guidance, and focusing supervision and enforcement resources to achieve this goal.

In August 2022, the FDIC issued guidance with respect to banking practices involving charging multiple non-sufficient funds fees on the representment of the same unpaid transaction on a deposit account.

In addition, the CFPB issued guidance in October 2022 with respect to certain practices relating to overdraft fees.

In addition, the Dodd-Frank Act created the CFPB, which has broad authority to regulate the offering and provision of consumer financial products.

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The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure but provides a presumption or rebuttable presumption of compliance for loans that are “qualified mortgages.” The CFPB has also issued regulations that, among other things, specify the types of income and assets that may be considered in the ability-to-repay determination, the permissible sources for income verification, and the required methods of calculating the loan’s monthly payments.

These regulations extend the requirement that creditors verify and document a borrower’s income and assets to include a requirement to verify all information that creditors rely on in determining repayment ability.

These regulations extend the requirement that creditors verify and document a borrower’s income and assets to include a requirement to verify all information that creditors rely on in determining

repayment ability.

The rules also define “qualified mortgages” based on adherence to certain underwriting standards and certain restrictions on loan terms.

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an ongoing employee training program;

and testing of the program by an independent audit function.

testing of the program by an independent audit function;

and a customer due diligence program.

Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and customer identification, especially in their dealings with foreign financial institutions and foreign customers.

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Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant laws and regulations, could have serious legal, reputational, and financial consequences for the institution.

Federal law and regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties.

Federal laws and regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties.

These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party.

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In addition to applicable federal privacy regulations, Red River Bank is subject to certain state privacy laws.

Federal law and regulations also include certain information security guidelines that require a bank, under the supervision and ongoing oversight of its board of directors or an appropriate committee of the board, to develop, implement, and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

Federal laws and regulations also include certain information security guidelines that require a bank, under the supervision and ongoing oversight of its board of directors or an appropriate committee of the board, to develop, implement, and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

Federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cybersecurity risk management.

A financial institution is expected to implement multiple lines of defense against cyber-attacks.

Under Federal guidance, banks are required to provide notice to affected customers of a data breach under certain circumstances, and the agencies recently adopted a rule requiring notice to the primary federal regulator within certain timeframes for certain data security incidents.

Federal Home Loan Bank System

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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.

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Impact of Current Laws and Regulations

The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus have a negative impact on our profitability.

The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus has a negative impact on our profitability.

There has also been a notable expansion in recent years of financial service providers that are not subject to the examination, oversight, and other rules and regulations to which we are subject.

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We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business may be affected by any new regulation or statute.

Future legislation, regulation, and policies, and the effects of that legislation, regulation, and policies, may have a significant influence on our operations and activities, financial condition, results of operations, growth plans, or future prospects, and the overall growth and distribution of loans, investments, and deposits.

Future legislation, regulation, and policies, and the effects of such legislation, regulation, and policies, may have a significant influence on our operations and activities, financial condition, results of operations, growth plans, or future prospects, and the overall growth and distribution of loans, investments, and deposits.

Such legislation, regulation, and policies have had a significant effect on the operations and activities, financial condition, results of operations, growth plans, and future prospects of commercial banks in the past and are expected to continue to do so.

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