What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-18 · 242 added, 190 removed, 1085 unchanged (28% of the section changed)

31 unchanged sentences

Total Cash and Cash Equivalents 278,392 784,864

Securities available-for-sale 659,178 498,206

Equity securities 7,846 4,021

Securities available-for-sale, at fair value 614,407 659,178

Securities held-to-maturity, at amortized cost 151,683 —

Equity securities, at fair value 9,979 7,846

Nonmarketable equity securities 3,478 3,450

44 unchanged sentences

Interest on deposits 7,736 5,617

Interest on other borrowed funds — 16

Total Interest Expense 7,736 5,617

43 unchanged sentences

Tax effect ( 13 ) 41

Change in unrealized net loss on securities transferred to held-to-maturity 1,975 —

Tax effect ( 414 ) —

Total other comprehensive income (loss) ( 67,393 ) ( 10,694 )

Comprehensive Income $ 22,258 $ 35,090

Comprehensive Income (Loss) $ ( 30,477 ) $ 22,258

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

(dollars in thousands, except per

share amounts) Common Shares Issued Common

Stock Additional

8 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

7 unchanged sentences

Issuance of restricted shares of common stock through stock incentive plan, net 7,550 — — — — —

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

Issuance of shares of common stock as board compensation 675 35 — — — 35

17 unchanged sentences

Net (accretion) amortization on securities AFS 2,339 2,479

Net (accretion) amortization on securities HTM ( 1,953 ) —

(Gain) Loss on sale and call of securities 59 ( 194 )

(Gain) Loss on equity securities 468 175

Provision for loan losses 1,750 1,900

12 unchanged sentences

Purchases ( 313,514 ) ( 389,493 )

Activity in securities HTM:

Maturities, principal repayments, and calls 16,580 —

Sale of equity securities 7,399 —

Purchase of equity securities ( 10,000 ) ( 4,000 )

9 unchanged sentences

Net increase (decrease) in deposits ( 111,412 ) 569,988

Proceeds from other borrowed funds — 50,000

Repayments of other borrowed funds — ( 50,000 )

Repurchase of common stock ( 218 ) ( 7,878 )

Proceeds from exercise of stock options — 8

Cash dividends ( 2,011 ) ( 2,033 )

13 unchanged sentences

Assets acquired in settlement of loans $ — $ 266

Transfers of investment securities from AFS to HTM, prior to market value adjustment $ 184,238 $ —

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business and Summary of Significant Accounting Policies

The accounting and reporting policies of the Company conform to GAAP and the prevailing practices within the banking industry.

A summary of significant accounting policies is as follows:

Significant Accounting Policies

Nature of Operations

The Company is a bank holding company headquartered in Alexandria, Louisiana.

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

As of December 31, 2022, Red River Bank 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:

4 unchanged sentences

the Northshore, which includes Covington;

and Acadiana, which includes the Lafayette MSA.

Acadiana, which includes the Lafayette MSA;

and New Orleans.

Basis of Presentation

1 unchanged sentence

All significant intercompany accounts and transactions have been eliminated in consolidation.

Non-Bank Subsidiaries

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

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

The accounting and reporting policies of the Company conform to GAAP and the prevailing practices within the banking industry.

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.

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

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

7 unchanged sentences

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.

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

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

Acquired loans, with evidence of credit deterioration, are accounted for under the accounting guidance found in ASC Topic 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality.

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

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

Cash and Cash Equivalents

1 unchanged sentence

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.

All debt securities of the Company as of December 31, 2022 and 2021, were classified either as AFS or HTM.

Securities AFS are held for indefinite periods of time and are carried at estimated fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss), net of tax.

Securities HTM, which the Company has the intent and ability to hold until maturity, are carried at amortized cost.

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

5 unchanged sentences

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.

For HTM debt securities, the amount of OTTI recorded in other comprehensive income for the noncredit portion of an OTTI should be amortized over the remaining life of the security based on the timing of its future estimated cash flows.

For HTM debt securities, the amount of OTTI recorded in other comprehensive income (loss) for the noncredit portion of an OTTI should be amortized over the remaining life of the security based on the timing of its future estimated cash flows.

Nonmarketable Equity Securities

17 unchanged sentences

Any subsequent payments are recognized as income.

Acquired Loans

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

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

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

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

Allowance for Loan Losses

10 unchanged sentences

Because of the uncertainties associated with economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that management’s estimate of loan losses in the loan portfolio and the amount of the allowance needed may change in the future.

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

The determination of the allowance for loan losses is, in a large part, based on estimates that are particularly

susceptible to significant changes in the economic environment and market conditions.

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

6 unchanged sentences

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

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

As of December 31, 2022, the Company had no foreclosed assets.

As of December 31, 2021, the balance of foreclosed assets was $ 660,000 .

Credit Related Financial Information

13 unchanged sentences

The evaluation indicated no impairment of the Company’s goodwill.

Treasury Stock

On January 1, 2015, the LBCA became effective.

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

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

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss).

Other comprehensive income (loss) includes the after tax effect of unrealized net gains and losses on securities AFS and the amortization of the unrealized net loss on securities transferred to HTM.

Stock-Based Compensation Plans

2 unchanged sentences

Under the fair value recognition provisions of this guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.

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

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

The Company recognizes forfeitures as they occur.

The Company has a Director Compensation Program which allows directors the option of receiving payment for director fees in Company stock.

The Company has a Director Compensation Program, which allows directors the option of receiving their board attendance fees in Company stock in lieu of cash.

Board compensation expense is recorded when board service is rendered.

Advertising Cost

Advertising costs are expensed as incurred.

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

13 unchanged sentences

Earnings Per Common Share.”

Treasury Stock

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

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

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

Comprehensive Income

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

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

Advertising Costs

Advertising costs are expensed as incurred.

Revenue Recognition

8 unchanged sentences

The Company is the principal in each of these contracts.

Revenue recognized

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

Revenue recognized under these contracts totaled approximately $ 771,000 and $ 765,000 for the years ended December 31, 2022 and 2021, 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 .

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

Due to the nature of the services the Company provides to its customers, it does not incur costs to obtain contracts, and there are no material incremental costs to fulfill these contracts that should be capitalized.

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

As of December 31, 2022 and 2021, the Bank had $ 1.4 million and $ 2.0 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.

During the years ended December 31, 2022 and 2021, the Bank recognized $ 605,000 each year, of revenue relating to these contract liabilities and expects to recognize the remaining liabilities as revenue ratably through June 2025.

Accounting Standards Adopted in 2022

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

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

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 sets forth the CECL model requiring the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASU 2016-13 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses.

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

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

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

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

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):

4 unchanged sentences

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.

ASU 2021-05 was adopted as of January 1, 2022, and did not have a material impact on the Company’s consolidated financial statements.

2022-06, Reference Rate Reform (Topic 848) Deferral of the Sunset Date of Topic 848 .

The amendments in this update defer the sunset date for temporary relief during the LIBOR transition period of Topic 848 from December 31, 2022 to December 31, 2024.

This amendment was adopted upon issuance in December 2022.

The Company has several loans that are LIBOR-based with a setting that expires June 30, 2023.

Alternative rate language is present in each credit agreement with a LIBOR-based rate.

Transition is expected to be complete by June 30, 2023.

Adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

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

Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses.

The Company adopted this guidance effective January 1, 2023.

The adoption of this standard has required significant changes to the processes and procedures required to calculate the allowance for credit losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model.

The Company expects the adoption of this standard to result in a combined 3.5 % increase in its allowance for credit losses and allowance for unfunded commitments.

In addition, ASU 2016-13 amends the accounting for credit losses on securities AFS and requires an allowance for expected credit losses for certain securities HTM, including municipal securities HTM.

The Company does not hold any municipal securities HTM.

As of January 1, 2023, there was no impact to the allowance for credit losses from the Company’s securities AFS and securities HTM.

In the first quarter of 2023, there may be additional adjustments to the allowance for credit losses when the Company finalizes its first quarter of 2023 financial statements.

For additional information on the allowance for loan losses, see “Note 3.

Loans and Asset Quality - Allowance for Loan Losses.”

2021-08, Business Combinations (Topic 805):

3 unchanged sentences

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.

This standard was 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.

2022-02 Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

The guidance issued in this update eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors , but also enhances the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

The guidance requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost .

This standard was 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

1 unchanged sentence

These changes in presentation did not have a material impact on the Company’s financial condition or results of operations.

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

Securities are classified as AFS, HTM, and equity securities.

Total securities were $ 776.1 million as of December 31, 2022.

Securities AFS and Securities HTM

Securities AFS and securities HTM are debt securities.

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

As of December 31, 2022, the estimated fair value of securities AFS was $ 614.4 million.

The net unrealized loss on securities AFS increased $ 69.4 million for the year ended December 31, 2022, resulting in a net unrealized loss of $ 74.1 million as of December 31, 2022.

During the second quarter of 2022, the Company reclassified $ 166.3 million, net of $ 17.9 million of unrealized loss, or 20.5 % of the securities portfolio, from AFS to HTM.

The securities were transferred at fair value, which became the cost basis for the securities HTM.

The net unrealized loss will be amortized over the remaining life of the securities as a yield

adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.

There were no gains or losses recognized as a result of the transfer.

Securities HTM, which the Company has the intent and ability to hold until maturity, are carried at amortized cost.

As of December 31, 2022, the amortized cost of securities HTM was $ 151.7 million.

Investment activity for the year ended December 31, 2022, included $ 313.5 million of securities purchased, partially offset by $ 31.8 million in sales and $ 87.1 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:

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

December 31, 2022

6 unchanged sentences

Total Securities AFS $ 688,539 $ 6 $ ( 74,138 ) $ 614,407

Securities HTM:

Mortgage-backed securities $ 150,771 $ — $ ( 19,142 ) $ 131,629

agency securities 912 — ( 134 ) 778

Total Securities HTM $ 151,683 $ — $ ( 19,276 ) $ 132,407

December 31, 2021

6 unchanged sentences

Total Securities AFS $ 663,954 $ 4,838 $ ( 9,614 ) $ 659,178

The amortized cost and estimated fair value of debt securities as of December 31, 2021, by contractual maturity, are shown below.

Securities HTM:

Mortgage-backed securities $ — $ — $ — $ —

agency securities — — — —

Total Securities HTM $ — $ — $ — $ —

The amortized cost and estimated fair value of securities AFS and securities HTM as of December 31, 2022, 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.

December 31, 2022

(in thousands) Amortized

Securities AFS:

Within one year $ 92,145 $ 90,267

2 unchanged sentences

After ten years 394,942 334,934

Total $ 663,954 $ 659,178

Information pertaining to securities with gross unrealized losses as of December 31, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous loss position is described as follows:

Total Securities AFS $ 688,539 $ 614,407

Securities HTM:

Within one year $ — $ —

After one year but within five years — —

After five years but within ten years 912 778

After ten years 150,771 131,629

Total Securities HTM $ 151,683 $ 132,407

Information pertaining to securities AFS and securities HTM with gross unrealized losses as of December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is described as follows:

December 31, 2022

Less than twelve months Twelve months or more

(in thousands) Gross

December 31, 2021

Securities AFS:

4 unchanged sentences

Total Securities AFS $ ( 26,014 ) $ 331,117 $ ( 48,124 ) $ 282,149

Securities HTM:

Mortgage-backed securities $ ( 19,142 ) $ 131,629 $ — $ —

agency securities ( 134 ) 778 — —

Total Securities HTM $ ( 19,276 ) $ 132,407 $ — $ —

December 31, 2021

Less than twelve months Twelve months or more

Securities AFS:

4 unchanged sentences

Total Securities AFS $ ( 7,757 ) $ 380,567 $ ( 1,857 ) $ 49,748

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.

Securities HTM:

Mortgage-backed securities $ — $ — $ — $ —

agency securities — — — —

Total Securities HTM $ — $ — $ — $ —

As of December 31, 2022, the Company held 574 securities AFS and securities HTM that were in unrealized loss positions.

The aggregate unrealized loss of these securities as of December 31, 2022, was 11.12 % of the amortized cost basis of total debt securities.

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.

8 unchanged sentences

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

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

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:

There were no OTTI losses on debt securities related to credit losses recognized during the years ended December 31, 2022 and 2021.

The proceeds from sales and calls of debt securities and their gross gain (loss) for the years ended December 31, 2022 and 2021, are shown below:

Years Ended December 31,

4 unchanged sentences

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

Equity Securities

Equity securities are an investment in a CRA mutual fund, consisting primarily of bonds.

Equity securities are carried at fair value on the consolidated balance sheets with periodic changes in value recorded through the consolidated statements of income.

As of December 31, 2021, equity securities had a fair value of $ 7.8 million with a recognized loss of $ 175,000 for the year ended December 31, 2021.

In April 2022, the Company liquidated all shares invested in this fund and recorded a loss of $ 447,000 from January 1, 2022, through the date of liquidation.

In December 2022, the Company purchased shares in this fund.

As of December 31, 2022, equity securities had a fair value of $ 10.0 million with a recognized loss of $ 468,000 for the year ended December 31, 2022.

Pledged Securities

Securities with carrying values of approximately $ 118.6 million and $ 105.1 million were pledged to secure public entity deposits, as of December 31, 2021 and December 31, 2020, respectively.

Securities with carrying values of approximately $ 168.2 million and $ 118.6 million were pledged to secure public entity deposits as of December 31, 2022 and 2021, respectively.

Loans and Asset Quality

11 unchanged sentences

Deferred loan origination fees, including PPP loan fees, net of certain direct costs, were $ 1.4 million and $ 1.6 million as of December 31, 2022 and 2021, respectively.

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

There were no deferred PPP loan fees as of December 31, 2022.

Deferred PPP loan fees were $ 626,000 as of December 31, 2021.

Related Party Transactions

15 unchanged sentences

Balance Provision

Charged-off Recoveries Ending

Losses Charge-offs Recoveries Ending

Commercial real estate $ 6,749 $ 970 $ — $ 1 $ 7,720

9 unchanged sentences

Balance Provision

Charged-off Recoveries Ending

Losses Charge-offs Recoveries Ending

Commercial real estate $ 5,798 $ 1,401 $ ( 450 ) $ — $ 6,749

77 unchanged sentences

Impaired loans include TDRs and performing and nonperforming loans.

Information pertaining to impaired loans as of December 31, 2021, is as follows:

Information pertaining to impaired loans as of and for the year ended December 31, 2022, is as follows:

(in thousands) Unpaid

22 unchanged sentences

Total impaired loans $ 7,658 $ 7,568 $ 314 $ 6,219 $ 252

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

Information pertaining to impaired loans as of and for the year ended December 31, 2021, is as follows:

(in thousands) Unpaid

26 unchanged sentences

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

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

There were no unfunded commitments to extend credit related to these loans as of December 31, 2022 or 2021.

A summary of current, past due, and nonaccrual TDR loans as of December 31, 2022, is as follows:

1 unchanged sentence

Past Due 90 Days

Past Due Nonaccrual (1)

Past Due Nonaccrual Total

Commercial real estate $ 3,197 $ — $ — $ 42 $ 3,239

7 unchanged sentences

Number of TDR loans 11 2 — 3 16

(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, 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 loans modified as TDRs that occurred during the years ended December 31, 2022 and 2021, is as follows:

22 unchanged sentences

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan.

Substandard - Loans in this category have well defined weaknesses which jeopardize normal repayment of principal and interest.

However, the loss potential does not warrant substandard classification.

Substandard - Loans in this category have well-defined weaknesses that jeopardize normal repayment of principal and interest.

Prompt corrective action is required to reduce exposure and to assure adequate remedial actions are taken by the borrower.

If these weaknesses do not improve, loss is possible.

Doubtful - Loans in this category have well-defined weaknesses that make full collection improbable.

48 unchanged sentences

$ 54,383 $ 48,056

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 government stimulus programs, customers depositing the proceeds from their PPP2 loans, and customers maintaining higher deposit balances.

Deposits are summarized below:

Depreciation expense amounted to approximately $ 2.1 million and $ 1.9 million for the years ended December 31, 2022 and 2021 , respectively.

Deposits were $ 2.80 billion and $ 2.91 billion as of December 31, 2022 and 2021, respectively.

This decrease was primarily a result of expected customer deposit account activity and customer response to the changing interest rate environment.

D eposits are summarized below:

(in thousands) 2022 2021

1 unchanged sentence

Interest-bearing deposits:

Interest-bearing demand deposits 89,144 —

NOW accounts 503,308 503,383

10 unchanged sentences

Thereafter 8,479

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.

As of December 31, 2022 and 2021, deposits from directors, executive officers, their immediate family members, and their affiliates totaled approximately $ 67.3 million and $ 71.8 million, respectively.

Other Borrowed Funds

6 unchanged sentences

Operating right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the term using the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with similar terms.

The Company maintains six operating leases on land and buildings for banking center facilities under long-term leases.

These operating leases contain renewal options for periods ranging from three to five years that expire at various dates through October 31, 2031, with no residual value guarantees.

Future obligations relating to the exercise of renewal options is included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised.

As of December 31, 2022, the Company maintained seven operating leases on land and buildings for banking center facilities under long-term leases.

These operating leases contain renewal options for periods ranging from one to five years that expire at various dates through October 31, 2033, with no residual value guarantees.

Future obligations relating to the exercise of renewal options are included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised.

Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised.

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

For each of the years ended December 31, 2021 and 2020, operating lease expenses were $ 549,000 .

For the years ended December 31, 2022 and 2021, operating lease expenses were $ 628,000 and $ 549,000 , respectively.

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

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

Cash paid for amounts included in the measurement of lease liabilities for operating leases totaled $ 606,000 and $ 530,000 for the years ended December 31, 2022 and 2021, respectively.

The table below summarizes other information related to the Company’s operating leases as of and for the year ended December 31, 2022:

As of and for the Year Ended

December 31, 2021

As of and for the Year Ended December 31, 2022

Weighted average remaining operating lease term 8.97 years

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Depreciation $ ( 2,435 ) $ ( 1,964 )

Unrealized gain on securities — ( 1,840 )

FHLB of Dallas stock dividends ( 22 ) ( 20 )

4 unchanged sentences

Deferred compensation 620 554

Unrealized loss on securities 1,003 —

Net unrealized loss on securities 18,917 1,003

Equity security valuation 4 33

1 unchanged sentence

Accrued bonus 448 368

Other 100 139

Gross deferred tax asset 24,630 6,584

1 unchanged sentence

Employee Benefits

The Company adopted a contributory retirement plan for employees of Red River Bank effective March 1, 1999, and amended as of December 22, 2015.

The plan covers all employees who meet the length of service and the number of hours worked requirements and elect to participate.

The Company adopted a contributory retirement plan for employees of Red River Bank effective March 1, 1999, and most recently amended effective January 1, 2022.

Beginning April 1, 2022, employees have the opportunity to invest a portion of their plan funds in the Company’s common stock through a unitized fund.

The contributory retirement plan covers all employees who meet the length of service and the number of hours worked requirements and elect to participate.

Discretionary employer contributions during the years ended December 31, 2022 and 2021, totaled approximately $ 742,000 and $ 721,000 , respectively.

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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.

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

The supplemental executive retirement agreements provide post-retirement benefit payments to those employees.

The liability related to these agreements was $ 3.0 million and $ 2.7 million as of December 31, 2022 and 2021, 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 (“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 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 (“2018 Plan”), which was approved by the Company’s shareholders in April of 2019.

On April 17, 2008, the Company adopted its 2008 Plan, which provided for the grant of stock-based awards for key employees and non-employee members of the Company’s board of directors.

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 had been exercised although there were nonvested restricted stock awards outstanding.

On October 25, 2018, the Company adopted its 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.

Similar to the 2008 Plan, the Compensation Committee 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 .

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Awards granted ( 7,400 )

Awards forfeited 100

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

Awards granted ( 7,550 )

Awards forfeited 100

Awards available for issuance - December 31, 2022 173,550

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

Disclosures for stock options and restricted stock awards are shown separately due to their dissimilar characteristics.

Stock Options

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

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

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

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

No options have been granted under the 2018 Plan.

The fair value of options granted was estimated as of the date granted using the Black Scholes model.

No options were granted in 2020 or 2021.

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

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

Stock Options

Shares Exercise

Range Weighted

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

Exercised (1)

( 20,500 ) $ 14.31 - $ 17.33

Outstanding - December 31, 2020 — $ —

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.

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

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

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

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 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.

During 2022, the Compensation Committee granted 7,550 restricted stock awards with a weighted average fair value of $ 53.40 .

For the year ended December 31, 2022, the compensation expense for the vested restricted stock was $ 274,000 .

1 unchanged sentence

That cost is expected to be recognized over a weighted average period of 4.5 years.

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

During 2021, the Compensation 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 .

As of December 31, 2021, there was approximately $ 705,000 of total unrecognized compensation cost related to restricted stock awards.

That cost is expected to be recognized over a weighted average period of 4.5 years.

That cost was expected to be recognized over a weighted average period of 4.5 years.

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

5 unchanged sentences

Vested ( 6,820 ) $ 38.40

Forfeited ( 100 ) $ 42.35

Nonvested - December 31, 2021 18,135 $ 45.61

1 unchanged sentence

Vested ( 5,830 ) $ 43.03

Forfeited ( 100 ) $ 42.35

Nonvested - December 31, 2022 19,855 $ 49.33

1 unchanged sentence

The Company has a Director Compensation Program.

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 the year board services are rendered, and the related stock is issued the following year.

This program allows directors the option of receiving their board attendance fees in Company stock in lieu of cash.

Under the program, director 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, 2022 and 2021, are as follows:

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

Investment Commitment

Investment Commitments

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

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As of December 31, 2022, there was a $ 4.3 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.

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

As of December 31, 2022, there was a $ 652,000 outstanding commitment to this partnership.

Construction Commitment

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

The Company has two committed construction contracts totaling approximately $ 1.1 million as of December 31, 2022.

Contingencies

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The Company used the following methods and significant assumptions to estimate fair value:

Investment Securities and other Stocks:

The fair values for marketable securities are determined by quoted market prices, if available (Level 1).

Securities AFS and Equity Securities:

The fair values for securities AFS are determined by quoted market prices, if available (Level 1).

For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

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Municipal bonds $ 184,092 $ — $ 184,092 $ —

agency securities 8,065 — 8,065 —

Treasury securities $ 170,478 $ — $ 170,478 $ —

agency securities $ 18,856 $ — $ 18,856 $ —

Equity securities $ 9,979 $ 9,979 $ — $ —

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Municipal bonds $ 229,971 $ — $ 229,971 $ —

agency securities 10,098 — 10,098 —

Treasury securities $ 41,616 $ — $ 41,616 $ —

agency securities $ 8,065 $ — $ 8,065 $ —

Equity securities $ 7,846 $ 7,846 $ — $ —

14 unchanged sentences

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 as a foreclosed asset.

These include certain foreclosed assets, which are remeasured and reported at fair value through a charge-off to the 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.

22 unchanged sentences

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

Fair Value of Financial Instruments

7 unchanged sentences

Securities AFS $ 614,407 $ 614,407 $ — $ 614,407 $ —

Securities HTM $ 151,683 $ 132,407 $ — $ 132,407 $ —

Equity securities $ 9,979 $ 9,979 $ 9,979 $ — $ —

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Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s and the Company’s financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

2 unchanged sentences

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%.

Effective January 1, 2019, the final CCB was fully phased in at 2.50% of total risk weighted assets.

It is management’s belief that, as of December 31, 2022, 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 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:

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.

Capital amounts and ratios for Red River Bank as of December 31, 2022 and 2021, are presented in the following table, including the minimum Basel III requirements:

Regulatory Requirements

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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 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.

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

In May 2018, the Economic Growth Act was enacted.

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 the Company 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, the Company has 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, the Company had more than $3.0 billion in assets.

Therefore, effective January 1, 2023, the Company expects to no longer receive any benefits under the Policy Statement.

Although the minimum regulatory capital requirements were not applicable to the Company in 2021 or 2022, the Company calculated these ratios for its own planning and monitoring purposes.

Capital amounts and ratios for Red River Bancshares, Inc.

12 unchanged sentences

Community Bank Leverage Ratio Framework

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

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

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

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

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

16 unchanged sentences

and (3) the bank holding company will continue to meet, and is not in danger of failing to meet, minimum regulatory capital adequacy ratios.

The ability of Red River Bank to pay dividends on its common stock is restricted by Louisiana Banking Law, the FDIA, and by FDIC regulations.

The ability of Red River Bank to pay dividends on its common stock is restricted by Louisiana Banking Law, the FDIA, and FDIC regulations.

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 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.

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.

The Bank and the Company have internal policies regarding dividends.

3 unchanged sentences

Taking into consideration the Company’s performance and capital levels, dividends were paid in both 2022 and 2021.

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

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.

During 2022 and 2021 respectively, a quarterly cash dividend of $ 0.07 per share was paid each quarter, resulting in $ 0.28 per share in cash dividends for the years ended December 31, 2022 and 2021.

Stock Repurchase Programs

On February 4, 2022, the Company’s board of directors approved the renewal of its stock repurchase program that was completed in the fourth quarter of 2021 after reaching its purchase limit.

The renewed repurchase program, the 2022 Program, authorized the Company to purchase up to $ 5.0 million of its outstanding shares of common stock from February 4, 2022 through December 31, 2022.

For the year ended December 31, 2022, the Company repurchased 4,465 shares of its common stock at an aggregate cost of $ 218,000 .

Repurchases were made from time to time in the open market at prevailing prices and based on market conditions.

On November 4, 2022, the Company’s board of directors approved the renewal of the 2022 Program that expired on December 31, 2022.

The renewed repurchase program, the 2023 Program, has similar terms to the 2022 Program and authorizes the Company to purchase up to $ 5.0 million of its outstanding shares of common stock from January 1, 2023 through December 31, 2023.

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.

AOCI - Transfer of Unrealized Gain (Loss) of Securities AFS and HTM

During the second quarter of 2022, the Company reclassified certain securities from AFS to HTM.

Such transfers are made at fair value on the date of transfer.

The net unrealized holding loss on the date of transfer is retained, net of tax, in AOCI, with no immediate change to the total balance in AOCI.

The unrealized holding loss will be amortized over the remaining life of the securities.

At the date of transfer, the net unamortized, unrealized loss on the transferred securities included in the consolidated balance sheets totaled $ 17.9 million, of which $ 14.2 million, net of tax, was included in AOCI.

As of December 31, 2022, the net unamortized, unrealized loss remaining on the transferred securities included in the consolidated balance sheets totaled $ 16.0 million, of which $ 12.6 million, net of tax, was included in AOCI.

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.

5 unchanged sentences

Effect of Director Compensation Program 1,655 923

Effect of stock options and restricted stock 17,661 21,628

Effect of restricted stock 14,823 17,661

Weighted average shares outstanding - diluted 7,197,453 7,299,720

31 unchanged sentences

Diluted $ 1.17 $ 1.12 $ 1.13 $ 1.10

Subsequent Events

Management has evaluated subsequent events and transactions through March 16, 2023, the date that the financial statements were available to be issued.

On March 7, 2023, the Company liquidated $ 6.0 million of equity securities, which are an investment in a CRA mutual fund.

As of the date of liquidation, the fair value of the Company’s remaining equity securities was $ 3.9 million.

Parent Company Financial Statements

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(in thousands) Years ended December 31,

INTEREST AND DIVIDEND INCOME

Interest and dividend income from subsidiaries $ 1 $ —

Total income — —

Total Interest and Dividend Income 1 —

OPERATING EXPENSES

Technology expenses 52 88

Legal and professional expenses 837 571

Advertising 2 2

Other operating expenses 32 15

Total expenses

Total Operating Expenses

Income (Loss) Before Income Tax Expense (Benefit) ( 922 ) ( 676 )

Income tax expense (benefit) ( 194 ) ( 143 )

9 unchanged sentences

Net income $ 36,916 $ 32,952

Adjustments to reconcile net income to net cash

provided by (used in) operating activities:

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

Undistributed earnings of subsidiaries ( 37,644 ) ( 33,485 )

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Capital contribution in partnerships ( 175 ) ( 173 )

Net cash provided by (used in) investing activities ( 175 ) ( 173 )

1 unchanged sentence

Repurchase of common stock ( 218 ) ( 7,878 )

Proceeds from exercise of stock options — 8

Cash dividends ( 2,011 ) ( 2,033 )

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