What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-15 compared with 2023-03-16 · 474 added, 257 removed, 1070 unchanged (41% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

To the Board of Directors and Stockholders of

Red River Bancshares, Inc.

Opinion on the Financial Statements

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

and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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

and its subsidiaries (the Company) as of December 31, 2023, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in note 1 to the financial statements, the Company has changed its method of accounting for credit losses in 2023 due to the adoption of ASU No.

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

Measurement of Credit Losses on Financial Instruments .

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company’s auditors since 2023 (Note:

Partners of Postlethwaite & Netterville, APAC joined EisnerAmper LLP in 2023.

Postlethwaite & Netterville, APAC had served as the Company’s auditor since 1998).

/s/ EISNERAMPER LLP

Baton Rouge, Louisiana

March 15, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Red River Bancshares, Inc.

Opinion on the Financial Statements

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

and its subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

21 unchanged sentences

Total Cash and Cash Equivalents 305,426 278,392

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

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

Securities available-for-sale, at fair value (amortized cost of $ 632,258 and $ 688,539 , respectively)

570,092 614,407

Securities held-to-maturity, at amortized cost (fair value of $ 119,029 and $ 132,407 , respectively)

141,236 151,683

Equity securities, at fair value 2,965 9,979

2 unchanged sentences

Loans held for investment 1,992,858 1,916,267

Allowance for loan losses ( 20,628 ) ( 19,176 )

Allowance for credit losses ( 21,336 ) ( 20,628 )

Premises and equipment, net 57,088 54,383

31 unchanged sentences

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

2023 2022 2021

INTEREST AND DIVIDEND INCOME

7 unchanged sentences

Interest on deposits 32,066 7,736 5,617

Interest on other borrowed funds 64 — —

Total Interest Expense 32,130 7,736 5,617

Net Interest Income 86,438 86,639 71,722

Provision for loan losses 1,750 1,900

Net Interest Income After Provision for Loan Losses 84,889 69,822

Provision for credit losses 735 1,750 1,900

Net Interest Income After Provision for Credit Losses 85,703 84,889 69,822

NONINTEREST INCOME

33 unchanged sentences

(in thousands) Years Ended December 31,

2023 2022 2021

Net income $ 34,879 $ 36,916 $ 32,952

22 unchanged sentences

Stock incentive plan — — 269 — — 269

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

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

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

7 unchanged sentences

Stock incentive plan — — 274 — — 274

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

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

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

4 unchanged sentences

Balance as of December 31, 2022 7,183,915 $ 60,050 $ 2,088 $ 274,781 $ ( 71,166 ) $ 265,753

Net income — — — 34,879 — 34,879

Stock incentive plan — — 319 — — 319

Issuance of restricted shares of common stock through stock incentive plan 9,300 — — — — —

Forfeiture of restricted shares of common stock ( 1,940 ) — — — —

Issuance of shares of common stock as board compensation 1,660 85 — — — 85

Repurchase of common stock under stock repurchase program ( 101,298 ) ( 4,999 ) — — — ( 4,999 )

Cash dividend - $ 0.32 per share

— — — ( 2,289 ) — ( 2,289 )

Cumulative effect of change in accounting principle — — — ( 569 ) — ( 569 )

Other comprehensive income (loss) — — — — 10,672 10,672

Balance as of December 31, 2023 7,091,637 $ 55,136 $ 2,407 $ 306,802 $ ( 60,494 ) $ 303,851

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

2 unchanged sentences

(in thousands) Years Ended December 31,

2023 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES

10 unchanged sentences

(Gain) Loss on equity securities 14 468 175

Provision for loan losses 1,750 1,900

Provision for credit losses 735 1,750 1,900

Deferred income tax (benefit) expense ( 330 ) 313 ( 773 )

15 unchanged sentences

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

Sale of nonmarketable equity securities 2,178 — —

Purchase of nonmarketable equity securities ( 792 ) ( 28 ) ( 3 )

8 unchanged sentences

Net increase (decrease) in deposits 2,952 ( 111,412 ) 569,988

Proceeds from other borrowed funds 60,000 — —

Repayments of other borrowed funds ( 60,000 ) — —

Repurchase of common stock ( 4,999 ) ( 218 ) ( 7,878 )

8 unchanged sentences

(in thousands) Years Ended December 31,

2023 2022 2021

SUPPLEMENTAL DISCLOSURES

32 unchanged sentences

Actual results could differ from those estimates.

On January 1, 2023, the Company adopted ASU No.

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

Measurement of Credit Losses on Financial Instruments , which significantly changed the impairment model for most financial assets that are measured at amortized cost, including loans HFI, securities, and unfunded commitments, from an incurred loss model to an expected loss model.

Accounting policies related to the ACL are considered critical as these policies involve considerable subjective judgment and estimation by management.

Changes in factors and forecasts used in evaluating the overall loan portfolio may result in significant changes in the ACL and related provision expense in future periods.

The allowance level is influenced by loan portfolio growth, changes in the quality and composition of the loan portfolio, the level of nonperforming loans, delinquency and charge-off trends, current economic conditions, forecasted information, and other conditions influencing loss expectations.

Changes to the assumptions in the model in future periods could have a material impact on the Company’s Consolidated Financial Statements.

Refer to “- Securities” and “- Loans Held for Investment” for a detailed discussion on the Company’s methodologies for estimating expected credit losses.

Acquisition Accounting

4 unchanged sentences

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

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

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

All debt securities of the Company as of December 31, 2023 and 2022, were classified either as AFS or HTM.

4 unchanged sentences

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

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

Prior to the adoption of ASC 326 on January 1, 2023, declines in the fair value of HTM and AFS debt securities below their cost that were deemed to be other-than-temporary were reflected in earnings as realized losses to the extent the losses were credit related.

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

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

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

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

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

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

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

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.

Securities AFS

The Company adopted the provisions of ASC 326 on January 1, 2023.

The Company is required to measure expected credit losses on securities AFS.

Impairment is evaluated when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value.

Management evaluates each security by considering the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, volatility of the security’s fair value, and historical loss information for financial assets secured with similar collateral, along with other factors.

In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments.

If a decline in the fair value related to creditworthiness or other factors is determined, an ACL is calculated using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security.

The credit loss component is recognized through the provision for credit losses in the consolidated statements of income.

Accrued interest receivable is excluded from the amortized cost basis in measuring expected credit losses on the investment securities, and no ACL is recorded on accrued interest receivable.

The Company’s current securities AFS portfolio consists of U.S.

Treasury securities, mortgage-backed securities, U.S.

agency securities, and municipal bonds.

The Company’s securities AFS, other than the municipal bonds, are considered treasuries, agencies, and instrumentalities of the U.S.

government, which have a zero credit loss assumption.

These securities have the full faith and credit backing of the U.S.

government or one of its agencies.

Municipal bonds AFS do not fall under the zero credit loss assumption and are evaluated quarterly using the considerations mentioned above to determine whether there is a credit loss associated with a decline in fair value.

Securities HTM

The Company is required to measure expected credit losses on securities HTM.

Securities HTM are measured on a collective basis by major security type with those sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the securities HTM portfolio.

Management monitors the HTM portfolio to determine whether an ACL should be recorded.

The Company’s current securities HTM portfolio consists of mortgage-backed securities and U.S.

agency securities.

The Company’s securities HTM are considered agencies and instrumentalities of the U.S.

government that have a zero credit loss assumption.

These securities have the full faith and credit backing of the U.S.

government or one of its agencies.

Nonmarketable Equity Securities

4 unchanged sentences

Loans Held for Investment

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

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

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

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

When a loan is placed on nonaccrual, uncollected accrued interest is reversed, reducing interest income, and future income accrual is discontinued.

Loans that management has the intent and ability to hold, for the foreseeable future or until maturity or payoff, are reported at amortized cost.

Amortized cost is the principal balance outstanding, net of deferred fees and costs.

Accrued interest receivable is reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Interest income is accrued on the unpaid principal balance.

Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on loans is discontinued, and the loans are placed on nonaccrual status at the time the loan is 90 days past due unless the loan is well-secured and in process of collection.

When a loan is placed on nonaccrual status, uncollected accrued interest is reversed, reducing interest income, and future income accrual is discontinued.

Subsequent payments, if any, of interest and fees are applied as reductions to the loan’s outstanding principal balance.

Once the principal balance of a loan placed on nonaccrual has been fully recovered, subsequent payments received are recognized as income on a cash basis.

Loans are returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is charged-off to the allowance for loan losses in full when management is relatively certain that principal and interest will be uncollectible.

Once the principal balance of a loan placed on nonaccrual status has been fully recovered, subsequent payments received are recognized as interest income on a cash basis.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans, excluding credit cards, are charged-off to the ACL to the extent management is relatively certain that principal and interest will be uncollectible.

Management may elect to partially charge-off a loan to adjust the principal balance to the net realizable value of the collateral that secures the loan.

When a partial charge-off is made, the remaining balance of the loan is placed on nonaccrual.

Recoveries of amounts previously charged-off, if any, are credited to the allowance for loan losses until the principal balance of the loan is fully recovered.

Recoveries of amounts previously charged-off, if any, are credited to the ACL until the principal balance of the loan is fully recovered.

Any subsequent payments are recognized as income.

Credit card loans continue to accrue interest until they are charged-off to the ACL no later than 120 days past due unless the loan is in the process of collection.

Past due status is based on the contractual terms of the loan.

In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Allowance for Credit Losses - Loans

The ACL is a valuation account calculated in accordance with ASC 326 and is deducted from the amortized cost basis of loans HFI to present management’s best estimate of the expected credit losses to be recognized over the lifetime of the loans.

The amount of the ACL should not be interpreted as an indication that charge-offs in future periods will necessarily occur in those amounts, or at all.

Loans are charged-off against the allowance when management is relatively certain that principal and interest will be uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Subsequent recoveries, if any, are credited to the allowance.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

This reasonable and supportable forecast period is currently one year and incorporates the Company’s and its peer’s historical losses.

After the forecast period, the Company reverts to an average historical loss rate over a two-year period.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in economic conditions, such as changes in unemployment rates, property values, or other relevant factors.

These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in the Company’s historic loss factors.

The determination of the amount of allowance involves a high degree of judgement and subjectivity.

The ACL is measured on a collective pool basis when similar risk characteristics and risk profiles exist.

The Company utilizes cohort loss rate (static pool analysis) and remaining life loss rate methodologies to estimate the quantitative portion of the ACL for loan pools.

The cohort loss rate methodology tracks a closed pool of loans over their remaining lives to determine their loss behavior.

The remaining life loss rate methodology takes the calculated loss rate and applies that rate to a pool of loans on a periodic basis based on the remaining life expectation of that pool.

The portfolio pools are based primarily on regulatory call report codes.

These pools and certain of the inherent risks in the Company’s loan portfolio are summarized in the following table.

Loan Pool Risk Characteristics

Residential construction This category consists of loans to residential developers and to individual clients for construction of single-family homes.

Risks inherent in this portfolio pool include fluctuations in the value of real estate, project completion risk, and change in market trends.

Commercial construction This category consists of loans to small and medium-sized businesses to construct owner occupied facilities and developers of commercial real estate investment properties.

Risks inherent in this portfolio pool include fluctuations in the value of real estate, project completion risk, change in market trends, and the ability to sell the property upon completion.

Farmland This category consists of loans secured by real estate that is used or usable for agricultural purposes, including land used for crops, livestock production, grazing/pastureland, and timberland.

Risks inherent in this portfolio pool include adverse changes in climate, fluctuations in feed and livestock prices, and changes in property values.

Home equity loans and lines This category consists of home equity loans and lines of credit.

Risks inherent in this portfolio pool include local unemployment rates, local residential real estate market conditions, and the interest rate environment.

Secured closed-liens This category consists of loans secured by primary and secondary liens on residential real estate.

Risks inherent in this portfolio pool include local unemployment rates, local residential real estate market conditions, and the interest rate environment.

Generally, these loans are for longer terms than home equity loans and lines of credit.

Multifamily This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis.

Risks inherent in this portfolio pool include local unemployment rates, changes in the local economy, and factors that would impact property values.

Owner occupied commercial real estate This category consists of loans to established operating companies and secured by owner occupied offices and industrial real estate properties.

Risks inherent in this portfolio pool include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, environmental contamination, and the quality of the borrower’s management.

Non-owner occupied commercial real estate This category consists of loans to developers and other persons or entities and secured by non-owner occupied commercial real estate properties.

Risks inherent in this portfolio pool include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination, and the quality of the borrower’s management.

Commercial and industrial This category consists of secured and unsecured loans to purchase capital equipment, agriculture operating loans, and other business loans for working capital and operating purposes.

Secured loans are primarily secured by accounts receivable, inventory, and other business assets.

The performance of commercial and industrial loans may be adversely affected by, among other factors, conditions specific to the relevant industry, fluctuations in the value of the collateral, and individual performance factors related to the borrower such as the quality of the borrower’s management.

Consumer This category consists of loans to individuals for household, family, and other personal use.

Risks inherent in this portfolio pool include the borrower’s financial condition, local unemployment rates, local economic conditions, and the interest rate environment.

Tax-exempt This category consists of loans to political subdivisions primarily of the State of Louisiana including parishes, municipalities, utility districts, school districts, and development authorities.

These loans undergo the same underwriting as any of the Company’s other loans and are typically paid for by ad valorem taxes or specific revenue sources.

Other loans This category consists of loans not included in any other category.

Risks inherent in this portfolio pool include local unemployment rates, local economic conditions, and the interest rate environment.

Loans that do not share similar risk characteristics are evaluated on an individual basis and excluded from the collective evaluation.

For loans evaluated on an individual basis that are collateral dependent, the specific allowance is estimated by calculating the difference between the fair value of the underlying collateral less estimated selling costs and the Bank’s exposure.

If the loan is not collateral dependent, the discounted cash flow methodology is used.

Either of these determinations are highly subjective and based on information available at the time of valuation.

Reserve for Unfunded Commitments

Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met.

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The reserve for unfunded commitments is recorded within accrued interest payable on the consolidated balance sheets, and the related provision is recorded in other operating expenses on the consolidated statements of income.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The loss rates computed for each pool and expected pool-level funding rates are applied to the related unfunded commitment balance to obtain the reserve amount.

Allowance for Loan Losses

For reporting periods prior to January 1, 2023, the ALL was established for known and inherent losses in the loan portfolio based upon management’s best assessment of the loan portfolio at each balance sheet date.

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

The ALL consisted of specific and general reserves.

Specific reserves related to loans classified as impaired.

Loans were considered impaired when, based on current information and events, it was probable that the Bank would be unable to collect all amounts due in accordance with the contractual terms of the loan.

Impaired loans included TDRs and performing and nonperforming loans.

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

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

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.

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.

Allowance for Loan Losses

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

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

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

Specific reserves relate to loans classified as impaired.

Loans are considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due in accordance with the contractual terms of the loan.

Impaired loans include TDRs and performing and nonperforming loans.

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

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

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

Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers’ ability to honor their contractual repayment obligations is dependent on changing economic conditions.

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.

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.

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

Also, regulatory agencies, as an integral part of their examination process, periodically review management’s assessments of the adequacy of the allowance for loan losses.

Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination.

With the adoption of ASC 326 on January 1, 2023, loans acquired as part of a business combination that have evidence of credit deterioration since their origination date are to be recorded at amortized cost with an associated allowance for the expected credit loss at the date of the acquisition.

Prior to January 1, 2023, acquired loans, with evidence of credit deterioration, were accounted for under the accounting guidance found in ASC Topic 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Foreclosed Assets

2 unchanged sentences

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

As of December 31, 2023, the Company had $ 69,000 of foreclosed assets.

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

51 unchanged sentences

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

Revenue recognized under these contracts totaled approximately $ 16.5 million and $ 15.4 million for the years ended December 31, 2022 and 2021, respectively.

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

The Company is the principal in each of these contracts with

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

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

1 unchanged sentence

The Company is the principal in each of these contracts.

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 .

1 unchanged sentence

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

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, 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 2023

2021-05, Leases (Topic 842):

Lessors - Certain Leases with Variable Lease Payments .

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

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

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

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

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 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.

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.”

On January 1, 2023 , the Company adopted ASC 326 , as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans HFI, securities HTM, and unfunded commitments.

In addition, ASC 326 made changes to the accounting for securities AFS, which requires credit losses to be presented as an allowance rather than as a write-down on securities AFS that management does not intend to sell or believes that it is more likely than not that the Company will have the ability to hold until each security has recovered its cost basis.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and unfunded commitments.

Results for reporting periods beginning after January 1, 2023, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company recorded a $ 569,000 , net of tax, decrease to stockholders’ equity as of January 1, 2023, for the cumulative effect of adopting ASC 326 .

The transition adjustment included a $ 278,000 increase to the December 31, 2022 ALL and established a $ 442,000 reserve for unfunded commitments as presented in the following table.

(in thousands) December 31, 2022

ALL Impact of ASC 326 Adoption

January 1, 2023

Commercial real estate $ 7,720 $ 876 $ 8,596

One-to-four family residential 5,682 1,231 6,913

Construction and development 1,654 ( 444 ) 1,210

Commercial and industrial 4,350 ( 822 ) 3,528

Tax-exempt 751 ( 427 ) 324

Consumer 471 ( 136 ) 335

Total $ 20,628 $ 278 $ 20,906

Reserve for unfunded commitments $ — $ 442 $ 442

Due to the zero credit loss assumption on securities AFS and HTM and the considerations applied to the securities AFS, no ACL was recorded on January 1, 2023 for securities AFS or HTM.

2021-08, Business Combinations (Topic 805):

2 unchanged sentences

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

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

This standard 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.

On January 1, 2023, the Company adopted ASU No.

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

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

1 unchanged sentence

The guidance issued in this update eliminates the accounting guidance for TDRs by creditors in Subtopic 3 10-40, 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.

Amortized Cost .

On January 1, 2023, the Company adopted ASU No.

2022-02 on a prospective basis .

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

2023-01, Leases (Topic 842):

Common Control Arrangements.

The guidance issued in this update addresses two issues.

First, the standard requires entities to determine whether a related party arrangement between entities under common control is a lease.

If the arrangement is a lease, the accounting for the lease is treated the same as an arrangement with an unrelated party.

This is a change in the requirement under Topic 840, Leases, which used the basis of economic substance.

Secondly, the standard requires leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group as long as the lessee controls the use of the underlying asset.

If the lessor obtained control of the use of the underlying asset through a lease with another entity not within the common control group, the amortization period may not exceed the amortization period of the common control group.

If the lessee no longer controls the use of the underlying asset, the improvement is accounted for as a transfer between entities under common control through an adjustment to equity.

These leasehold improvements are subject to the impairment guidance in Topic 360 Property, Plant and Equipment .

Both items of this amendment are effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted for both interim periods and annual financial statements that have not been issued.

On January 1, 2023, the Company early adopted ASU No.

2023-01, and it did not have an impact on the Company’s consolidated financial statements.

2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718).

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

This update is an alignment of SEC and GAAP reporting.

This update was issued in the third quarter of 2023 and was effective upon issuance.

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

2023-06, Disclosure Improvements.

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

This update is an alignment of SEC and GAAP reporting.

This update was issued in the fourth quarter of 2023 and was effective upon issuance.

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

Recent Accounting Pronouncements

2023-07, Segment Reporting (Topic 280).

The guidance issued in this update requires improvement to the disclosures about a public entity’s reportable segments and more detailed information about a reportable segment’s expenses.

Even though the Company has a single reportable segment, all the disclosures required by this update are required.

The goal of these disclosures is to enable investors to develop more decision-useful financial analyses.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

ASU 2023-09 Income Taxes (Topic 740).

The guidance in this update provides enhanced transparency and decision usefulness of income tax disclosures.

The amendment addresses investor requests for income tax information through improvements to income tax disclosures related to the rate reconciliation and income taxes paid information.

Investors anticipate theses disclosures will provide an understanding of an entity’s exposures to changes in tax legislation and allow investors to better assess income tax information that affects cash flow forecasts and capital allocation decisions, as well as identify opportunities to increase future cash flows.

This update is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied on a prospective basis.

Retrospective application is permitted.

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

Reclassification

Certain amounts in the 2021 consolidated financial statements have been reclassified to conform to the 2022 presentation.

Certain prior period amounts have been reclassified to conform to the current period presentation.

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

5 unchanged sentences

As of December 31, 2023, the estimated fair value of securities AFS was $ 570.1 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.

The net unrealized loss on securities AFS decreased $ 12.0 million for the year ended December 31, 2023, resulting in a net unrealized loss of $ 62.2 million as of December 31, 2023.

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

As of December 31, 2023, the amortized cost of securities HTM was $ 141.2 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.

Investment activity for the year ended December 31, 2023, included $ 163.1 million in maturities, principal repayments, and calls, partially offset by $ 96.4 million of securities purchased.

There were no sales of securities AFS, and there were no purchases or sales of securities HTM for the same period.

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

39 unchanged sentences

Total Securities HTM $ 141,236 $ 119,029

Accounting for Credit Losses – Securities AFS and Securities HTM

The Company evaluates securities AFS for impairment when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

Due to the zero credit loss assumption and the considerations applied to the securities AFS, no ACL was recorded on January 1, 2023, and there was no ACL for securities AFS as of December 31, 2023.

Also, as part of the Company’s evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategy, cash flow needs, liquidity position, capital adequacy, and interest rate risk position.

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

Due to the zero credit loss assumption on the securities HTM portfolio, no ACL was recorded on January 1, 2023, and there was no ACL for securities HTM as of December 31, 2023.

Accrued interest receivable totaled $ 3.0 million as of December 31, 2023 and December 31, 2022, for securities AFS and securities HTM and was reported in accrued interest receivable on the consolidated balance sheets.

Information pertaining to securities AFS and securities HTM with gross unrealized losses as of December 31, 2023 and 2022, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is described as follows:

26 unchanged sentences

The aggregate unrealized loss of these securities as of December 31, 2023, was 10.96 % 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.

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

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

The Company does not consider these securities to have OTTI.

Management evaluates securities for OTTI on at least a quarterly basis and more frequently if economic or market concerns merit such evaluation.

Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost;

(2) the financial condition and near-term prospects of the issuer;

and (3) whether the Company intends to, and it is more likely than not that it will be able to, retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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, 2022 and 2021.

The proceeds from sales and calls of debt securities and their gross gain (loss) for the years ended December 31, 2023, 2022, and 2021, are shown below:

8 unchanged sentences

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.

The loss on equity securities during 2022 was due to a significant increase in interest rates.

During 2023, the Company sold $ 7.0 million of the mutual fund.

As of December 31, 2023, equity securities had a fair value of $ 3.0 million with a recognized loss of $ 14,000 for the year ended December 31, 2023.

Pledged Securities

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.

Securities with carrying values of approximately $ 230.9 million and $ 168.2 million were used as collateral as of December 31, 2023 and 2022, respectively.

Loans and Asset Quality

5 unchanged sentences

Commercial and industrial 315,327 310,067

SBA PPP, net of deferred income 14 17,550

Tax-exempt 72,913 83,166

2 unchanged sentences

Total loans HFS $ 1,306 $ 518

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.

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

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

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

Years Ended December 31,

(in thousands) 2022 2021

Balance - beginning of period $ 23,792 $ 33,191

New loans/changes in relationships 21,463 12,493

Repayments/changes in relationships ( 12,607 ) ( 21,892 )

Balance - end of period $ 32,648 $ 23,792

Deferred loan origination fees, net of certain direct costs, were $ 1.4 million as of December 31, 2023 and 2022.

Accrued interest receivable on loans HFI totaled $ 6.8 million and $ 5.8 million as of December 31, 2023 and 2022, respectively, and was reported in accrued interest receivable on the accompanying consolidated balance sheets.

Concentrations of Credit Risk

2 unchanged sentences

Substantially all of the Bank’s real estate loans are secured by properties located within Louisiana.

Allowance for Credit Losses

Effective January 1, 2023, the Company adopted the provisions of ASC 326 using the modified retrospective method.

For reporting periods beginning on and after January 1, 2023, the Company maintains an ACL on all loans that reflects management’s estimate of expected credit losses for the full life of the loan portfolio.

The following table summarizes the activity in the ACL by category for the year ended December 31, 2023:

(in thousands) Beginning

Balance Impact of ASC 326 Adoption

Losses Charge-offs Recoveries Ending

Commercial real estate $ 7,720 $ 876 $ 522 $ — $ — $ 9,118

One-to-four family residential 5,682 1,231 584 ( 23 ) 10 7,484

Construction and development 1,654 ( 444 ) 108 ( 9 ) — 1,309

Commercial and industrial 4,350 ( 822 ) ( 947 ) ( 58 ) 30 2,553

Tax-exempt 751 ( 427 ) 251 — — 575

Consumer 471 ( 136 ) 217 ( 383 ) 128 297

Total allowance for credit losses $ 20,628 $ 278 $ 735 $ ( 473 ) $ 168 $ 21,336

Allowance for Loan Losses

The following table summarizes the activity in the allowance for loan losses by category for the year ended December 31, 2022:

For reporting periods prior to January 1, 2023, the Company maintained an ALL on loans that represented management’s estimate of probable losses incurred in the portfolio category.

The following table summarizes the activity in the ALL by category for the year ended December 31, 2022:

(in thousands) Beginning

5 unchanged sentences

Commercial and industrial 4,465 ( 162 ) ( 39 ) 86 4,350

SBA PPP, net of deferred income 25 ( 25 ) — — —

Tax-exempt 749 2 — — 751

1 unchanged sentence

Total allowance for loan losses $ 19,176 $ 1,750 $ ( 547 ) $ 249 $ 20,628

The following table summarizes the activity in the allowance for loan losses by category for the year ended December 31, 2021:

The following table summarizes the activity in the ALL by category for the year ended December 31, 2021:

(in thousands) Beginning

5 unchanged sentences

Commercial and industrial 3,949 563 ( 74 ) 27 4,465

SBA PPP, net of deferred income 318 ( 293 ) — — 25

Tax-exempt 680 69 — — 749

1 unchanged sentence

Total allowance for loan losses $ 17,951 $ 1,900 $ ( 885 ) $ 210 $ 19,176

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2022, are as follows:

The balance in the ACL and the related recorded investment in loans by category as of December 31, 2023, are as follows:

(in thousands) Individually

Impairment Collectively

Impairment Acquired with

Quality Total

Allowance for loan losses:

Impairment Total

Allowance for credit losses:

Commercial real estate $ 342 $ 8,776 $ 9,118

2 unchanged sentences

Commercial and industrial 226 2,327 2,553

SBA PPP, net of deferred income — — — —

Tax-exempt — 575 575

Consumer 104 193 297

Total allowance for loan losses $ 314 $ 20,314 $ — $ 20,628

Total allowance for credit losses $ 729 $ 20,607 $ 21,336

Commercial real estate $ 1,379 $ 850,203 $ 851,582

2 unchanged sentences

Commercial and industrial 972 314,355 315,327

SBA PPP, net of deferred income — 14 — 14

Tax-exempt — 72,913 72,913

1 unchanged sentence

Total loans HFI $ 3,242 $ 1,989,616 $ 1,992,858

The balance in the allowance for loan losses and the related recorded investment in loans by category as of December 31, 2021, are as follows:

The balance in the ALL and the related recorded investment in loans by category as of December 31, 2022, are as follows:

(in thousands) Individually

Impairment Collectively

Impairment Acquired with

Quality Total

Impairment Total

Allowance for loan losses:

3 unchanged sentences

Commercial and industrial 172 4,178 4,350

SBA PPP, net of deferred income — 25 — 25

Tax-exempt — 751 751

5 unchanged sentences

Commercial and industrial 1,402 308,665 310,067

SBA PPP, net of deferred income — 17,550 — 17,550

Tax-exempt — 83,166 83,166

1 unchanged sentence

Total loans HFI $ 7,568 $ 1,908,699 $ 1,916,267

Past Due and Nonaccrual Loans

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

(in thousands) Current 30-89 Days

Nonaccrual and Past Due Loans

The following table presents nonaccrual loans as of December 31, 2023:

(in thousands) Nonaccrual with No ACL Nonaccrual with ACL Total Nonaccrual

Commercial real estate $ — $ 714 $ 714

One-to-four family residential — 269 269

Construction and development — — —

Commercial and industrial 709 135 844

Tax-exempt — — —

Consumer — 132 132

Total loans HFI $ 709 $ 1,250 $ 1,959

No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the years ended December 31, 2023, 2022, or 2021.

The following table presents the aging analysis of the past due loans and loans 90 days or more past due and still accruing interest by loan category as of December 31, 2023:

(in thousands) 30-59 Days 60-89 Days

Past Due 90 Days

Past Due Nonaccrual Total

or More Current Total

Loans HFI 90 Days or More Past Due and Accruing

Commercial real estate $ 36 $ — $ 678 $ 850,868 $ 851,582 $ —

2 unchanged sentences

Commercial and industrial 132 60 847 314,288 315,327 45

SBA PPP, net of deferred income 14 — — — 14

Tax-exempt — — — 72,913 72,913 —

1 unchanged sentence

Total loans HFI $ 587 $ 327 $ 2,245 $ 1,989,699 $ 1,992,858 $ 574

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

The following table presents the current, past due, and nonaccrual loans by category as of December 31, 2022:

(in thousands) Current 30-89 Days

5 unchanged sentences

Commercial and industrial 308,611 165 — 1,291 310,067

SBA PPP, net of deferred income 17,550 — — — 17,550

Tax-exempt 83,166 — — — 83,166

2 unchanged sentences

Impaired Loans

Impaired loans include TDRs and performing and nonperforming loans.

For reporting periods prior to January 1, 2023, when ASC 326 was adopted, the Company individually evaluated impaired loans, including TDRs and performing and nonperforming loans.

Once a loan was deemed to be impaired, the difference between the loan value and the Bank’s exposure was charged-off or a specific reserve was established.

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

9 unchanged sentences

Commercial and industrial 51 51 — 58 4

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

Tax-exempt — — — — —

6 unchanged sentences

Commercial and industrial 1,360 1,351 172 623 4

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

Tax-exempt — — — — —

13 unchanged sentences

Commercial and industrial — — — 355 —

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

Tax-exempt — — — — —

6 unchanged sentences

Commercial and industrial 85 77 40 1,570 5

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

Tax-exempt — — — — —

2 unchanged sentences

Total impaired loans $ 6,210 $ 6,149 $ 226 $ 7,205 $ 204

Troubled Debt Restructurings

The restructuring of a loan is considered a TDR if the borrower is experiencing financial difficulties and the Bank has granted a concession.

Concessions grant terms to the borrower that would not be offered for new debt with similar risk characteristics.

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 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:

(dollars in thousands) Current 30-89

Past Due 90 Days

Past Due Nonaccrual Total

Loan Modifications

The Company adopted ASU No.

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

Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023, using the prospective method.

This ASU eliminates the TDR recognition and measurement guidance and requires all loan modifications to be evaluated based on whether the modification represents a new loan or a continuation of an existing loan.

Modifications are made to a borrower experiencing financial difficulty, and the modified terms are in the form of principal forgiveness, interest rate reduction, other-than-insignificant payment delay, or a term extension in the current reporting period.

As of December 31, 2023, the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty during the year ended December 31, 2023 is as follows:

December 31, 2023

(dollars in thousands) Term Extension Total Class of Loans Receivable Financial Effect

Commercial real estate $ — — %

One-to-four family residential 797 151 — 22 970

One-to-four family residential 300 0.1 % Amortization period was extended by a weighted-average of 2.34 years.

Construction and development — — %

Commercial and industrial — — %

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

Tax-exempt — — %

1 unchanged sentence

Total $ 300 0.1 %

Number of TDR loans 11 2 — 3 16

Troubled Debt Restructurings

For reporting periods prior to January 1, 2023, when ASC 326 was adopted, the restructuring of a loan was considered a TDR if the borrower was experiencing financial difficulties and the Bank had granted a concession.

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

9 unchanged sentences

Commercial and industrial — — — — — —

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

Tax-exempt — — — — — —

1 unchanged sentence

Total 7 $ 850 $ 853 2 $ 2,194 $ 2,211

The TDRs described above increased the allowance for loan losses by $ 101,000 and $ 14,000 during the years ended December 31, 2022 and 2021, respectively.

Additionally, there were no charge-offs of TDRs in 2022 or 2021.

There were no TDRs that subsequently defaulted in 2022 or 2021.

The TDRs described above increased the ALL by $ 101,000 and $ 14,000 during the years ended December 31, 2022 and 2021, respectively.

Additionally, there were no charge-offs of TDRs in 2022 or 2021, and there were no TDRs that subsequently defaulted in 2022 or 2021.

Credit Quality Indicators

9 unchanged sentences

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

Loss - Loans classified in this category are considered uncollectible and charged-off to the allowance for loan losses.

The following table summarizes loans by risk rating as of December 31, 2022:

(in thousands) Pass Special

Mention Substandard Doubtful Loss Total

Loss - Loans classified in this category are considered uncollectible and charged-off to the ACL.

As of December 31, 2023, the Company had no loans classified as doubtful or loss.

The following table summarizes loans by risk rating and year of origination as of December 31, 2023:

Year of Origination

(in thousands) 2023 2022 2021 2020 2019 Prior Years Revolving Lines Total

Commercial real estate

Pass $ 124,134 $ 256,707 $ 239,364 $ 76,754 $ 63,475 $ 61,957 $ 18,467 $ 840,858

Special mention 73 — 3,186 — 1,031 4,082 — 8,372

Substandard 184 779 675 — — 714 — 2,352

Total $ 124,391 $ 257,486 $ 243,225 $ 76,754 $ 64,506 $ 66,753 $ 18,467 $ 851,582

One-to-four family residential

Pass $ 122,004 $ 134,583 $ 129,388 $ 90,190 $ 31,110 $ 74,077 $ 16,472 $ 597,824

Special mention — — — — — 261 — 261

Substandard — 79 — 37 385 827 74 1,402

Total $ 122,004 $ 134,662 $ 129,388 $ 90,227 $ 31,495 $ 75,165 $ 16,546 $ 599,487

Construction and development

Pass $ 54,189 $ 55,515 $ 10,333 $ 1,742 $ 2,158 $ 1,015 $ 286 $ 125,238

Special mention — — — — — — — —

Substandard — — — — — — — —

Total $ 54,189 $ 55,515 $ 10,333 $ 1,742 $ 2,158 $ 1,015 $ 286 $ 125,238

Commercial and industrial

SBA PPP, net of deferred income 14 — — — — 14

Tax-exempt 83,166 — — — — 83,166

Consumer 27,298 — 138 — — 27,436

Pass $ 73,653 $ 49,637 $ 51,012 $ 13,863 $ 7,409 $ 813 $ 107,171 $ 303,558

Special mention 1,208 937 4,659 — 310 509 3,173 10,796

Substandard 4 — 59 5 54 51 800 973

Total $ 74,865 $ 50,574 $ 55,730 $ 13,868 $ 7,773 $ 1,373 $ 111,144 $ 315,327

Pass $ 959 $ 15,679 $ 8,174 $ 13,919 $ 4,250 $ 29,932 $ — $ 72,913

Special mention — — — — — — — —

Substandard — — — — — — — —

Total $ 959 $ 15,679 $ 8,174 $ 13,919 $ 4,250 $ 29,932 $ — $ 72,913

Pass $ 16,947 $ 6,385 $ 2,325 $ 858 $ 363 $ 133 $ 1,173 $ 28,184

Special mention — — — — — — — —

Substandard — 29 — — — 90 8 127

Total $ 16,947 $ 6,414 $ 2,325 $ 858 $ 363 $ 223 $ 1,181 $ 28,311

Total loans HFI $ 393,355 $ 520,330 $ 449,175 $ 197,368 $ 110,545 $ 174,461 $ 147,624 $ 1,992,858

Current period gross charge-offs $ 12 $ 20 $ 1 $ — $ 10 $ 25 $ 405 $ 473

The following table summarizes loans by risk rating as of December 31, 2022:

5 unchanged sentences

Commercial and industrial 297,166 11,428 1,473 — — 310,067

SBA PPP, net of deferred income 17,550 — — — — 17,550

Tax-exempt 83,166 — — — — 83,166

12 unchanged sentences

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

Effective January 1, 2023, the Company adopted the provision of ASC 326 using the modified retrospective method and established a reserve for unfunded commitments based on estimates of expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

As of December 31, 2023, the reserve on unfunded commitments was $ 442,000 .

Premises and Equipment, Net

13 unchanged sentences

$ 57,088 $ 54,383

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.

Depreciation expense amounted to approximately $ 2.2 million, $ 2.1 million, and $ 1.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Deposits were consistent at $ 2.80 billion as of December 31, 2023 and 2022.

In 2023, there was a deposit mix shift between deposit categories as customers moved funds from noninterest-bearing and lower yielding categories to higher yielding categories.

D eposits are summarized below:

15 unchanged sentences

Thereafter 3,511

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.

Collateral for Deposits

As of December 31, 2023 and 2022, securities and FHLB of Dallas letters of credit with values of approximately $ 287.4 million and $ 268.6 million, respectively, were pledged as collateral to secure public entity deposits.

Other Borrowed Funds

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

The Company has established borrowing capacity with the FHLB of Dallas, the Federal Reserve Bank’s Discount Window facility, and other correspondent banks to provide additional sources of operating funds.

As of June 30, 2023, the Company had $ 60.0 million in short-term advances at an interest rate of 5.49 % from the FHLB of Dallas under the existing line of credit.

The $ 60.0 million advance matured and was repaid in July 2023.

As of December 31, 2023, total borrowing capacity from these sources was $ 975.7 million.

As of December 31, 2022 and 2021, the Company had no borrowings under these agreements.

As of December 31, 2023 and 2022, the Company had no outstanding borrowings under these agreements.

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

5 unchanged sentences

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.

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.

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

23 unchanged sentences

The source and tax effect of items reconciling income tax expense to the amount computed by applying the federal income tax rates in effect to income before income tax expense for the years ended December 31, 2023, 2022, and 2021, are as follows:

(dollars in thousands) Amount Percent Amount Percent

2023 2022 2021

(dollars in thousands) Amount Percent Amount Percent Amount Percent

Income before income tax expense $ 42,944 100.0 % $ 44,981 100.0 % $ 40,060 100.0 %

11 unchanged sentences

Gross deferred tax liability ( 2,562 ) ( 2,457 )

Allowance for loan losses 4,190 4,025

Allowance for credit losses 4,541 4,190

Allowance for operational losses 54 34

8 unchanged sentences

Employee Benefits

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.

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

11 unchanged sentences

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.

As of December 31, 2020, all granted stock options under the 2008 Plan had been exercised.

Effective July 1, 2023, all restricted stock awards had vested or been forfeited and the 2008 Plan was completed.

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 administers the 2018 Plan, makes determinations with respect to participation, and authorizes stock-based awards under the plan.

The 2018 Plan provides for the granting of stock-based awards to key employees, directors, and consultants.

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 .

3 unchanged sentences

Awards granted ( 7,550 )

Awards forfeited 100

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

Awards granted ( 9,300 )

Awards forfeited 1,850

Awards available for issuance - December 31, 2023 166,100

4 unchanged sentences

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

During 2023, the Compensation Committee granted 9,300 restricted stock awards with a weighted average fair value of $ 48.11 , and 1,940 restricted stock awards with a weighted average fair value of $ 49.51 were forfeited.

For the year ended December 31, 2023, the compensation expense for the vested restricted stock was $ 319,000 .

1 unchanged sentence

That cost is expected to be recognized over a weighted average period of 4.3 years.

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.

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

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

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

10 unchanged sentences

Nonvested - December 31, 2022 19,855 $ 49.33

Granted 9,300 $ 48.11

Vested ( 5,870 ) $ 47.18

Forfeited ( 1,940 ) $ 49.51

Nonvested - December 31, 2023 21,345 $ 49.40

Director Compensation Program

2 unchanged sentences

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:

The Director Compensation Program stock earned and the issuance of shares as board compensation for the years ended December 31, 2023, 2022, and 2021 were as follows:

Years Ended December 31,

20 unchanged sentences

Construction Commitment

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

The Company has one committed construction agreement to construct a banking center, and there was approximately $ 1.6 million remaining on this commitment as of December 31, 2023.

Contingencies

1 unchanged sentence

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

Related Party Transactions

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

Years Ended December 31,

(in thousands) 2023 2022

Loan balance - beginning of period $ 32,648 $ 23,792

New loans 3,773 4,408

Changes in relationships, net 690 10,886

Repayments ( 7,053 ) ( 6,438 )

Loan balance - end of period $ 30,058 $ 32,648

As of December 31, 2023 and 2022, deposits from directors, executive officers, their immediate family members, and their affiliates totaled approximately $ 74.6 million and $ 67.3 million, respectively.

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

12 unchanged sentences

• Level 3 pricing is derived without the use of observable data.

In such case, mark-to-model strategies are typically employed.

In such cases, mark-to-model strategies are typically employed.

Often, these types of instruments have no active market, possess unique characteristics, and are thinly traded.

5 unchanged sentences

Residential mortgage loans originated and held for sale are carried at the lower of cost or estimated fair value on an individual basis.

The fair values of mortgage loans HFS are based on commitments on hand from investors within the secondary market for loans with similar characteristics.

The fair values of mortgage loans HFS are based on commitments on hand from investors within

the secondary market for loans with similar characteristics.

As such, the fair value adjustments for mortgage loans HFS are recurring Level 2.

The Company does not record loans HFI at fair value on a recurring basis.

However, from time to time, a loan may be considered impaired and an allowance for loan losses may be established.

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.

However, from time to time, a loan may be considered impaired and an allowance may be established.

Loans for which it was probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.

Once a loan is identified as individually impaired, management measures impairment using estimated fair value methodologies.

31 unchanged sentences

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

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

The table below presents certain impaired loans that were remeasured and reported at fair value through the ALL or ACL based upon the fair value of the underlying collateral during the reported periods:

Years Ended December 31,

(in thousands) 2023 2022 2021

Carrying value of impaired loans before allowance for loan losses $ 3,149 $ 4,114

Specific allowance for loan losses ( 306 ) ( 79 )

Carrying value of impaired loans before allowance $ 633 $ 3,149 $ 4,114

Specific allowance ( 100 ) ( 306 ) ( 79 )

Fair value of impaired loans $ 533 $ 2,843 $ 4,035

2 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 the 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 ACL 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.

46 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 $ — $ —

7 unchanged sentences

Regulatory Capital Requirements

Red River Bank

The Bank is subject to various regulatory capital requirements administered by the FDIC.

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 its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and 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.

The Bank is subject to Basel III capital guidelines.

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

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% 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 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

Prompt corrective action provisions are not applicable to bank holding companies.

Basel III Capital Requirements

The Company and the Bank are subject to Basel III capital guidelines.

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

It is management’s belief that, as of December 31, 2023, both the Company and the Bank met all capital adequacy requirements under Basel III.

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

Management believes that, as of December 31, 2023, the Bank is well-capitalized under the regulatory framework for prompt corrective action.

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 30 th 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 and 2023, the last applicable measurement dates, the Company had more than $3.0 billion in assets.

Therefore, effective January 1, 2023, the Company no longer receives any benefits under the Policy Statement and became subject to consolidated capital requirements.

Capital amounts and ratios for the Company as of December 31, 2023 and 2022, are presented in the following table:

Regulatory Requirement

Actual Minimum (1)

Minimum Plus CCB

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

(dollars in thousands) Amount Ratio Amount Ratio

December 31, 2023

4 unchanged sentences

December 31, 2022

Total Risk-Based Capital $ 305,771 17.06 % $ 143,372 8.00 % $ 188,176 10.50 %

Tier I Risk-Based Capital $ 286,595 15.99 % $ 107,529 6.00 % $ 152,333 8.50 %

Common Equity Tier I Capital $ 286,595 15.99 % $ 80,647 4.50 % $ 125,451 7.00 %

Tier I Leverage Capital $ 286,595 9.23 % $ 124,241 4.00 % $ 124,241 4.00 %

Red River Bancshares, Inc.

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 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.

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.

as of December 31, 2022 and 2021, are presented in the following table:

(dollars in thousands) Amount Ratio

Total Risk-Based Capital $ 356,001 17.39 % N/A N/A

Tier I Risk-Based Capital $ 335,373 16.38 % N/A N/A

Common Equity Tier I Capital $ 335,373 16.38 % N/A N/A

Tier I Leverage Capital $ 335,373 10.71 % N/A N/A

(1) Due to the full phase-in of the CCB, these are the Basel III regulatory minimum amounts and ratios.

These amounts and ratios were labeled as “Minimum Plus CCB” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and prior filings.

Capital amounts and ratios for the Bank as of December 31, 2023 and 2022, are presented in the following table:

Regulatory Requirements

Actual Minimum (1)

Well-Capitalized (2)

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

December 31, 2023

8 unchanged sentences

Tier I Leverage Capital $ 324,239 10.35 % $ 125,252 4.00 % $ 156,565 5.00 %

(1) Due to the full phase-in of the CCB, these are the Basel III regulatory minimum amounts and ratios.

These amounts and ratios were labeled as “Minimum Plus CCB” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and prior filings.

(2) This column refers to the prompt corrective action requirements applicable to banks.

Community Bank Leverage Ratio Framework

2 unchanged sentences

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

Specifically, depository institutions and depository institution holding companies that have less than $10.0 billion in total consolidated assets and meet other qualifying criteria, including a Tier I leverage ratio of greater than 9.00% (subsequently temporarily reduced to 8.00% for 2020 and 8.50% for 2021 as a COVID-19 relief measure), are considered qualifying community banking organizations and are eligible to opt into the CBLR framework, and replace the applicable Basel III risk-based capital requirements.

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

As of December 31, 2023, the Company and the Bank qualify for the CBLR framework.

17 unchanged sentences

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.

2 unchanged sentences

Also, the Company’s internal policy requires that the Company maintain a common stockholders’ equity to total assets ratio of greater than 7.0 % and that trust preferred securities are less than 25.0 % of capital.

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

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.

Taking into consideration the Company’s performance and capital levels, cash dividends were paid in 2023, 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 .

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

The 2023 stock repurchase program authorized the Company to purchase up to $ 5.0 million of its outstanding shares of common stock from January 1, 2023 through December 31, 2023.

For the year ended December 31, 2023, the Company repurchased 101,298 shares of its common stock at an aggregate cost of $ 5.0 million, and reached the 2023 stock repurchase program purchase limit.

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.

As of December 31, 2023, there were no available funds remaining under the 2023 stock repurchase program.

On December 14, 2023, the Company’s board of directors approved the renewal of the 2023 stock repurchase program that was completed in the fourth quarter of 2023 after reaching its purchase limit.

The 2024 stock repurchase program has

similar terms to the 2023 stock repurchase program and authorizes the Company to purchase up to $ 5.0 million of its outstanding shares of common stock from January 1, 2024 through December 31, 2024.

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.

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

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

At the date of transfer, the net unrealized loss of $ 17.9 million, of which $ 14.2 million, net of tax, was included in AOCI and is being 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.

As of December 31, 2023, the net unamortized, unrealized loss remaining on the transferred securities included in the consolidated balance sheets totaled $ 14.4 million, of which $ 11.4 million, net of tax, was included in AOCI.

CECL Adjustment - Implementation of Current Expected Credit Losses Methodology related to ASU No.

On January 1, 2023, the Company adopted the CECL methodology for estimating credit losses.

In the first quarter of 2023, the implementation of CECL resulted in a $ 720,000 adjustment to the ACL and reserve for unfunded commitments, and a $ 569,000 , net of tax, adjustment to retained earnings.

Earnings Per Common Share

3 unchanged sentences

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

Years Ended December 31,

(in thousands, except share amounts) 2023 2022 2021

15 unchanged sentences

Net interest income 21,294 20,725 21,510 22,909

Provision for loan losses 750 600 250 150

Net interest income after provision for loan losses 22,924 22,488 20,899 18,578

Provision for credit losses 250 185 300 —

Net interest income after provision for credit losses 21,044 20,540 21,210 22,909

Noninterest income 5,187 5,581 6,007 4,340

20 unchanged sentences

Management has evaluated subsequent events and transactions through March 15, 2024, 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.

On March 13, 2024, the Company entered into a privately negotiated stock repurchase agreement for the purchase of 200,000 shares of the Company’s common stock, no par value per share for a total purchase price of approximately $ 10.0 million.

The repurchase was supplemental to the Company’s $ 5.0 million stock repurchase program and did not impact the amount of permitted repurchases thereunder.

Parent Company Financial Statements

29 unchanged sentences

(in thousands) Years ended December 31,

2023 2022 2021

INTEREST AND DIVIDEND INCOME

Interest and dividend income from subsidiaries $ 1 $ —

Dividend income from subsidiaries $ 2,500 $ — $ —

Total Interest and Dividend Income 2,500 — —

NONINTEREST INCOME

Other income 2 1 —

Total Noninterest Income 2 1 —

OPERATING EXPENSES

7 unchanged sentences

Income (Loss) Before Equity in Undistributed Earnings of Subsidiaries 1,745 ( 728 ) ( 533 )

( 728 ) ( 533 )

Equity in undistributed earnings of subsidiaries 33,134 37,644 33,485

37,644 33,485

Net Income $ 34,879 $ 36,916 $ 32,952

2 unchanged sentences

(in thousands) Years Ended December 31,

2023 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES

16 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