Business Overview and History
Red River Bancshares, Inc. (RRBI) is the bank holding company for Red River Bank, a Louisiana state-chartered bank that has been serving the financial needs of the Bayou State since its inception in 1999. With a strong focus on commercial and retail banking, the company has steadily built a diversified portfolio and an extensive network of 28 banking centers across Louisiana, positioning it as a prominent player in the state's financial ecosystem.
Red River Bancshares was founded in 1999 with the goal of establishing a customer-centric, community-focused bank to serve the financial needs of individuals and businesses in Louisiana. The company's initial public offering in 2019 marked a significant milestone, providing the capital necessary to fuel its organic growth and strategic acquisitions.
The bank's priority has been to drive shareholder value through the establishment of a market-leading commercial banking franchise based in Louisiana. Red River Bank provides its services through relationship-oriented bankers who are committed to their customers and the communities where the bank operates.
In 2014, the company committed to an investment in a Small Business Investment Company (SBIC) limited partnership, which has provided additional capital and resources to support small businesses in the region. In 2020, the company made an additional commitment to another SBIC limited partnership to further its efforts in this area.
During the COVID-19 pandemic in 2021, Red River Bancshares worked closely with its customers to provide support and assistance during that difficult time. The company was able to maintain strong financial performance throughout the pandemic, demonstrating the resilience of its business model and the dedication of its team.
Throughout its history, Red River Bancshares has remained focused on its core strategy of expanding its market share in existing Louisiana markets and engaging in opportunistic new market de novo expansion, supplemented by strategic acquisitions of financial institutions with compatible philosophies and geographic footprints. This approach has allowed the company to steadily grow its operations and solidify its position as a leading community bank in the state.
Today, Red River Bank operates in seven geographic markets across Louisiana, including the Central, Capital, Northwest, Southwest, New Orleans, Northshore, and Acadiana regions. The company also maintains one combined loan and deposit production office in New Orleans.
The company's loan portfolio is well-diversified, with a focus on commercial real estate (42.6% of total loans as of September 30, 2024), one-to-four family residential (30% of total loans), and commercial and industrial (15.9% of total loans) lending. This balanced approach has allowed Red River Bancshares to navigate various economic cycles and mitigate risk, as evidenced by its consistent financial performance.
Financial Performance and Ratios
For the nine months ended September 30, 2024, Red River Bancshares reported net income of $24.9 million, or $3.59 per diluted share, a decrease of 6.2% compared to the same period in the prior year. The company's net interest income increased by 0.7% to $65.6 million during this period, driven by higher yields on its loan and securities portfolios.
The company's net interest margin (NIM) on a fully taxable equivalent basis was 2.92% for the nine months ended September 30, 2024, compared to 2.94% for the same period in 2023. The slight decrease in NIM was primarily due to an increase in the cost of deposits, which rose from 1.05% to 1.75% over the same period, as the company responded to rising interest rates.
As of September 30, 2024, Red River Bancshares reported total assets of $3.10 billion, a 0.9% decrease from December 31, 2023, primarily due to a $54.8 million, or 2%, decline in total deposits. The company's loans held for investment (HFI) grew by 3.2% to $2.06 billion during the same period, reflecting its continued lending activity across its target markets.
The company's asset quality remains strong, with nonperforming assets (NPAs) accounting for just 0.10% of total assets as of September 30, 2024, compared to 0.08% at the end of 2023. The allowance for credit losses (ACL) was 1.06% of total loans HFI as of September 30, 2024, down slightly from 1.07% at the end of 2023.
For the fiscal year 2023, Red River Bancshares reported revenue of $106.57 million and net income of $34.88 million. The company generated operating cash flow (OCF) of $40.11 million and free cash flow (FCF) of $35.20 million during the same period.
In the most recent quarter (Q3 2024), the company reported revenue of $34.90 million, representing a year-over-year growth of 15.4% compared to Q3 2023. Net income for the quarter was $8.75 million, a 9.0% increase from the same period last year. The company's OCF for Q3 2024 was $14.81 million, while FCF stood at $16.84 million. These increases were primarily driven by higher net interest income from improved yields on securities and loans, as well as higher noninterest income.
Liquidity
Red River Bancshares maintains a well-capitalized position, with a total risk-based capital ratio of 18.07% and a Tier 1 leverage ratio of 11.90% as of September 30, 2024. These ratios comfortably exceed the regulatory requirements for well-capitalized institutions, providing the company with ample flexibility to support its growth initiatives and weather any potential economic turbulence.
The company's liquidity position remains strong, with $232.65 million in cash and cash equivalents as of September 30, 2024. Red River Bancshares has no outstanding debt, resulting in a debt-to-equity ratio of 0. The company maintains substantial available credit lines, including $989.80 million from the Federal Home Loan Bank (FHLB) and $154.00 million from the Federal Reserve's Discount Window program.
Red River Bancshares' current ratio and quick ratio both stand at 1.12, indicating a healthy ability to meet short-term obligations. The company's loan-to-deposit ratio was 74.84% as of September 30, 2024, compared to 71.13% at the end of 2023, reflecting a balanced approach to lending and deposit gathering.
Quarterly Performance and Trends
In the third quarter of 2024, Red River Bancshares reported net income of $8.8 million, or $1.27 per diluted share, an increase of 9.6% compared to the previous quarter. This solid performance was driven by a 3.1% increase in net interest income, which reached $22.5 million, and a 6.3% rise in noninterest income to $5.4 million.
The company's net interest margin (NIM) on a fully taxable equivalent basis expanded by 6 basis points to 2.98% in the third quarter, as higher yields on loans and securities more than offset the increase in deposit costs. Red River Bancshares continued to prudently manage its balance sheet, with loans HFI increasing by 0.5% to $2.06 billion and total deposits decreasing by 1.1% to $2.75 billion during the quarter.
The company's asset quality metrics remained stable, with nonperforming assets (NPAs) accounting for 0.10% of total assets as of September 30, 2024, consistent with the prior quarter. The allowance for credit losses (ACL) was 1.06% of total loans HFI, unchanged from June 30, 2024.
Red River Bancshares' efficiency ratio, which measures operating expenses as a percentage of net interest income plus noninterest income, improved to 60.09% in the third quarter of 2024 from 62.07% in the previous quarter. For the nine months ended September 30, 2024, the efficiency ratio was 60.84%, compared to 59.02% in the same period of 2023.
Strategic Initiatives and Outlook
Looking ahead, Red River Bancshares remains focused on expanding its market share in existing Louisiana markets through organic growth and targeted acquisitions. The company continues to invest in technology and digital banking capabilities to enhance the customer experience and improve operational efficiency.
In December 2023, the company's board of directors renewed its stock repurchase program, authorizing the purchase of up to $5 million of outstanding common stock through the end of 2024. This initiative underscores Red River Bancshares' commitment to maximizing shareholder value and maintains financial flexibility to support its strategic objectives.
Despite the challenges posed by the recent inflationary environment and the Federal Reserve's monetary policy actions, the company's diversified business model, strong credit quality, and well-capitalized balance sheet position it well to navigate the evolving financial landscape in Louisiana. As Red River Bancshares continues to execute on its growth strategy, investors can expect the company to remain a consistent performer in the regional banking sector.
The company's loan portfolio, its largest category of earning assets, continues to be a primary driver of interest income. As of September 30, 2024, loans held for investment totaled $2.06 billion, representing an increase of $63.2 million, or 3.2%, compared to December 31, 2023. The portfolio remains well-diversified across various categories, with the largest concentrations in commercial real estate, one-to-four family residential, and commercial and industrial loans.
Red River Bancshares' commercial real estate loan portfolio is collateralized by both owner-occupied and non-owner-occupied properties, predominantly in Louisiana, with an average loan size of $947,000 as of September 30, 2024. Non-owner occupied office loans comprised 2.8% of total loans HFI. The bank's largest industry concentration is in the healthcare sector, which made up 8.0% of total loans HFI as of September 30, 2024, with an average loan size of $399,000.
The company operates solely within the state of Louisiana, with banking centers in the Central, Northwest, Capital, Southwest, Northshore, Acadiana, and New Orleans markets. This focused geographic approach allows Red River Bancshares to maintain deep local relationships and tailor its services to the specific needs of its communities.
As Red River Bancshares continues to navigate the evolving financial landscape, its strong financial position, diversified loan portfolio, and commitment to its core markets position the company well for sustained growth and success in the coming years.