Executive Summary
This report analyzes Red River Bancshares Inc.’s 10-K filing for the year ended December 31, 2024. The company demonstrates steady performance with loan growth and a slight increase in net interest margin. However, increased operating expenses and a higher provision for credit losses slightly impacted net income. The company appears well-capitalized and strategically focused on organic growth within Louisiana. Given the current economic climate and the company’s strategic positioning, a HOLD rating is recommended. Monitor future performance closely, particularly regarding expense management and asset quality.
Company Overview
Red River Bancshares, Inc. (RRBI) is a Louisiana-based bank holding company operating through its subsidiary, Red River Bank. The bank provides a range of commercial and retail banking services across 28 banking centers and one loan production office in Louisiana. The company’s strategy focuses on organic growth, opportunistic expansion within Louisiana, and disciplined acquisitions.
Financial Statement Analysis
Income Statement
Net income decreased slightly in 2024 compared to 2023, primarily due to increased operating expenses and provision for credit losses, despite higher net interest income.
| Metric |
2024 |
2023 |
Change |
| Net Income (in thousands) |
$34,235 |
$34,879 |
-1.8% |
| Earnings per Share (Diluted) |
$4.95 |
$4.86 |
+1.9% |
| Net Interest Margin (FTE) |
2.96% |
2.91% |
+5 bps |
| Efficiency Ratio |
60.29% |
59.39% |
+0.9% |
Balance Sheet
Total assets experienced modest growth. Loan growth was a key driver, while securities holdings decreased slightly. Deposit levels remained relatively stable.
| Metric |
2024 (in thousands) |
2023 (in thousands) |
Change |
| Total Assets |
$3,149,594 |
$3,128,810 |
+0.7% |
| Loans Held for Investment |
$2,075,013 |
$1,992,858 |
+4.1% |
| Total Deposits |
$2,805,106 |
$2,801,888 |
+0.1% |
| Stockholders’ Equity |
$319,739 |
$303,851 |
+5.2% |
Key Ratios
| Ratio |
2024 |
2023 |
| Return on Average Assets |
1.11% |
1.15% |
| Return on Average Equity |
11.02% |
12.44% |
| Loans HFI to Deposits |
73.97% |
71.13% |
| Noninterest-Bearing Deposits to Deposits |
30.89% |
32.71% |
| NPAs to Assets |
0.10% |
0.08% |
| ACL to Loans HFI |
1.05% |
1.07% |
Management’s Discussion and Analysis (MD&A) Insights
Growth Strategy
The company is focused on organic growth, supplemented by strategic acquisitions. They are expanding their banking center network and recruiting experienced bankers. They are also opportunistic in new market expansion, establishing a presence with a loan production office before building a full-service banking center.
Loan Portfolio
The loan portfolio is diversified across commercial real estate, residential mortgages, and commercial & industrial loans. Management emphasizes local market knowledge and thorough underwriting.
Deposit Strategy
The company offers a wide range of deposit products and focuses on driving relationships and noninterest-bearing accounts. They believe their rates are competitive.
Risk and Opportunity Assessment
Risks
- Credit Risk: Potential for borrower defaults and insufficient collateral, especially in the CRE portfolio.
- Interest Rate Risk: Sensitivity to changing interest rates, which could impact net interest margin.
- Economic Conditions: Exposure to economic downturns, natural disasters, and industry-specific challenges (e.g., healthcare, energy).
- Competition: Intense competition from larger banks and non-bank financial service providers.
- Operational Risks: Reliance on third-party service providers and vulnerability to cybersecurity threats.
- Regulatory Risks: The uncertain future of the CFPB and potential for increased regulatory scrutiny.
Opportunities
- Organic Growth: Expanding market share in existing markets and entering new markets within Louisiana.
- Strategic Acquisitions: Acquiring institutions with compatible philosophies in desirable geographic areas.
- Treasury Management Services: Offering sophisticated treasury management services to commercial clients.
- Private Banking: Providing specialized services to high-net-worth individuals.
- Technology Investments: Enhancing IT systems to improve customer experience and operational efficiency.
Red Flags and Uncommon Metrics
- Increased Operating Expenses: The increase in operating expenses needs to be monitored to ensure it doesn’t erode profitability.
- Decline in Noninterest Income: The decrease in noninterest income, particularly from SBIC investments, warrants further investigation.
- Uncertainty Regarding the CFPB: The potential changes to the CFPB’s operations and regulations could significantly impact the company’s compliance costs and business practices.
Conclusion and Actionable Insights
Red River Bancshares demonstrates a solid financial foundation with a clear growth strategy focused on Louisiana. While the slight decrease in net income and increased operating expenses are areas to watch, the company’s strong capital position and strategic initiatives position it for continued success. The HOLD recommendation is based on the need to monitor expense management, asset quality, and the evolving regulatory landscape. Key recommendations include:
- Expense Management: Implement strategies to control operating expense growth.
- Asset Quality Monitoring: Closely monitor the performance of the loan portfolio, particularly in sectors sensitive to economic conditions.
- Regulatory Compliance: Stay informed about and prepare for potential changes in regulations, especially those related to the CFPB.
- Capital Management: Continue to maintain strong capital ratios to support growth and withstand potential economic shocks.