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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion and analysis is to focus on significant changes in financial condition and results of operations of Red River Bancshares, Inc. on a consolidated basis during the year ended December 31, 2023 and selected prior periods. This discussion and analysis should be read in conjunction with information presented elsewhere in this Report, including our audited consolidated financial statements and notes thereto included in “Item 8. Financial Statements and Supplementary Data.”

The following discussion contains forward-looking statements that reflect our current views with respect to, among other things, future events and our financial performance. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. See the risk factors and other cautionary statements described in “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” in this Report. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

CORPORATE SUMMARY

Red River Bancshares, Inc. is the bank holding company for Red River Bank, a Louisiana state-chartered bank established in 1999 that provides a fully integrated suite of banking products and services tailored to the needs of our commercial and retail customers. As of December 31, 2023, Red River Bank operated from a network of 27 banking centers throughout Louisiana and one combined LDPO in New Orleans, Louisiana. Banking centers are located in the following Louisiana markets: Central, which includes the Alexandria MSA; Northwest, which includes the Shreveport-Bossier City MSA; Capital, which includes the Baton Rouge MSA; Southwest, which includes the Lake Charles MSA; the Northshore, which includes Covington; Acadiana, which includes the Lafayette MSA; and New Orleans.

Our priority is to drive shareholder value through the establishment of a market-leading commercial banking franchise based in Louisiana. We provide our services through relationship-oriented bankers who are committed to their customers and the communities where we offer our products and services. Our strategy is to expand market share in existing markets and engage in opportunistic new market de novo expansion, supplemented by strategic acquisitions of financial institutions with customer-oriented, compatible philosophies and in desirable geographic areas.

2023 FINANCIAL AND OPERATIONAL HIGHLIGHTS

2023 was a challenging year due to the failure of a few financial institutions in the first half of the year. These issues and the changing interest rate environment impacted most financial institutions. However, we navigated these challenges and had steady and solid financial results for 2023. We also implemented the CECL methodology, completed the 2023 stock repurchase program, increased the cash dividend, and improved our banking center network.

•Net income for the year ended December 31, 2023, was $34.9 million, or $4.86 diluted EPS, a decrease of $2.0 million, or 5.5%, compared to $36.9 million, or $5.13 diluted EPS, for the year ended December 31, 2022. These decreases were mainly due to higher operating expenses, partially offset by higher noninterest income and lower provision for credit losses. Net interest income was consistent between the years with offsetting increases in interest income and interest expense.

•The return on assets was 1.15% for 2023 and 1.18% for 2022.

•The return on equity was 12.44% for 2023 and 13.98% for 2022.

•Assets increased $46.1 million, or 1.5%, to $3.13 billion as of December 31, 2023, compared to $3.08 billion as of December 31, 2022.

•Loans HFI increased $76.6 million, or 4.0%, to $1.99 billion as of December 31, 2023, compared to $1.92 billion as of December 31, 2022. The increase in loans was due to improved loan activity in various markets across Louisiana.

•Deposits totaled $2.80 billion as of December 31, 2023, consistent with December 31, 2022. During 2023, there was a deposit mix shift as customers moved funds from lower yielding categories to higher yielding categories.

•As of December 31, 2023, total securities were $714.3 million, or 22.8% of assets, compared to $776.1 million, or 25.2% of assets, as of December 31, 2022. Securities decreased $61.8 million mainly due to maturities and principal repayments exceeding purchases, partially offset by a smaller net unrealized loss on securities AFS.

•For 2023, average liquid assets, which are cash and cash equivalents, decreased $186.8 million to $237.9 million, compared to $424.8 million for 2022. The liquid assets to assets ratio was 9.8% as of December 31, 2023 and 9.0% as of December 31, 2022.

•Net interest income was fairly consistent for 2023 and 2022, with offsetting increases in interest income and interest expense. The net interest margin FTE increased slightly to 2.91% for 2023 compared to 2.86% for the prior year. The 2023 net interest income and net interest margin FTE were impacted by the higher interest rate environment in 2023, an improved asset mix, and increased deposit costs.

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•The CECL methodology became effective for us on January 1, 2023. The adoption of CECL resulted in a $720,000 adjustment to the ACL and reserve for unfunded commitments. This adjustment was 3.5% of the December 31, 2022 ALL. Provision expense was $735,000 for 2023 compared to $1.8 million for 2022.

•NPAs were $2.6 million, or 0.08% of assets, as of December 31, 2023. As of December 31, 2023, the ACL was $21.3 million, or 1.07% of loans HFI.

•We expanded organically throughout Louisiana with the following events:

◦In our Southwest market, we closed one of our banking centers in the first quarter of 2023 and relocated the staff and services to an existing, expanded banking center.

◦In the third quarter of 2023, Red River Bank held a groundbreaking ceremony for a banking center in Metairie, Louisiana, which is our third banking location in our New Orleans market. Construction on this new banking center is in process, and it is projected to open for business in the third quarter of 2024.

•In 2023, we paid a quarterly cash dividend of $0.08 per share, resulting in annual cash dividends of $0.32 per share. In 2022, we paid a quarterly cash dividend of $0.07 per share, resulting in annual cash dividends of $0.28 per share. In the first quarter of 2024, we declared a quarterly cash dividend of $0.09 per share.

•The 2023 stock repurchase program authorized us to purchase up to $5.0 million of our outstanding common stock from January 1, 2023 through December 31, 2023. In 2023, we repurchased 101,298 shares of our common stock at an aggregate cost of $5.0 million and completed the program. On December 14, 2023, our board of directors approved the renewal of our stock repurchase program for 2024. The 2024 stock repurchase program authorizes us to purchase up to $5.0 million of our outstanding shares of common stock from January 1, 2024 through December 31, 2024.

•In mid-2023, S&P Market Intelligence ranked Red River Bank 45th of the top 50 best-performing community banks in 2022 with assets between $3.0 and $10.0 billion.

•In the fourth quarter of 2023, the American Banker publication included Red River Bank in its “2023 Best Banks to Work For” ranking.

•On January 25, 2024, Michael J. Brown, CFA was appointed to the boards of the Company and the Bank.

The following tables set forth selected historical consolidated financial information for each of the periods indicated. The historical financial information as of and for the years ended December 31, 2023, 2022, and 2021, except for the selected ratios, is derived from our audited consolidated financial statements. Our historical results may not be indicative of our future performance.

As of December 31,

Selected Period End Balance Sheet Data:

Securities held-to-maturity, at amortized cost $ 141,236 $ 151,683 $ —

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As of and for the Years Ended December 31,

Per Common Share Data:

Earnings per share, basic $ 4.87 $ 5.14 $ 4.53

Earnings per share, diluted $ 4.86 $ 5.13 $ 4.51

Summary Performance Ratios:

Noninterest-bearing deposits to deposits ratio 32.71 % 38.96 % 39.50 %

Noninterest income to average assets 0.70 % 0.60 % 0.84 %

Operating expense to average assets 2.11 % 1.87 % 1.87 %

Summary Credit Quality Ratios:

Nonperforming loans to loans HFI 0.13 % 0.12 % 0.02 %

Net charge-offs to average loans 0.02 % 0.02 % 0.04 %

Capital Ratios:

Stockholders’ equity to assets 9.71 % 8.62 % 9.25 %

Tangible common equity to tangible assets(1,6) 9.67 % 8.57 % 9.20 %

Total risk-based capital to risk-weighted assets 18.28 % 17.39 % 17.83 %

Tier I risk-based capital to risk-weighted assets 17.24 % 16.38 % 16.76 %

Common equity Tier I capital to risk-weighted assets 17.24 % 16.38 % 16.76 %

Tier I risk-based capital to average assets 11.56 % 10.71 % 9.67 %

(1)Non-GAAP financial measure. Calculations of this measure and reconciliations to GAAP are included in “- Non-GAAP Financial Measures” in this Report. This measure has not been audited.

(2)We calculate tangible book value per share as total stockholders’ equity, less intangible assets, divided by the outstanding number of shares of our common stock at the end of the relevant period.

(3)We calculate realized book value per share as total stockholders’ equity, less AOCI, divided by the outstanding number of shares of our common stock at the end of the relevant period.

(4)Net interest margin FTE includes an FTE adjustment using a 21.0% federal income tax rate on tax-exempt securities and tax-exempt loans.

(5)Efficiency ratio represents operating expenses divided by the sum of net interest income and noninterest income.

(6)We calculate tangible common equity as total stockholders’ equity, less intangible assets, net of accumulated amortization, and we calculate tangible assets as total assets, less intangible assets, net of accumulated amortization.

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RESULTS OF OPERATIONS

Net income for the year ended December 31, 2023, was $34.9 million, or $4.86 diluted EPS, a decrease of $2.0 million, or 5.5%, compared to $36.9 million, or $5.13 diluted EPS, for the year ended December 31, 2022. The decrease in net income was mainly due to a $5.2 million increase in operating expenses, partially offset by a $2.4 million increase in noninterest income and a $1.0 million decrease in the provision for credit losses. The return on assets for the year ended December 31, 2023, was 1.15%, compared to 1.18% for the prior year. The return on equity was 12.44% for the year ended December 31, 2023, compared to 13.98% for the prior year. Our efficiency ratio for the year ended December 31, 2023, was 59.39%, compared to 56.60% for the year ended December 31, 2022.

Net Interest Income and Net Interest Margin

Our operating results depend primarily on our net interest income. Fluctuations in market interest rates impact the yield on interest-earning assets and the rate paid on interest-bearing liabilities. Changes in the amount and type of interest-earning assets and interest-bearing liabilities impact our net interest income. To evaluate net interest income, we measure and monitor: (1) yields on loans and other interest-earning assets; (2) the cost of deposits and other funding sources; (3) net interest spread; and (4) net interest margin. Since noninterest-bearing sources of funds, such as noninterest-bearing deposits and stockholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing funding sources.

The Federal Reserve sets the target federal funds rate, which is the cost of immediately available overnight funds, and influences other market rates, such as the prime rate. These market rates impact pricing of certain assets and liabilities used by financial institutions. Between March 2020 and September 2023, the interest rate environment changed significantly. In March 2020, the target federal funds range decreased 150 bps to a range of 0.00% to 0.25% and remained at that level until March 2022, when the FOMC began increasing the target federal funds range. The FOMC increased the federal funds rate by 425 bps in 2022, by 50 bps in the first quarter of 2023, by 25 bps in the second quarter of 2023, by 25 bps in the third quarter of 2023, and kept the rate consistent during the fourth quarter of 2023, ending 2023 with a target range of 5.25% to 5.50%. The average effective federal funds rate was 5.03% for 2023 compared to 1.68% for 2022. The net interest income and net interest margin FTE for the twelve months ended December 31, 2023, were both impacted by the federal funds rate increases by the FOMC in 2023.

Net interest income for the year ended December 31, 2023, was $86.4 million, which was fairly consistent with the year ended December 31, 2022. Net interest income was impacted by a $24.4 million increase in interest expense, mostly offset by a $24.2 million increase in interest and dividend income.

Interest expense increased during 2023 primarily due to increased deposit rates as a result of deposit rate pressures, combined with larger balances in higher cost deposit accounts. We also experienced a change in the deposit mix due to customers moving deposits from lower yielding categories to higher yielding categories. The increase in interest and dividend income for the year ended December 31, 2023, when compared to the year ended December 31, 2022, was primarily due to higher interest income on loans and short-term liquid assets. Loan income increased $17.6 million due to higher rates on new, renewed, and floating rate loans and a $126.8 million increase in the average balance of loans, when compared to the year ended December 31, 2022. Interest income on short-term liquid assets increased $5.9 million due to the FOMC’s increases to the target federal funds range, partially offset by a $179.3 million decrease in the average balance of these short-term liquid assets.

Net interest margin FTE increased five bps to 2.91% for the year ended December 31, 2023, from 2.86% for the year ended December 31, 2022, primarily due to the higher interest rate environment and an improved asset mix. The yield on loans increased 62 bps due to higher rates on new, renewed, and floating rate loans resulting from the higher interest rate environment. The average rate on new and renewed loans was 7.19% for the year ended December 31, 2023. Our deployment of lower-yielding short-term liquid assets into these higher-yielding loans further benefited the net interest margin FTE. Also, the yield on securities increased 15 bps for the same period, primarily due to reinvesting securities cash flows received during 2023 into new securities at higher yields. In addition, the yield on short-term liquid assets was 388 bps higher for the year ended December 31, 2023, compared to the prior year.

The net interest margin FTE was negatively impacted by an increase in the cost of deposits. The cost of deposits increased 91 bps to 1.18% for the year ended December 31, 2023, from 0.27% for the year ended December 31, 2022, due to a 140 bp increase in the rate on interest-bearing deposits, combined with customers moving deposits from lower yielding categories to higher yielding categories in 2023. Within total interest-bearing deposits, the rate on time deposits and interest-bearing transaction deposits increased 197 and 111 bps, respectively. These rates increased as we responded to deposit rate pressure that began in the second half of 2022 and continued into 2023.

In the fourth quarter of 2023, the target range for the federal funds rate was 5.25% to 5.50%. The expectation is that the FOMC will lower the federal funds rate in 2024. During 2024, we anticipate receiving approximately $145.0 million in securities cash flows. We expect to redeploy these cash flows into higher yielding assets, which should benefit both net interest income and net interest margin FTE. As of December 31, 2023, floating rate loans were 11.7% of loans HFI, and floating rate transaction deposits were 6.1% of interest-bearing transaction deposits. Depending on balance sheet activity and the movement of interest rates, we expect the net interest margin FTE to improve slightly in the first half of 2024.

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The following table presents average balance sheet information, interest income, interest expense, and the corresponding average yields earned and rates paid for the years presented:

For the Years Ended December 31,

Assets

Interest-earning assets:

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Noninterest-bearing liabilities:

Accrued interest and other liabilities 22,385 18,111

Net interest spread 2.09 % 2.60 %

Net interest margin 2.87 % 2.80 %

Net interest margin FTE(3) 2.91 % 2.86 %

(1)Includes average outstanding balances of loans HFS of $2.4 million and $3.3 million for the years ended December 31, 2023 and 2022, respectively.

(2)Nonaccrual loans are included as loans carrying a zero yield.

(3)Net interest margin FTE includes an FTE adjustment using a 21.0% federal income tax rate on tax-exempt securities and tax-exempt loans.

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Rate/Volume Analysis

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the years ended December 31, 2023 and 2022.

Increase (Decrease)Due to Change in TotalIncrease

(in thousands) Volume Rate (Decrease)(1)

Interest-earning assets:

Securities - tax-exempt (148) 59 (89)

Nonmarketable equity securities (1) 116 115

Interest-bearing liabilities:

Other borrowings 64 — 64

Increase (decrease) in net interest income $ 1,080 $ (1,281) $ (201)

(1)The change in interest attributable to rate has been determined by applying the change in rate between periods to average balances outstanding in the earlier period. The change in interest due to volume has been determined by applying the rate from the earlier period to the change in average balances outstanding between periods. Changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

Provision for Credit Losses

Effective January 1, 2023, we adopted ASC 326, the CECL methodology for estimating credit losses. The guidance for CECL replaces our previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses.

The provision for credit losses is the amount necessary to maintain the ACL at a level considered appropriate by management. Factors impacting the provision include loan portfolio growth, changes in the quality and composition of the loan portfolio, the level of nonperforming loans, delinquency and charge-off trends, and current economic conditions.

The table below presents, for the periods indicated, the provision for credit losses:

For the Years Ended December 31,

(dollars in thousands) 2023 2022 Increase (Decrease)

The provision for credit losses for the year ended December 31, 2023, was $735,000, a decrease of $1.0 million from $1.8 million for the year ended December 31, 2022. The primary drivers of the decrease were the current inflationary environment, changing monetary policy, current economic forecasts, and lower loan growth. We will continue to evaluate future provision needs in relation to current economic situations, loan growth, trends in asset quality, forecasted information, and other conditions influencing loss expectations.

Noninterest Income

Our primary sources of noninterest income are fees related to the sale of mortgage loans, service charges on deposit accounts, debit card fees, brokerage income from advisory services, and other loan and deposit fees.

Noninterest income increased $2.4 million to $21.1 million for the year ended December 31, 2023, compared to $18.7 million for the prior year. The increase in noninterest income was due to higher income from an SBIC limited partnership of which Red River Bank is a member, a decreased loss on equity securities, and higher loan and deposit and brokerage income. These increases were partially offset by lower mortgage and net debit card income.

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The table below presents, for the periods indicated, the major categories of noninterest income:

For the Years Ended December 31,

(dollars in thousands) 2023 2022 Increase/(Decrease)

Noninterest income:

Gain (Loss) on sale and call of securities — (59) 59 100.0 %

SBIC income increased $2.3 million to $2.9 million for 2023, compared to $563,000 for 2022. The increase was primarily due to the sale of an investment by the SBIC in the second quarter of 2023, which resulted in higher income being distributed by the SBIC.

Equity securities are an investment in a CRA mutual fund consisting primarily of bonds. The gain or loss on equity securities is a fair value adjustment primarily driven by changes in the interest rate environment. In 2023, we sold $7.0 million of the CRA mutual fund. The mutual fund had a loss of $14,000 in 2023, compared to a $468,000 loss in 2022.

Loan and deposit income increased $417,000 to $2.1 million for 2023, compared to $1.7 million for 2022. The increase was primarily associated with fees related to customers moving funds from lower yielding deposit accounts to higher yielding deposit accounts.

Brokerage income increased $249,000 to $3.8 million for 2023, compared to $3.5 million for 2022. The increase was primarily due to investing activities of new clients. Assets under management were $1.04 billion and $915.1 million as of December 31, 2023 and 2022, respectively.

Mortgage loan income decreased $1.1 million to $2.0 million for 2023, compared to $3.1 million for 2022 due to higher mortgage interest rates and reduced purchase activity.

Debit card income, net, decreased $334,000 to $3.6 million for 2023, compared to $3.9 million for 2022. The decrease was primarily related to higher debit card processing expenses.

Operating Expenses

Operating expenses are composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships, and providing services.

Operating expenses increased $5.2 million to $63.9 million for the year ended December 31, 2023, compared to $58.7 million for the year ended December 31, 2022. The increase in operating expenses was mainly due to higher personnel expenses, regulatory assessment expenses, occupancy and equipment expenses, legal and professional expenses, other business development expenses, and loan and deposit expenses.

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The following table presents, for the periods indicated, the major categories of operating expenses:

For the Years Ended December 31,

(dollars in thousands) 2023 2022 Increase (Decrease)

Operating expenses:

Non-staff expenses:

Personnel expenses are the largest component of operating expenses and include payroll expenses, incentive compensation, benefit plans, health insurance, and payroll taxes. Personnel expenses increased $2.7 million to $37.2 million for 2023 compared to $34.6 million for 2022. This increase was primarily due to higher personnel health insurance expenses and additional staff added during the year. As of December 31, 2023 and 2022, we had 362 and 351 total employees, respectively.

Regulatory assessment expenses increased $587,000 to $1.6 million for 2023 compared to $1.1 million for 2022. This increase was primarily due to the FDIC raising the deposit insurance assessment rate by two bps, effective January 1, 2023, for all insured depository institutions.

Occupancy and equipment expenses increased $472,000 to $6.6 million for 2023 compared to $6.1 million for 2022. This increase was mainly due to opening the new operations center building in the first quarter of 2023, the expansion of a banking center in the Southwest market in the second quarter of 2023, and renovations of the main office building in Alexandria, Louisiana, in the second half of 2023.

Legal and professional expenses increased $381,000 to $2.4 million for 2023 compared to $2.0 million for 2022. This increase was primarily due to higher audit and compliance fees.

Other business development expenses increased $342,000 to $2.0 million for 2023 compared to $1.6 million for 2022. This increase was mainly the result of an increase in community sponsorships and CRA related contributions, as well as expenses associated with an SBIC limited partnership.

Loan and deposit expenses increased $325,000 to $984,000 for 2023 compared to $659,000 for 2022. Deposit expenses in 2022 benefited from the receipt of a $122,000 negotiated, variable rebate from a vendor, resulting in lower loan and deposit expenses during that period.

Income Tax Expense

The amount of income tax expense is influenced by the amounts of our pre-tax income, tax-exempt income, and other nondeductible expenses. Deferred tax assets and liabilities are reflected at currently enacted income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Our accrued tax rate is based on an annualized projection and changes considering our most recent financial results and balances. Our effective income tax rates have differed from the U.S. statutory rate due to the effect of tax-exempt income from loans, securities, life insurance policies, income tax effects associated with stock-based compensation, and permanent and temporary tax differences.

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The table below presents, for the periods indicated, income tax expense:

For the Years Ended December 31,

(dollars in thousands) 2023 2022 Increase (Decrease)

Income tax expense $ 8,065 $ 8,065 $ — — %

For the years ended December 31, 2023 and 2022, income tax expense remained consistent at $8.1 million. The comparability in income tax expense was primarily due to the decrease in pre-tax income offset by an increase in the effective income tax rate due to permanent book versus tax differences. The effective income tax rate for 2023 was 18.8%, compared to 17.9% for 2022.

FINANCIAL CONDITION

General

As of December 31, 2023, assets were $3.13 billion, which was $46.1 million, or 1.5%, higher than $3.08 billion as of December 31, 2022. During 2023, loans HFI increased $76.6 million, or 4.0%, during the year to $1.99 billion as of December 31, 2023. The increase in loans was due to improved loan activity in various markets across Louisiana. Cash and cash equivalents increased $27.0 million, or 9.7%, to $305.4 million and were 9.8% of assets as of December 31, 2023. Total securities decreased $61.8 million, or 8.0%, to $714.3 million and were 22.8% of assets as of December 31, 2023. The decrease in securities was due to maturities and principal repayments exceeding purchases, partially offset by a smaller net unrealized loss on securities AFS. Deposits were consistent at $2.80 billion as of December 31, 2023 and 2022. During 2023, there was a deposit mix shift as customers moved funds from lower yielding categories to higher yielding categories. We had no outstanding borrowings as of December 31, 2023 and 2022. During 2023, stockholders’ equity increased $38.1 million to $303.9 million as of December 31, 2023. As of December 31, 2023, the loans HFI to deposits ratio was 71.13%, compared to 68.46% as of December 31, 2022, and the noninterest-bearing deposits to total deposits ratio was 32.71%, compared to 38.96% as of December 31, 2022.

Interest-Bearing Deposits in Other Banks

Interest-bearing deposits in other banks were the third-largest component of earning assets as of December 31, 2023. As of December 31, 2023, interest-bearing deposits in other banks were $252.4 million and were 8.1% of assets, an increase of $11.8 million, or 4.9%, compared to $240.6 million and 7.8% of assets as of December 31, 2022. Excess liquidity that is not being deployed into loans or securities is placed in these accounts.

Securities

Our securities portfolio is the second-largest component of earning assets and provides a significant source of revenue. Securities are classified as AFS, HTM, and equity securities. As of December 31, 2023, our total securities portfolio was 22.8% of assets. It is designed primarily to provide and maintain liquidity, generate a favorable return on investments without incurring unnecessary interest rate and credit risk, and complement our lending activities. We may invest in various types of liquid assets that are permissible under governing regulations and approved by our investment policy, which include U.S. Treasury obligations, U.S. government agency obligations, certificates of deposit of insured domestic banks, mortgage-backed and mortgage-related securities, corporate notes having an investment rating of “A” or better, municipal bonds, and certain equity securities.

Securities AFS and Securities HTM

Securities AFS and securities HTM are debt securities. Total debt securities were $711.3 million as of December 31, 2023, a decrease of $54.8 million, or 7.1%, from $766.1 million as of December 31, 2022.

Securities AFS are held for indefinite periods of time and are carried at estimated fair value. As of December 31, 2023, the estimated fair value of securities AFS was $570.1 million. The carrying values of our securities AFS are adjusted for unrealized gain or loss, and any unrealized gain or loss is reported on an after-tax basis as a component of AOCI in stockholders’ equity. 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, compared to a net unrealized loss of $74.1 million as of December 31, 2022.

Securities HTM, which we have 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. Securities HTM had an unrealized loss of $22.2 million as of December 31, 2023, compared to an unrealized loss of $19.3 million as of December 31, 2022.

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.

Securities AFS purchased for the year ended December 31, 2023, consisted of $53.0 million in mortgage-backed securities, $23.7 million in U.S. agency securities, and $19.8 million in U.S. Treasury securities. The U.S. agency

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securities purchased had a yield of 5.78% and an average life of 5.22 years. The mortgage-backed securities purchased had a yield of 5.35% and an average life of 4.37 years. The U.S. Treasury securities purchased had a yield of 5.30% and an average life of 0.15 years.

The securities AFS portfolio tax-equivalent yield was 1.90% for the year ended December 31, 2023, compared to 1.75% for the year ended December 31, 2022. The increase in yield for the year ended December 31, 2023, was primarily due to reinvesting securities cash flows received during 2023 into new securities at higher yields.

The contractual maturity of mortgage-backed securities and collateralized mortgage obligations is not a reliable indicator of their expected lives because borrowers have the right to prepay their obligations at any time. Mortgage-backed securities and collateralized mortgage obligations are typically issued with stated principal amounts and are backed by pools of mortgage loans and other loans with varying maturities. The term of the underlying mortgages and loans may vary significantly due to the ability of a borrower to prepay. Monthly pay downs on mortgage-backed securities may cause the average lives of the securities to be much different than the stated contractual maturity. During a period of rising interest rates, fixed rate mortgage-backed securities are not likely to experience heavy prepayments of principal, and consequently, the average lives of these securities are typically lengthened. If interest rates begin to fall, prepayments may increase, thereby shortening the estimated average lives of these securities. As of December 31, 2023, the average life of our securities portfolio was 7.1 years with an estimated effective duration of 5.0 years. As of December 31, 2022, the average life of our securities portfolio was 6.8 years with an estimated effective duration of 5.0 years.

The following tables summarize the amortized cost and estimated fair value of our securities by type as of the dates indicated. As of December 31, 2023, other than securities issued by U.S. government agencies or government-sponsored enterprises, our securities portfolio did not contain securities of any one issuer with an aggregate book value in excess of 10.0% of our stockholders’ equity.

Securities AFS:

Securities HTM:

Securities AFS:

Securities HTM:

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The following table shows the fair value of securities AFS that mature during each of the periods indicated. The contractual maturity of a mortgage-backed security is the date the last underlying mortgage matures. Yields are weighted-average tax equivalent yields that are calculated by dividing projected annual income by the average amortized cost of the applicable securities while using a 21.0% federal income tax rate, when applicable.

Contractual Maturity as of December 31, 2023

Securities AFS:

(1)Tax equivalent projected book yield as of December 31, 2023.

The following table shows the amortized cost of securities HTM that mature during each of the periods indicated. The contractual maturity of a mortgage-backed security is the date the last underlying mortgage matures. Yields are weighted-average tax equivalent yields that are calculated by dividing projected annual income by the average amortized cost of the applicable securities while using a 21.0% federal income tax rate, when applicable.

Contractual Maturity as of December 31, 2023

Securities HTM:

U.S. agency securities — — % — — % 922 2.61 % — — % 922 2.61 %

Equity Securities

Equity securities are an investment in a CRA mutual fund, consisting primarily of bonds. We invest in the mutual fund as part of our strategy to meet our obligations described within the CRA, which encourages financial institutions to help meet the credit needs of their entire market area, including low and moderate income neighborhoods, consistent with safe and sound banking principles. Through this fund, mortgage-backed securities are purchased according to our allocations, with their underlying collateral located in our market areas, which strengthens our efforts to meet our CRA obligations.

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, 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, we 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.

Loan Portfolio

Our loan portfolio is our largest category of earning assets, and interest income earned on our loan portfolio is our primary source of income. We maintain a diversified loan portfolio with a focus on commercial real estate, one-to-four family residential, and commercial and industrial loans. As of December 31, 2023, loans HFI were $1.99 billion, an increase of $76.6 million, or 4.0%, compared to $1.92 billion as of December 31, 2022. Loans HFI increased primarily due to improved loan activity in various markets across Louisiana.

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Loans by Category

Loans HFI by category and loans HFS are summarized below as of the dates indicated:

(dollars in thousands) Amount Percent Amount Percent $ Change % Change

Real estate:

Average loan HFI size, excluding credit cards $ 239 $ 236 $ 3 1.3 %

Commercial Real Estate Loans. Commercial real estate loans are primarily made for commercial property that is owner occupied as well as commercial property owned by real estate investors. Real estate securing these loans includes many property types, such as retail centers, nursing homes, offices and office buildings, medical facilities, warehouses, churches and related facilities, production facilities, and multifamily properties. Commercial real estate loans increased $56.9 million, or 7.2%, to $851.6 million as of December 31, 2023, from $794.7 million as of December 31, 2022. The average CRE loan size was $938,000 as of December 31, 2023 and $917,000 as of December 31, 2022.

Non-owner occupied commercial real estate loans were $438.8 million, or 22.0% of loans HFI, and represented 115.9% of the Bank’s total risk-based capital as of December 31, 2023. Investor-owned office properties were $62.3 million, or 3.1% of loans HFI, as of December 31, 2023, and are primarily centered in low-rise suburban areas. The owner occupied and non-owner occupied components of the commercial real estate portfolio are summarized below:

December 31,

(dollars in thousands) Amount Percent of Loans HFI Amount Percent of Loans HFI

Commercial real estate

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Industry concentrations, based on NAICS, within the commercial real estate loan portfolio are presented below:

December 31,

(dollars in thousands) Amount Percent of Loans HFI Amount Percent of Loans HFI

Owner Occupied

Professional, scientific, and technical services 11,543 0.6 % 9,626 0.5 %

Non-Owner Occupied

Management of company and enterprises 3,742 0.2 % 2,525 0.1 %

One-to-Four Family Residential Loans. One-to-four family residential loans are predominantly first lien mortgage loans secured by owner occupied one-to-four family residential properties. One-to-four family residential loans increased $56.0 million, or 10.3%, to $599.5 million as of December 31, 2023, compared to $543.5 million as of December 31, 2022.

Construction and Development Loans. The construction and development portfolio includes loans to small and medium-sized businesses to construct owner occupied facilities, loans to developers of commercial real estate investment properties and residential developments, and, to a lesser extent, loans to individual clients for construction of single-family homes. Construction and development loans decreased $32.1 million, or 20.4%, to $125.2 million as of December 31, 2023, compared to $157.4 million as of December 31, 2022.

Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including, but not limited to, inventory, equipment, capital expansion, and working capital enhancement. Collateral typically includes a lien on general business assets including, among other things, accounts receivable, inventory, equipment, and available real estate. A personal guaranty is generally obtained from the borrower or principal. Commercial and industrial loans increased $5.3 million, or 1.7%, to $315.3 million as of December 31, 2023, from $310.1 million as of December 31, 2022.

Tax-Exempt Loans. Tax-exempt loans are made to political subdivisions of the State of Louisiana including parishes, municipalities, utility districts, school districts, and development authorities. These loans are typically secured by and paid

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for by ad valorem taxes. Tax-exempt loans decreased $10.3 million, or 12.3%, to $72.9 million as of December 31, 2023, compared to $83.2 million as of December 31, 2022.

Consumer Loans. Consumer loans are made to individuals for personal, family, and household purposes and include secured and unsecured installment and term loans. Consumer loans are offered as an accommodation to existing customers and are not marketed to persons without a pre-existing relationship with us.

Industry Concentrations

Industry concentrations, based on NAICS, stated as a percentage of loans HFI are presented below:

Health care 7.7 %

Investor one-to-four family and multifamily 5.7 %

Construction 4.2 %

Retail trade 3.4 %

Hospitality services 3.1 %

Public administration 2.3 %

Finance and insurance 1.8 %

Energy 1.7 %

Religious and other nonprofit 1.5 %

Manufacturing 1.0 %

All other 67.6 %

Total loans HFI by industry concentration 100.0 %

Health care loans are our largest industry concentration and are made up of a diversified portfolio of health care providers. As of December 31, 2023, total health care loans were $153.8 million, or 7.7% of loans HFI, compared to $160.3 million, or 8.4% of loans HFI, as of December 31, 2022. The average health care loan size was $334,000 as of December 31, 2023, and $338,000 as of December 31, 2022. Within the health care sector, loans to nursing and residential care facilities were 4.0% of loans HFI as of December 31, 2023, and 4.4% as of December 31, 2022. Loans to physician and dental practices were 3.6% of loans HFI as of December 31, 2023, and 3.9% as of December 31, 2022.

Geographic Markets

As of December 31, 2023, Red River Bank operated in seven geographic markets throughout the state of Louisiana. The following table summarizes loans HFI by market of origin:

(dollars in thousands) Amount Percent of Loans HFI

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Loan Portfolio Maturity Analysis

The maturity distribution for loans HFI are summarized below:

Real estate:

Fixed and Floating Rate Loans

The dollar amount, as of December 31, 2023, of fixed and floating rate loans HFI that mature after December 31, 2024, are presented in the following table:

(dollars in thousands) Fixed Rate Loans Floating Rate Loans Total

Real estate:

LIBOR

In July 2017, the United Kingdom Financial Conduct Authority, the authority that regulates LIBOR, announced its intent to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Subsequently, on March 5, 2021, it was announced that certain U.S. Dollar LIBOR rates would cease to be published after June 30, 2023. As of December 31, 2023, there were no loans HFI tied to a LIBOR-based rate.

Nonperforming Assets

NPAs consist of nonperforming loans and property acquired through foreclosures or repossession. Nonperforming loans include loans that are contractually past due 90 days or more and loans that are on nonaccrual status. Loans are considered past due when principal and interest payments have not been received as of the date such payments are due.

Asset quality is managed through disciplined underwriting policies, continual monitoring of loan performance, and focused management of NPAs. There can be no assurance, however, that the loan portfolio will not become subject to losses due to declines in economic conditions, deterioration in the financial condition of our borrowers, or a decline in the value of collateral.

NPAs totaled $2.6 million as of December 31, 2023, an increase of $236,000, or 10.0%, from $2.4 million as of December 31, 2022. The increase was primarily due to an increase in accruing loans 90 days or more past due. The ratio of NPAs to assets was 0.08% as of December 31, 2023 and 2022.

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Nonperforming loan and asset information is summarized below:

December 31,

Nonperforming loans:

Accruing loans 90 or more days past due 574 2

Foreclosed assets:

Real estate 69 —

Total foreclosed assets 69 —

Nonaccrual loans to loans HFI 0.10 % 0.12 %

Nonperforming loans to loans HFI 0.13 % 0.12 %

Nonaccrual loans are summarized below by category:

December 31,

Real estate:

Commercial real estate $ 714 $ 720

One-to-four family residential 269 243

Construction and development — 9

Tax-exempt — —

Potential Problem Loans

From a credit risk standpoint, we classify loans in one of five categories: pass, special mention, substandard, doubtful, or loss. Loan classifications reflect a judgment about the risk of default and loss associated with the loans. Classifications are reviewed periodically and adjusted to reflect the degree of risk and loss believed to be inherent in each loan. The methodology is structured so that reserve allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

Loans classified as pass are of satisfactory quality and do not require a more severe classification.

Loans classified as special mention have potential weaknesses that deserve management’s close attention. If these weaknesses are not corrected, repayment possibilities for the loan may deteriorate. However, the loss potential does not warrant substandard classification.

Loans classified as substandard have well-defined weaknesses that jeopardize normal repayment of principal and interest. Prompt corrective action is required to reduce exposure and to assure adequate remedial actions are taken by the borrower. If these weaknesses do not improve, loss is possible.

Loans classified as doubtful have well-defined weaknesses that make full collection improbable.

Loans classified as loss are considered uncollectible and charged-off to the ACL.

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The following table summarizes loans HFI by risk rating:

(dollars in thousands) Amount Percent Amount Percent

There were no loans classified as doubtful or loss as of December 31, 2023 or 2022.

Allowance for Credit Losses

On January 1, 2023, we adopted ASC 326, as amended, using the modified retrospective method. For reporting periods beginning on or after January 1, 2023, we maintain an ACL on all loans that reflects management’s best estimate of expected credit losses to be recognized over the lifetime of the loans. The determination of the amount of allowance involves a high degree of judgement and subjectivity. Refer to “Item 8. Financial Statements and Supplementary Data - Note 1. Significant Accounting Policies - Securities” and “- Loans Held for Investment” in this Report for more information regarding our ACL methodologies.

In determining the ACL for loans HFI, we estimate losses on a collective pool basis when similar risk characteristics and risk profiles exist. Loans that do not share similar risk characteristics are evaluated individually and excluded from the collective evaluation. The ACL is determined using the CECL model, which considers relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

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

As of December 31, 2023, the ACL was $21.3 million, or 1.07% of loans HFI. As of December 31, 2022, the ALL was $20.6 million, or 1.08% of loans HFI. The $708,000 increase in the ACL for the year ended December 31, 2023, was due to the $278,000 increase in ACL from the adoption of ASC 326 and $735,000 from the provision for credit losses, partially offset by $305,000 of net charge-offs.

Net charge-offs for the year ended December 31, 2023, were $305,000, an increase of $7,000 from $298,000 for the year ended December 31, 2022. The ratio of net charge-offs to average loans HFI was 0.02% for the years ended December 31, 2023 and 2022.

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The following table displays activity in the ACL for December 31, 2023, and the ALL for December 31, 2022:

As of and for the Years Ended December 31,

Impact of adopting ASC 326 278 —

Charge-offs:

Real estate:

One-to-four family residential (23) —

Construction and development (9) (18)

Commercial and industrial (58) (39)

Recoveries:

Real estate:

Commercial real estate — 1

One-to-four family residential 10 11

Construction and development — 18

Commercial and industrial 30 86

Net (charge-offs)/recoveries (305) (298)

Net charge-offs to average loans 0.02 % 0.02%

We believe that we have established our ACL in accordance with GAAP and that the ACL was adequate to provide for known and inherent losses in the portfolio at all times shown above. Future provisions for credit losses are subject to ongoing evaluations of the factors and loan portfolio risks, including economic pressures related to inflation, labor market and supply chain constraints, and natural disasters affecting the state of Louisiana. A decline in market area economic conditions, deterioration of asset quality, or growth in portfolio size could cause the allowance to become inadequate, and material additional provisions for credit losses could be required.

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The following table displays the allocation of the ACL and ALL among the loan classifications as of the dates indicated. The allocations shown below should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in the future will necessarily occur in these amounts or in the indicated proportions. The total ACL is available to absorb losses from any loan classification.

December 31,

(dollars in thousands) Amount Percent Amount Percent

Real estate:

The following table displays the ratio of net charge-offs to average loans HFI outstanding by category for the periods shown:

For the Years Ended December 31,

Real estate:

Commercial real estate —% —%

One-to-four family residential —% —%

Construction and development —% —%

Commercial and industrial —% —%

Tax-exempt —% —%

Total net charge-offs to average loans HFI 0.02% 0.02%

Deposits

Deposits are the primary funding source for loans and investments. We offer a variety of deposit products designed to attract and retain consumer, commercial, and public entity customers. These products consist of noninterest and interest-bearing checking accounts, savings accounts, money market accounts, and time deposit accounts. Deposits are gathered from individuals, partnerships, corporations, and public entities located primarily in our market areas. We do not have any internet-sourced or brokered deposits.

Total 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. Noninterest-bearing deposits decreased $174.1 million, or 16.0%, during 2023 to $916.5 million as of December 31, 2023. Noninterest-bearing deposits as a percentage of total deposits were 32.71% as of December 31, 2023, compared to 38.96% as of December 31, 2022. Interest-bearing deposits increased $177.0 million, or 10.4%, during 2023 to $1.89 billion as of December 31, 2023, with the largest increase in time deposits.

Red River Bank has a granular, diverse deposit portfolio with customers in a variety of industries throughout Louisiana. As of December 31, 2023, the average deposit account size was approximately $28,000, compared to $30,000 as of December 31, 2022.

In 2022, we implemented the IntraFi Network Insured Cash Sweep and related reciprocal balance programs for qualified commercial customers. The IntraFi Network Insured Cash Sweep program provides our customers a demand deposit sweep account that has a competitive interest rate as well as full FDIC insurance coverage. As of December 31, 2023, we had $129.1 million swept off our balance sheet. The related reciprocal program brings deposit balances back on to our balance sheet as interest-bearing demand deposit accounts. As of December 31, 2023, we had $138.4 million of interest-bearing demand deposit accounts.

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The following table presents our deposits by account type as of the dates indicated:

(dollars in thousands) Balance % of Total Balance % of Total $ Change % Change

Interest-bearing deposits:

The following table presents deposits by customer type as of the dates indicated:

(dollars in thousands) Balance % of Total Balance % of Total Balance % of Total

We manage our interest expense on deposits through a deposit pricing strategy that is based on competitive pricing, economic conditions, and current or anticipated funding needs. We adjust deposit rates in part based upon our anticipated funding needs and liquidity position. We also consider the potential interest rate risk caused by extended maturities of time deposits when adjusting deposit rates.

Our average deposit balance was $2.72 billion for the year ended December 31, 2023, a decrease of $128.2 million, or 4.5%, from $2.85 billion for the year ended December 31, 2022. For 2023, average public entity deposits were 7.9% of average total deposits. The average cost of interest-bearing deposits and total deposits for 2023 was 1.86% and 1.18%, respectively, compared to 0.46% and 0.27% for 2022, respectively. The increase in the average cost of interest-bearing deposits and total deposits in 2023 as compared to 2022 was due to rate competition for deposits that began in the second half of 2022 and continued into 2023. Also, as of December 31, 2023, 6.1% of interest-bearing transaction deposits had floating rates, which adjust with market rates.

The following table presents our average deposits by account type and the average rate paid for the periods indicated:

For the Years Ended December 31,

(dollars in thousands) AverageBalance AverageRate AverageBalance AverageRate

Interest-bearing deposits:

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As of December 31, 2023, our estimated uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit (currently $250,000), were approximately $887.8 million, or 31.7% of total deposits, compared to $975.1 million, or 34.8% of total deposits, as of December 31, 2022. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes. Also, as of December 31, 2023, our estimated uninsured deposits, excluding collateralized public entity deposits, were approximately $643.6 million, or 23.0% of total deposits, compared to $786.9 million, or 28.1% of total deposits, as of December 31, 2022. As of December 31, 2023, our cash and cash equivalents of $305.4 million combined with our available borrowing capacity of $1.46 billion equaled 198.4% of our estimated uninsured deposits and 273.7% of our estimated uninsured deposits, excluding collateralized public entity deposits.

The following table presents the amount of time deposits, by account, that are in excess of the FDIC insurance limit (currently $250,000) by time remaining until maturity for the period indicated:

(in thousands) December 31, 2023

Three months or less $ 31,970

Over three months through six months 26,983

Over six months through 12 months 22,448

Borrowings

Although deposits are our primary source of funds, we may, from time to time, utilize borrowings as a cost-effective source of funds when such borrowings can then be invested at a positive interest rate spread for additional capacity to fund loan demand or to meet our liquidity needs. We had no outstanding borrowings as of December 31, 2023 or 2022.

Federal Home Loan Bank Advances. We utilize the FHLB of Dallas as needed as a funding source. As of December 31, 2023 and 2022, our total FHLB of Dallas line availability was $934.1 million and $875.8 million, respectively. This line is secured by a blanket lien on selected Red River Bank loans that meet FHLB of Dallas collateral requirements. At various times, we may obtain letters of credit from the FHLB of Dallas as collateral for our public entity deposits. As of December 31, 2023 and 2022, we held unfunded letters of credit from the FHLB of Dallas in the amount of $104.8 million and $100.9 million, respectively. As of December 31, 2023 and 2022, we had net borrowing capacity of $829.2 million and $774.9 million, respectively, under this arrangement. As of June 30, 2023, we 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 and 2022, we had no outstanding borrowings under these agreements.

Federal Reserve Bank’s Discount Window. In the third quarter of 2023, we pledged securities to have borrowing access to the Federal Reserve Bank’s Discount Window facility. As of December 31, 2023, our borrowing capacity through this facility was $45.5 million; however, we had no outstanding borrowings under this facility. As of December 31, 2022, we had no borrowing capacity through this facility as collateral had not been pledged.

Other Borrowings. We may also utilize federal funds from various correspondent financial institutions as a source of short-term funding. As of December 31, 2023 and 2022, we had $95.0 million in federal funds lines available from these funding sources. We had no outstanding balances on these lines as of December 31, 2023 or 2022.

Hancock Whitney Bank Line of Credit. We maintain a revolving line of credit at Hancock Whitney Bank collateralized by 100.0% of the stock of Red River Bank. As of December 31, 2023 and 2022, total borrowing capacity was $6.0 million under this arrangement. We had no outstanding balances on this line during 2023 or 2022.

Stockholders’ Equity

Total stockholders’ equity as of December 31, 2023, was $303.9 million, compared to $265.8 million as of December 31, 2022, an increase of $38.1 million, or 14.3%. This increase was attributable to $34.9 million of net income for the year ended December 31, 2023, a $10.7 million, net of tax, market adjustment to AOCI related to securities, and $404,000 of stock compensation, partially offset by the repurchase of 101,298 shares of common stock for $5.0 million, $2.3 million in cash dividends, and a $569,000, net of tax, adjustment to retained earnings related to the adoption of CECL.

During the second quarter of 2022, we 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.

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On November 4, 2022, our board of directors approved the renewal of the 2022 stock repurchase program that expired on December 31, 2022. The 2023 stock repurchase program authorized us to purchase up to $5.0 million of our outstanding shares of common stock from January 1, 2023 through December 31, 2023. For the year ended December 31, 2023, we repurchased 101,298 shares of our 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. As of December 31, 2023, there were no available funds remaining under the 2023 stock repurchase program.

On December 14, 2023, our 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 us to purchase up to $5.0 million of our 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.

Effective January 1, 2023, repurchases are subject to a nondeductible excise tax under the Inflation Reduction Act of 2022 equal to 1.0% of the fair market value of the shares repurchased, subject to certain limitations. We did not have a material impact to our financial condition or results of operations in 2023 as a result of the excise tax.

On January 1, 2023, we 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.

Regulatory Capital Requirements

Capital management consists of maintaining equity and other instruments that qualify as regulatory capital to support current and future operations. Banking regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, bank holding companies and FDIC-insured depository institutions are required to maintain minimum capital relative to the amount and types of assets they hold.

As we deploy our capital and continue to grow our operations, our capital levels may decrease depending on our level of earnings. However, we expect to monitor and control our growth in order to remain in compliance with all regulatory capital standards applicable to us.

For additional information on regulatory capital guidelines and limits for Red River Bank and Red River Bancshares, Inc., see “Item 8. Financial Statements and Supplementary Data - Note 15. Regulatory Capital Requirements.”

LIQUIDITY AND ASSET-LIABILITY MANAGEMENT

Liquidity

As of December 31, 2023, we had sufficient liquid assets available and $1.46 billion accessible from other liquidity sources.

Liquidity involves our ability to raise funds to support asset growth and potential acquisitions, reduce assets to meet deposit withdrawals and other payment obligations, maintain reserve requirements, and otherwise operate on an ongoing basis and manage unexpected events. For the years ended December 31, 2023 and 2022, liquidity needs were primarily met by core deposits, security and loan maturities, and cash flows from amortizing security and loan portfolios. While maturities and scheduled amortization of loans are predictable sources of funds, deposit outflows, mortgage prepayments, and prepayments on amortizing securities are greatly influenced by market interest rates, economic conditions, and the competitive environment in which we operate; therefore, these cash flows are monitored regularly.

Liquidity levels are dependent on our operating, financing, lending, and investing activities during any given period. Access to purchased funds from correspondent banks and overnight advances from the FHLB of Dallas and the Federal Reserve Bank of Atlanta are also available. Purchased funds from correspondent banks and overnight advances can be utilized to meet funding obligations.

Our primary source of funds is deposits, and our primary use of funds is the funding of loans. We invest excess deposits in interest-earning deposit accounts at other banks or at the Federal Reserve, federal funds sold, securities, or other short-term liquid investments until the deposits are needed to fund loan growth or other obligations. Our average deposits decreased $128.2 million, or 4.5%, for the year ended December 31, 2023, compared to the average deposits for the year ended December 31, 2022. The decrease in average total deposits was primarily the result of the changing interest rate environment impacting customer deposit movement and activity. Our average total loans increased $126.8 million, or 7.0%, for the year ended December 31, 2023, compared to average total loans for the year ended December 31, 2022.

As of December 31, 2023, liquid assets were $305.4 million compared to $278.4 million as of December 31, 2022. The increase of $27.0 million, or 9.7%, was due to lower securities balances as a result of maturities and receiving principal repayments during the year, partially offset by the outflow of deposits during the first nine months of 2023. The liquid assets to assets ratio was 9.8% as of December 31, 2023, compared to 9.0% as of December 31, 2022.

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Our securities portfolio is an alternative source for meeting liquidity needs and was our second-largest component of assets as of December 31, 2023. The securities portfolio generates cash flow through principal repayments, calls, and maturities, and certain securities can be sold or used as collateral in borrowings that allow for their conversion to cash. Securities AFS can generally be sold, while securities HTM have significant restrictions related to sales. As of December 31, 2023, we project receipt of approximately $145.0 million of principal repayments and maturities through December 31, 2024. As of December 31, 2023, approximately $480.4 million, or 67.3%, of the securities portfolio was available to be sold or used as collateral in borrowings as a liquidity source.

Interest-bearing deposits in other banks are our main source of meeting daily liquidity needs and were our third-largest component of assets as of December 31, 2023. As of December 31, 2023, interest-bearing deposits in other banks were $252.4 million and were 8.1% of assets, an increase of $11.8 million, or 4.9%, compared to $240.6 million and 7.8% of assets as of December 31, 2022. Excess liquidity that is not being deployed into loans or securities is placed in these accounts.

We also utilize the FHLB of Dallas as needed as a viable funding source. FHLB of Dallas advances may be used to meet the Bank’s liquidity needs, particularly if the prevailing interest rate on an FHLB of Dallas advance compares favorably to the rates that would be required to attract the necessary deposits. We currently are classified as having “blanket lien collateral status,” which means that advances can be executed at any time without further collateral requirements. As of December 31, 2023 and 2022, our net borrowing capacity from the FHLB of Dallas was $829.2 million and $774.9 million, respectively.

In addition, effective the third quarter of 2023, we pledged securities to have borrowing access to the Federal Reserve Bank’s Discount Window facility. As of December 31, 2023, our borrowing capacity through this facility was $45.5 million; however, we had no borrowings under this facility. As of December 31, 2022, we had no borrowing capacity through this facility as collateral had not been pledged.

Other sources available for meeting liquidity needs include federal funds lines, repurchase agreements, and other lines of credit. We maintain four federal funds lines of credit with commercial banks that provided for the availability to borrow up to an aggregate of $95.0 million in federal funds as of December 31, 2023 and 2022. The rates for the federal funds lines are determined by the applicable commercial bank at the time of borrowing. We also maintain an additional $6.0 million revolving line of credit at one of our correspondent banks. As of December 31, 2023 and 2022, we had total borrowing capacity of $101.0 million through these combined funding sources. We had no outstanding balances from either of these funding sources as of December 31, 2023 or 2022.

The Federal Reserve’s Bank Term Funding Program was available from March 12, 2023 through March 11, 2024, as an additional liquidity source. The Bank Term Funding Program gave us the option to use eligible securities as collateral for a loan of up to one year from the Federal Reserve. We did not participate in the Bank Term Funding Program.

Off-Balance Sheet Items

In the normal course of business, we enter into certain financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of our customers. These commitments involve elements of credit risk, interest rate risk, and liquidity risk. Some instruments may not be reflected in the accompanying consolidated financial statements until they are funded, although they expose us to varying degrees of credit risk and interest rate risk in much the same way as funded loans. We may also enter into contractual obligations.

For more information about our commitments to extend credit and standby letters of credit, see “Item 8. Financial Statements and Supplementary Data - Note 3. Loans and Asset Quality - Commitments to Extend Credit.” For more information about our financial commitments with time deposits, operating lease obligations, and limited partnership investments and construction commitments, see “Item 8. Financial Statements and Supplementary Data - Note 5. Deposits,” “- Note 7. Leases,” and “- Note 12. Off-Balance Sheet Contractual Obligations and Contingencies,” respectively.

Interest Rate Sensitivity and Market Risk

As a financial institution, our primary component of market risk is interest rate volatility. Our asset-liability management policies provide management with guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We have historically managed our rate sensitivity position within our established policy guidelines.

Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, other than those that have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

We manage exposure to interest rates by structuring the balance sheet appropriately during the ordinary course of business. We have the ability to enter into interest rate swaps to mitigate interest rate risk in limited circumstances, but it

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is not our policy to enter into such transactions on a regular basis. We do not enter into instruments such as financial options, financial futures contracts, or forward delivery contracts for the purpose of reducing interest rate risk. We are not subject to foreign exchange risk, and our commodity price risk is immaterial, as the percentage of our agricultural loans to loans HFI was only 0.37% as of December 31, 2023.

Our exposure to interest rate risk is managed by Red River Bank’s Asset-Liability Management Committee. The committee formulates strategies based on appropriate levels of interest rate risk and monitors the results of those strategies. In determining the appropriate level of interest rate risk, the committee considers the impact on both earnings and capital given the current outlook on interest rates, regional economies, liquidity, business strategies, and other related factors.

The committee meets quarterly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and economic values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans, and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits, and consumer and commercial deposit activity. We employ methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities, as well as an interest rate simulation model and shock analysis.

In conjunction with our interest rate risk management process, on a quarterly basis, we run various simulations within a static balance sheet. This model tests the impact on net interest income and fair value of equity from changes in market interest rates under various scenarios. We use parallel rate shock scenarios that assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. We also deploy a ramped rate scenario over a 12-month and 24-month horizon based upon parallel yield curve shifts. Our nonparallel rate shock model simulation involves analysis of interest income and expense under various changes in the shape of the yield curve. Contractual maturities and repricing opportunities of loans are incorporated into the model, as are prepayment assumptions and maturity data and call options within the securities portfolio. The average life of non-maturity deposit accounts are based on assumptions developed from non-maturity deposit decay studies, which calculate average lives using historic closure rates.

Bank policy regarding interest rate risk simulations performed by our risk model currently specifies that for instantaneous parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than 10.0% for a 100 bp shift and 15.0% for a 200 bp shift. In accordance with Bank policy that was approved in September 2023, regarding economic value at risk simulations performed by our risk model for instantaneous parallel shifts of the yield curve, estimated fair value of equity for the subsequent one-year period should not decline by more than 10.0% for a 100 bp shift and 20.0% for a 200 bp shift.

The following table shows the impact of an instantaneous and parallel change in rates, at the levels indicated, and summarizes the simulated change in net interest income and fair value of equity over a 12-month horizon as of the dates indicated.

Change in Interest Rates (bps)

Base — % — % — % — %

The results above, as of December 31, 2023 and 2022, demonstrate that our balance sheet is asset sensitive, which means our assets have the opportunity to reprice at a faster pace than our liabilities, over the 12-month horizon. However, due to the deposit rate pressure we experienced in 2023, our deposit interest rates adjusted more quickly than the change in the federal funds rate. Our repricing opportunity is captured in a gap analysis, which is the process by which we measure the repricing gap between interest rate-sensitive assets versus interest rate-sensitive liabilities.

As of December 31, 2023, the reported percentage of changes in net interest income and fair value of equity remained within the policy thresholds. These values are reported at each quarterly Asset-Liability Committee meeting. The net interest income at risk and the fair value of equity will continue to be monitored, and appropriate mitigating action will be taken if needed.

The impact of our floating rate loans and floating rate transaction deposits are also reflected in the results shown in the above table. As of December 31, 2023, floating rate loans were 11.7% of loans HFI, and floating rate transaction deposits were 6.1% of interest-bearing transaction deposits.

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The assumptions incorporated into the model are inherently uncertain, and as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and the application and timing of various management strategies and the slope of the yield curve.

Impact of Inflation

Our consolidated financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” of this Report have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession. Changes in interest rates affect the financial condition of a financial institution to a much greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or by the same level as the inflation rate. The primary effect of inflation on our operations is our ability to manage the impact of changes in interest rates. In addition, inflation could also increase our operating costs related to our products and services.

NON-GAAP FINANCIAL MEASURES

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. Certain financial measures used by management to evaluate our operating performance are discussed in this Report as supplemental non-GAAP performance measures. In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the U.S.

Management and the board of directors review tangible book value per share, tangible common equity to tangible assets, and realized book value per share as part of managing operating performance. However, these non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner that we calculate the non-GAAP financial measures that are discussed in this Report may differ from that of other companies’ reporting measures with similar names. It is important to understand how such other banking organizations calculate and name their financial measures similar to the non-GAAP financial measures discussed in this Report when comparing such non-GAAP financial measures.

Tangible Assets, Tangible Equity, Tangible Book Value, and Realized Book Value

Tangible Book Value Per Share. Tangible book value per share is a non-GAAP measure commonly used by investors, financial analysts, and investment bankers to evaluate financial institutions. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. We calculate tangible book value per share as total stockholders’ equity, less intangible assets, divided by the outstanding number of shares of our common stock at the end of the relevant period. Intangible assets have the effect of increasing total book value while not increasing tangible book value. The most directly comparable GAAP financial measure for tangible book value per share is book value per share.

As a result of previous acquisitions, we have a small amount of intangible assets. As of December 31, 2023, total intangible assets were $1.5 million, which is less than 1.0% of total assets.

Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by investors, financial analysts, and investment bankers to evaluate financial institutions. We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of tangible common equity to tangible assets, each exclusive of changes in intangible assets. Intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets. We calculate tangible common equity as total stockholders’ equity less intangible assets, and we calculate tangible assets as total assets less intangible assets. The most directly comparable GAAP financial measure for tangible common equity to tangible assets is total common stockholders’ equity to total assets.

Realized Book Value Per Share. Realized book value per share is a non-GAAP measure that we use to evaluate our operating performance. We believe that this measure is important because it allows us to monitor changes from period to period in book value per share exclusive of changes in AOCI. Our AOCI is impacted primarily by the unrealized gains and losses on securities AFS. These unrealized gains or losses on securities AFS are driven by market factors and may also be temporary and vary greatly from period to period. Due to the possibly temporary and greatly variable nature of these changes, we find it useful to monitor realized book value per share. We calculate realized book value per share as total stockholders’ equity less AOCI, divided by the outstanding number of shares of our common stock at the end of the relevant period. AOCI has the effect of increasing or decreasing total book value while not increasing or decreasing realized book value. The most directly comparable GAAP financial measure for realized book value per share is book value per share.

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The following table reconciles, as of the dates set forth below, stockholders’ equity to tangible common equity, stockholders’ equity to realized common equity, and assets to tangible assets, and presents related resulting ratios:

December 31,

Tangible common equity

Adjustments:

Realized common equity

Adjustments:

Tangible book value per share (non-GAAP) $ 42.63 $ 36.78 $ 41.31

Realized book value per share (non-GAAP) $ 51.38 $ 46.90 $ 42.05

Tangible assets

Adjustments:

Total stockholders’ equity to assets 9.71 % 8.62 % 9.25 %

Tangible common equity to tangible assets (non-GAAP) 9.67 % 8.57 % 9.20 %

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in accordance with GAAP and with general practices within the financial services industry. Application of these principles requires management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

The following discussion presents an overview of our accounting policies that require difficult, subjective, or complex judgments and assumptions that are inherent in our policies and estimates and the potential sensitivity of the financial statements. Due to the complexity of these judgments and assumptions, an understanding of our financial condition and results of operations is critical. We believe that the judgments, estimates, and assumptions used in the preparation of the consolidated financial statements are appropriate. Refer to “Item 8. Financial Statements and Supplementary Data - Note 1. Significant Accounting Policies” for details on the significant accounting principles and practices we follow.

Allowance for Credit Losses

On January 1, 2023, the Company adopted ASC 326, which created changes to the ALL critical accounting policy that existed as of December 31, 2022. The ALL critical accounting policy was replaced with the ACL critical accounting policy. The ACL is a valuation account that 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. 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. The determination of the amount of allowance involves a high degree of judgement and subjectivity.

The ACL is available to absorb losses on loans HFI, and the reserve for unfunded commitments is a liability established to absorb credit losses for the expected life of the contractual term of off-balance sheet exposures as of the date of the

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determination. The process and methodology employed to establish an ACL consist of two components: (1) a component involving individual loans that do not share similar risk characteristics with other loans and the measurement of expected credit losses for such individual loans and (2) a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

Management establishes an allowance for individual loans that do not share similar risk characteristics with other loans based on the amount of expected credit losses calculated on those individual loans and any amounts determined to be uncollectible. Factors considered in measuring the extent of expected credit losses include payment status, collateral value, borrower financial condition, guarantor support, and the probability of collecting scheduled principal and interest payments when due. For loans evaluated on an individual bases 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.

In estimating an allowance for loans that share similar risk characteristics, loans are segmented into pools based on regulatory call report codes that are considered to share similar risk characteristics or areas of risk concentration. Expected credit losses are estimated using the cohort loss rate and remaining life loss rate methodologies. The cohort loss rate methodology tracks a closed pool of loans over their remaining lives to determine their loss behavior. Once the losses have been tracked, the results are averaged together to determine the average remaining life loss rate to be applied to the current loans in the cohort and are adjusted for reasonable and supportable forecast periods, which is not to exceed a two-year period. Additionally, a lookback period and delay period are established for each pool, which affects the average remaining life loss rate. The lookback period defines how many quarterly cohort periods will be averaged together to form the average remaining life loss rate and varies by pool in order to capture the performance of cohorts under a variety of different conditions, both internal and external. The delay period defines the most recent cohort that will be used in the historical average and varies by pool due to the differing terms and remaining lives that may exist in different pools. 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 and further adjusts for current conditions and for reasonable and supportable forecast periods.

Additionally, for loans that share similar risk characteristics, the ACL considers factors for each loan pool to adjust for differences between the historical period and expected conditions over the remaining lives of the loans in the portfolio related to:

•Lending policies and procedures;

•International, national, regional, and local economic business conditions;

•The nature of the loan portfolio, including the volume of the portfolio and terms of the loans;

•The experience, depth, and ability of our lending management;

•The volume and severity of past due loans and other similar conditions;

•The quality of the loan review and process;

•The value of underlying collateral for collateral dependent loans;

•The existence and effect of any concentrations of credit and changes in the level of such concentrations; and

•The effect of other external factors, such as competition and legal and regulatory requirements, on the level of estimated credit losses in the existing portfolio.

These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in the historical loss experience for these expectations.

Management considers the appropriateness of these critical assumptions as part of its allowance review and believes the ACL level is appropriate based on information available through the financial statement date.

RECENT ACCOUNTING PRONOUNCEMENTS

See “Item 8. Financial Statements and Supplementary Data - Note 1. Significant Accounting Policies - Accounting Standards Adopted in 2023” and “- Recent Accounting Pronouncements.”

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required for this item is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Asset-Liability Management - Interest Rate Sensitivity and Market Risk” and is incorporated herein by reference.

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Item 8. Financial Statements and Supplementary Data

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, 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

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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. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 audits, 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 audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Postlethwaite & Netterville

We have served as the Company’s auditor since 1998.

Baton Rouge, Louisiana

March 16, 2023

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RED RIVER BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts) December 31,

ASSETS

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

Nonmarketable equity securities 2,239 3,478

LIABILITIES

Accrued expenses and other liabilities 11,304 12,176

COMMITMENTS AND CONTINGENCIES — —

STOCKHOLDERS’ EQUITY

Accumulated other comprehensive income (loss) (60,494) (71,166)

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

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

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

INTEREST AND DIVIDEND INCOME

INTEREST EXPENSE

Interest on other borrowed funds 64 — —

NONINTEREST INCOME

Gain (Loss) on equity securities (14) (468) (175)

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

OPERATING EXPENSES

EARNINGS PER SHARE

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

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands) Years Ended December 31,

Other comprehensive income (loss):

(Gain) Loss on sale and call of securities included in net income — 59 (194)

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

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Stock incentive plan — — 269 — — 269

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

Issuance of shares of common stock as board compensation 1,075 56 — — — 56

Other comprehensive income (loss) — — — — (10,694) (10,694)

Stock incentive plan — — 274 — — 274

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

Other comprehensive income (loss) — — — — (67,393) (67,393)

Stock incentive plan — — 319 — — 319

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

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

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

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

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

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) Years Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Share-based board compensation earned 42 85 50

(Gain) Loss on other assets owned 60 60 (184)

Net (accretion) amortization on securities AFS 1,610 2,339 2,479

Net (accretion) amortization on securities HTM (1,502) (1,953) —

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

(Gain) Loss on equity securities 14 468 175

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

Net (increase) decrease in accrued interest receivable (1,115) (2,585) 635

Net (increase) decrease in BOLI (754) (714) (648)

Net increase (decrease) in accrued interest payable 6,437 253 (464)

Net increase (decrease) in accrued income taxes payable (527) 374 (70)

CASH FLOWS FROM INVESTING ACTIVITIES

Activity in securities AFS:

Activity in securities HTM:

Maturities, principal repayments, and calls 11,949 16,580 —

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

Sale of nonmarketable equity securities 2,178 — —

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

Capital contribution in partnerships (1,819) (892) (173)

Purchase of bank owned life insurance — — (5,000)

Proceeds from sales of foreclosed assets 15 641 563

Proceeds from sales of premises and equipment 15 — 483

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from other borrowed funds 60,000 — —

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

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

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RED RIVER BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands) Years Ended December 31,

SUPPLEMENTAL DISCLOSURES

Cash paid during the year for:

SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES

Assets acquired in settlement of loans $ 146 $ — $ 266

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

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RED RIVER BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Significant Accounting Policies

Nature of Operations

The Company is a bank holding company headquartered in Alexandria, Louisiana. The Company’s wholly owned bank subsidiary, Red River Bank, is a Louisiana state-chartered bank that provides a fully integrated suite of banking products and services tailored to the needs of commercial and retail customers. As of December 31, 2023, Red River Bank operated from a network of 27 banking centers throughout Louisiana and one combined LDPO in New Orleans, Louisiana. Banking centers are located in the following Louisiana markets: Central, which includes the Alexandria MSA; Northwest, which includes the Shreveport-Bossier City MSA; Capital, which includes the Baton Rouge MSA; Southwest, which includes the Lake Charles MSA; the Northshore, which includes Covington; Acadiana, which includes the Lafayette MSA; and New Orleans.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and all other entities in which the Company has controlling interest. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to GAAP and the prevailing practices within the banking industry.

Operating Segments

While the chief operating decision-maker monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Use of Estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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

The Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. Purchased assets, including loans, and assumed liabilities are recorded at their respective acquisition date fair values. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

Cash and Cash Equivalents

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, certificate of deposit, and checking accounts and are carried at cost.

RRBI US Equity

RRBI · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

RRBI US Equity☆

RRBI · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

RRBI US Equity