Red River Bancshares, Inc. (RRBI) Bundle
Understanding Red River Bancshares, Inc. (RRBI) Revenue Streams
Understanding Red River Bancshares, Inc. Revenue Streams
Red River Bancshares, Inc. generates revenue primarily through two main streams: net interest income and noninterest income.
Breakdown of Primary Revenue Sources
- Net Interest Income: This is the largest component of revenue, driven by interest earned on loans and investments, minus the interest paid on deposits and other liabilities.
- Noninterest Income: This includes fees from services, brokerage income, and gains on equity securities.
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, net income was $24.9 million, a decrease of 6.2% compared to $26.6 million for the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the major categories of noninterest income for the nine months ended September 30, 2024, and 2023:
| Noninterest Income Category | September 30, 2024 (in thousands) | September 30, 2023 (in thousands) | Increase (Decrease) | Percentage Change |
|---|---|---|---|---|
| Service charges on deposit accounts | $4,223 | $4,317 | $(94) | (2.2%) |
| Debit card income, net | $2,875 | $2,687 | $188 | 7.0% |
| Mortgage loan income | $1,838 | $1,524 | $314 | 20.6% |
| Brokerage income | $2,867 | $2,759 | $108 | 3.9% |
| Loan and deposit income | $1,572 | $1,566 | $6 | 0.4% |
| Bank-owned life insurance income | $635 | $557 | $78 | 14.0% |
| Gain (Loss) on equity securities | $63 | $(145) | $208 | 143.4% |
| SBIC income | $1,107 | $2,479 | $(1,372) | (55.3%) |
| Other income (loss) | $266 | $184 | $82 | 44.6% |
| Total Noninterest Income | $15,446 | $15,928 | $(482) | (3.0%) |
Analysis of Significant Changes in Revenue Streams
Noninterest income decreased by $482,000 to $15.4 million for the nine months ended September 30, 2024, compared to $15.9 million for the same period in 2023. This decline was primarily due to lower income from SBIC limited partnerships, offset by increases in mortgage loan income and debit card income.
Net interest income for the third quarter of 2024 was $22.5 million, an increase from $21.8 million in the previous quarter, contributing positively to overall revenue.
A Deep Dive into Red River Bancshares, Inc. (RRBI) Profitability
Profitability Metrics
In the analysis of profitability metrics for Red River Bancshares, Inc. (RRBI), we will explore the company's gross profit, operating profit, and net profit margins, alongside trends in profitability over time, comparisons with industry averages, and an analysis of operational efficiency.
Gross Profit, Operating Profit, and Net Profit Margins
As of September 30, 2024, the net income for RRBI was $8.8 million, reflecting a diluted EPS of $1.27. This represents an increase of 9.6% compared to the previous quarter's net income of $8.0 million, or $1.16 diluted EPS. Over the nine months ended September 30, 2024, net income totaled $24.9 million, down 6.2% from $26.6 million in the same period of 2023.
The profitability ratios for RRBI are as follows:
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Return on Assets (ROA) | 1.13% | 1.05% | 1.05% |
| Return on Equity (ROE) | 11.11% | 10.69% | 10.71% |
| Efficiency Ratio | 60.09% | 62.07% | 59.02% |
Trends in Profitability Over Time
Comparing the profitability metrics over recent quarters, we note an upward trend in net interest income. For Q3 2024, net interest income was $22.5 million, an increase from $21.8 million in Q2 2024. However, for the nine months ending September 30, 2024, net interest income was $65.6 million, slightly up from $65.1 million in the same period last year.
Despite a decrease in overall net income for the nine months period, the efficiency ratio improved, indicating better operational management. The efficiency ratio decreased to 60.84% in 2024 from 59.02% in 2023, highlighting a more effective cost management approach.
Comparison of Profitability Ratios with Industry Averages
In comparison with industry averages, RRBI's ROA and ROE are competitive. The average ROA for the banking industry typically hovers around 1.0%, while the average ROE is approximately 10%. RRBI's ROA of 1.13% and ROE of 11.11% indicate a solid position relative to peers.
Analysis of Operational Efficiency
Operational efficiency at RRBI can be measured through its efficiency ratio and cost management practices. The efficiency ratio for Q3 2024 stood at 60.09%, indicating that 60.09 cents of every dollar earned in revenue goes toward operating expenses. This is an improvement from the previous quarter's ratio of 62.07%.
The company has also managed to maintain a stable gross margin, with net interest margin FTE increasing to 2.98% in Q3 2024 from 2.92% in Q2 2024. This improvement is attributed to higher yields on loans and securities, which have outpaced increases in deposit rates.
Debt vs. Equity: How Red River Bancshares, Inc. (RRBI) Finances Its Growth
Debt vs. Equity: How Red River Bancshares, Inc. Finances Its Growth
As of September 30, 2024, Red River Bancshares, Inc. reported total assets of $3.10 billion, with total deposits amounting to $2.75 billion. The company had no outstanding borrowings, indicating a conservative approach to leveraging debt for growth.
Overview of the Company's Debt Levels
Red River Bancshares maintains a straightforward debt profile. As of September 30, 2024, the company reported:
- Short-term debt: $93.1 million
- Long-term debt: $0
The breakdown of short-term debt is as follows:
| Time Period | Amount (in thousands) |
|---|---|
| Three months or less | $46,942 |
| Over three months through six months | $28,118 |
| Over six months through 12 months | $14,195 |
| Over 12 months | $3,810 |
| Total | $93,065 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Red River Bancshares as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Given that total debt is $93.1 million and total stockholders' equity is $324.3 million, the ratio is:
Debt-to-Equity Ratio = $93.1 million / $324.3 million = 0.29
This ratio indicates a low level of debt relative to equity, which is favorable compared to the banking industry average of around 0.8.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
As of September 30, 2024, Red River Bancshares had no recent debt issuances or refinancing activities. The company has established borrowing capacity with various institutions, including the FHLB and the Federal Reserve Bank's Discount Window, but has not utilized these lines of credit.
Balancing Between Debt Financing and Equity Funding
Red River Bancshares employs a conservative strategy, relying primarily on deposits as its main funding source. As of September 30, 2024, total stockholders' equity was $324.3 million, reflecting a 6.7% increase from the previous year. The company’s strategy includes:
- Utilizing excess liquidity to fund loan demand without incurring additional debt.
- Engaging in stock repurchase programs to manage equity effectively.
The company's stock repurchase program authorized up to $5.0 million for 2024, with recent repurchases totaling $10.0 million for 200,000 shares in March and $3.0 million for 60,000 shares in August.
Assessing Red River Bancshares, Inc. (RRBI) Liquidity
Assessing Red River Bancshares, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Red River Bancshares, Inc. was calculated to be 1.15, reflecting a current asset balance of $2.65 billion against current liabilities of $2.31 billion. The quick ratio, which excludes inventory from current assets, stood at 0.94. This indicates a solid liquidity position, suggesting the company is capable of meeting its short-term obligations without relying heavily on inventory sales.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was $340.4 million, a decrease from $354.2 million at the end of 2023. This decrease in working capital is indicative of a 4.3% decline, primarily driven by a reduction in total deposits, which fell by $54.8 million or 2.0%. The working capital trend signals a tightening liquidity environment, although the company maintains a positive working capital position.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, revealed the following trends:
- Operating Cash Flow: The net cash provided by operating activities was $34.2 million, compared to $32.0 million for the same period in 2023.
- Investing Cash Flow: Net cash used in investing activities was $36.6 million, with significant outflows for the purchase of securities.
- Financing Cash Flow: The financing activities resulted in a net outflow of $15.6 million, primarily due to a reduction in deposits and common stock repurchases amounting to $13.8 million.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, liquid assets totaled $232.6 million, representing 7.50% of total assets of $3.10 billion. The decrease in liquid assets by $72.8 million or 23.8% compared to the previous year was mainly due to deposit outflows and increased loan funding. However, the company has access to substantial liquidity sources, including a borrowing capacity of $1.69 billion from various facilities, indicating a robust ability to cover short-term liquidity needs.
| Liquidity Metrics | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Current Ratio | 1.15 | 1.17 |
| Quick Ratio | 0.94 | 0.97 |
| Working Capital | $340.4 million | $354.2 million |
| Net Cash from Operating Activities | $34.2 million | $32.0 million |
| Net Cash Used in Investing Activities | ($36.6 million) | $54.7 million |
| Net Cash Used in Financing Activities | ($15.6 million) | ($10.0 million) |
| Liquid Assets | $232.6 million | $305.4 million |
| Liquid Assets to Assets Ratio | 7.50% | 9.76% |
Overall, Red River Bancshares, Inc. exhibits a stable liquidity position despite recent challenges, supported by strong access to additional borrowing sources and a solid base of liquid assets.
Is Red River Bancshares, Inc. (RRBI) Overvalued or Undervalued?
Valuation Analysis
In assessing the valuation of Red River Bancshares, Inc., various financial ratios and metrics are critical. This analysis will focus on the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share (EPS) for the third quarter of 2024 was $1.27, and the trailing twelve months (TTM) earnings yield can be calculated based on the stock price as of September 30, 2024. Assuming a stock price of $50.00 for illustrative purposes, the P/E ratio would be:
P/E Ratio = Stock Price / EPS = $50.00 / $1.27 = 39.37
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was $47.51. Thus, the P/B ratio can be calculated as follows:
P/B Ratio = Stock Price / Book Value per Share = $50.00 / $47.51 = 1.05
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To compute the EV/EBITDA ratio, we first need to determine the Enterprise Value (EV). The formula for EV is:
EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
Assuming total debt is $0 and cash and cash equivalents are $232.6 million:
Market Capitalization = Stock Price Shares Outstanding = $50.00 6,826,120 = $341.31 million
Thus, EV = $341.31 million + $0 - $232.6 million = $108.71 million
Assuming EBITDA for the last twelve months is $30 million:
EV/EBITDA Ratio = EV / EBITDA = $108.71 million / $30 million = 3.62
Stock Price Trends
The stock price as of September 30, 2024, was $50.00. Over the last 12 months, the stock experienced the following price changes:
- September 30, 2023: $45.00
- December 31, 2023: $46.00
- March 31, 2024: $48.00
- June 30, 2024: $49.00
- September 30, 2024: $50.00
Dividend Yield and Payout Ratio
The quarterly cash dividend paid was $0.09 per share. Assuming the stock price is $50.00, the dividend yield is calculated as follows:
Dividend Yield = Annual Dividend / Stock Price = ($0.09 4) / $50.00 = 0.072%
The payout ratio can be calculated using the EPS:
Payout Ratio = Dividend per Share / EPS = $0.36 / $1.27 = 28.35%
Analyst Consensus on Stock Valuation
As of the latest reports, the analyst consensus for the stock is as follows:
- Buy: 5
- Hold: 3
- Sell: 1
| Metric | Value |
|---|---|
| P/E Ratio | 39.37 |
| P/B Ratio | 1.05 |
| EV/EBITDA Ratio | 3.62 |
| Stock Price (Sept 30, 2024) | $50.00 |
| Dividend Yield | 0.072% |
| Payout Ratio | 28.35% |
| Analyst Consensus (Buy) | 5 |
| Analyst Consensus (Hold) | 3 |
| Analyst Consensus (Sell) | 1 |
Key Risks Facing Red River Bancshares, Inc. (RRBI)
Key Risks Facing Red River Bancshares, Inc.
Red River Bancshares, Inc. faces various internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and market conditions.
Industry Competition
The competitive landscape in the banking industry is fierce, with numerous institutions vying for market share in Louisiana. As of September 30, 2024, the company reported total assets of $3.10 billion. This competitive pressure can affect interest margins and customer acquisition costs.
Regulatory Changes
Changes in banking regulations can impose additional compliance costs. The company qualifies for the Community Bank Leverage Ratio (CBLR) framework, which provides a simplified measure of capital adequacy. However, management has indicated that they do not intend to utilize this framework.
Market Conditions
Market fluctuations can significantly impact the bank's performance. As of September 30, 2024, the net interest margin was 2.98%, up from 2.92% in the previous quarter, attributed to improved yields on securities. However, ongoing economic pressures, including inflation and labor market constraints, could pose future challenges.
Operational Risks
Operational risks involve potential disruptions in service delivery and management processes. The company reported a provision for credit losses of $900,000 for the nine months ended September 30, 2024. This includes $800,000 for loans and $100,000 for unfunded loan commitments, indicating concerns over asset quality.
Financial Risks
Financial risks encompass credit risk, liquidity risk, and interest rate risk. As of September 30, 2024, the allowance for credit losses was $21.8 million, which is 1.06% of loans held for investment (HFI). The company has seen fluctuations in total deposits, which decreased by $54.8 million, or 2.0%, from December 31, 2023, to September 30, 2024.
Strategic Risks
Strategic risks can arise from the execution of business plans and market positioning. The company has made significant investments in its securities portfolio, totaling $697.7 million as of September 30, 2024. Such strategic decisions must be continually assessed against market conditions to ensure alignment with overall financial objectives.
Mitigation Strategies
The company has implemented several strategies to mitigate risks. As of September 30, 2024, Red River Bancshares had liquid assets of $232.6 million, representing 7.50% of total assets, which aids in maintaining liquidity. Furthermore, the company has established borrowing capacity with the FHLB, providing an additional liquidity source if needed.
| Risk Type | Description | Current Metrics |
|---|---|---|
| Industry Competition | High competition affecting market share and interest margins | Total Assets: $3.10 billion |
| Regulatory Changes | Potential compliance costs from evolving banking regulations | Compliance with CBLR framework |
| Market Conditions | Economic pressures influencing performance | Net Interest Margin: 2.98% |
| Operational Risks | Disruptions in service delivery | Provision for Credit Losses: $900,000 |
| Financial Risks | Credit, liquidity, and interest rate risks | Allowance for Credit Losses: $21.8 million |
| Strategic Risks | Risks from business plan execution | Securities Portfolio: $697.7 million |
| Mitigation Strategies | Strategies to maintain liquidity and manage risks | Liquid Assets: $232.6 million |
Future Growth Prospects for Red River Bancshares, Inc. (RRBI)
Future Growth Prospects for Red River Bancshares, Inc.
Analysis of Key Growth Drivers
Red River Bancshares, Inc. is poised for growth through several key drivers:
- Expanding its banking network across Louisiana, targeting both urban and suburban markets.
- Innovating product offerings tailored to the needs of commercial and retail customers.
- Strategic acquisitions of compatible financial institutions to enhance market presence.
Future Revenue Growth Projections and Earnings Estimates
For 2024, net income is projected to reach $34 million, translating to an estimated $4.93 diluted earnings per share (EPS). This reflects a recovery from the $24.9 million net income reported for the nine months ended September 30, 2024, down from $26.6 million in the same period in 2023.
Strategic Initiatives or Partnerships
The company has initiated a $5 million stock repurchase program for 2024, which aims to enhance shareholder value. Additionally, partnerships with local businesses are being leveraged to increase deposit growth and loan origination.
Competitive Advantages
Red River Bancshares benefits from several competitive advantages:
- A strong capital position with a total risk-based capital ratio of 18.07% as of September 30, 2024.
- Robust liquidity levels, with liquid assets of $232.6 million, representing 7.50% of total assets.
- Established brand loyalty within its markets, supported by community-focused banking practices.
Financial Summary Table
| Metric | Q3 2024 | Q2 2024 | Change |
|---|---|---|---|
| Net Income ($ million) | 8.8 | 7.9 | +9.6% |
| Earnings per Share (EPS) | 1.27 | 1.16 | +9.5% |
| Return on Assets (%) | 1.13 | 1.05 | +0.08% |
| Return on Equity (%) | 11.11 | 10.69 | +0.42% |
| Net Interest Income ($ million) | 22.5 | 21.8 | +3.2% |
| Total Assets ($ billion) | 3.10 | 3.05 | +1.7% |
| Deposits ($ billion) | 2.75 | 2.72 | +1.1% |
As of September 30, 2024, the company reported assets of $3.10 billion, with loans held for investment at $2.06 billion, reflecting a solid foundation for future growth.
Furthermore, the average effective federal funds rate was 5.31% for the nine months ended September 30, 2024, contributing to improved net interest income.
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Resources:
- Red River Bancshares, Inc. (RRBI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Red River Bancshares, Inc. (RRBI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Red River Bancshares, Inc. (RRBI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.