We came across a bullish thesis on Red River Bancshares, Inc. (RRBI) on Substack by Ryan Hess. In this article, we will summarize the bulls’ thesis on RRBI. Red River Bancshares, Inc. (RRBI)’s share was trading at $59.40 as of Nov 22nd. RRBI’s trailing and forward P/E were 12.51 and 11.88 respectively according to Yahoo Finance.
An aerial shot of a regional bank with its numerous branches situated in a city.
Red River Bank (RRBI) is a standout success story in regional banking, leveraging a traditional yet disciplined model of relationship-driven banking. Founded in 1999 by community leaders dissatisfied with existing options, the bank has expanded strategically across Louisiana under the leadership of its founder and CEO, Blake Chatelain. Focusing on organic growth and fostering strong community ties, the bank now dominates its Alexandria market with a 40%+ share, embodying its core values of service excellence, integrity, and innovation.
Key to Red River Bank’s success is its steadfast commitment to sound financial management and long-term strategic planning. The bank’s “traditional” model emphasizes deposit gathering and competitive loan origination without succumbing to the temptations of aggressive rate competition. This approach ensures healthy profit margins and avoids the commoditization of its services. Notably, the bank’s expansion into new markets is calculated and deliberate, prioritizing alignment with its strategic goals to sustain profitability and minimize risk.
A prime example of Red River’s value-driven strategy is its healthcare-focused banking initiative. Offering tailored solutions such as financing for medical professionals and specialized loans for medical practices, the bank has carved out a niche that combines customer value with portfolio diversification. This strategy mitigates risk while reinforcing long-term growth and stability.
Red River’s financial performance underscores its operational excellence. From 2016 to 2023, the bank consistently outperformed its peers in key metrics, achieving higher average Core ROAA and Core ROAE, with significantly less earnings volatility. Its disciplined approach to pricing and cost management resulted in a robust net interest margin (NIM) of 3.14%, well above the industry average of 2.66%. Similarly, its efficiency ratio of 60.49 reflects prudent expense control, even during periods of capital-intensive expansion.
The bank’s credit culture is exemplary, with an average net charge-off ratio of just 0.05% compared to the industry average of 0.36%, highlighting superior underwriting standards. Liquidity management is another strength, as evidenced by a loan-to-deposit ratio of 74.24%, balancing income generation with risk mitigation. Balance sheet growth has been impressive, with assets, loans, deposits, and equity compounding annually at over 7%, supported by a strong equity base that outpaced asset growth.
In short, Red River Bank has outperformed its peers in every major financial category, driven by disciplined execution, strategic expansion, and a commitment to core values. Its long-term focus and strong insider ownership make it a model of sustainable growth, positioning it as an exceptional investment opportunity in regional banking.
Red River Bancshares, Inc. (RRBI) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 5 hedge fund portfolios held RRBI at the end of the third quarter which was 4 in the previous quarter. While we acknowledge the risk and potential of RRBI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RRBI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.