UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2024
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ______ to ______
Commission file number: 001-38447
BUSINESS FIRST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Louisiana
20-5340628
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification Number)
500 Laurel Street, Suite 101
Baton Rouge, Louisiana
70801
(Address of principal executive offices)
(Zip code)
(225) 248-7600
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
BFST
Nasdaq Global Select Market
Securities registered under Section 12(g) of the Exchange Act: None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.
Yes o
No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act.
Yes o
No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File
required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
x
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s
assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the
financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements.
o
Indicate by check mark whether any of those error corrections are restatements that required a recovery
analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b).
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
Yes o No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates was computed by reference
to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently
completed second fiscal quarter, was approximately $522.6 million.
As of February 28, 2025, there were 29,552,358 outstanding shares of the registrant’s common stock, $1.00 par
value per share.
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Document Incorporated By Reference:
Portions of the registrant’s Definitive Proxy Statement relating to the 2025 Annual Meeting of Shareholders are
incorporated by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Definitive Proxy
Statement, or an Amended Annual Report on Form 10-K/A containing such Part III information, will be filed with the
Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31,
2024.
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TABLE OF CONTENTS
PART I
ITEM 1.
Business
5
ITEM 1A.
Risk Factors
23
ITEM 1B.
Unresolved Staff Comments
44
ITEM 1C.
Cybersecurity
44
ITEM 2.
Properties
45
ITEM 3.
Legal Proceedings
45
ITEM 4.
Mine Safety Disclosures
46
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
47
ITEM 6.
Selected Financial Data
49
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
50
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk
83
ITEM 8.
Financial Statements and Supplementary Data
84
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
141
ITEM 9A.
Controls and Procedures
141
ITEM 9B.
Other Information
142
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
143
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
144
ITEM 11.
Executive Compensation
144
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
144
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
144
ITEM 14.
Principal Accountant Fees and Services
144
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
145
ITEM 16.
Form 10-K Summary
148
Signatures
149
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Important Notice about Information in this Annual Report on Form 10-K
When we refer in this Annual Report to “we,” “our,” “us,” “Business First” and the “Company,” we are referring
to Business First Bancshares, Inc. and its consolidated subsidiaries, including b1BANK, formerly known as Business First
Bank, which we sometimes refer to as “the Bank”, unless the context indicates otherwise.
The information contained in this Annual Report on Form 10-K is accurate only as of the date of this annual report
and as of the dates specified herein.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, or the “Report,” contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 (the “Securities Act”) and 21E of the Securities Exchange Act of 1934 (the
“Exchange Act”). These forward-looking statements include statements that reflect the current views of our senior
management with respect to our financial performance and future events with respect to our business and the banking
industry in general, including, without limitation, statements relating to the anticipated benefits of our recent acquisitions.
These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,”
“predict,” “potential,” “believe,” “will likely result,” “expect,” “will continue,” “anticipate,” “seek,” “estimate,” “intend,”
“plan,” “projection,” “would” and “outlook,” and similar expressions of a future or forward-looking nature. These
statements involve estimates, assumptions and risks and uncertainties. Accordingly, there are or will be important factors
that could cause our actual results to differ materially from those indicated in these statements.
We believe these factors include, but are not limited to, the following:
•
risks related to the integration of any acquired businesses, including exposure to potential asset quality
and credit quality risks and unknown or contingent liabilities, risks related to entering a new geographic
market, the time and costs associated with integrating systems, technology platforms, procedures and
personnel, the ability to retain key employees and maintain relationships with significant customers, the
need for additional capital to finance such transactions, and possible failures in realizing the anticipated
benefits from acquisitions;
•
changes in the strength of the United States (“U.S.”) economy in general and the local economy in our
local market areas adversely affecting our customers and their ability to transact profitable business with
us, including the ability of our borrowers to repay their loans according to their terms or a change in the
value of the related collateral;
•
risks relating to the material weakness we identified in our internal control over financial reporting;
•
economic risks posed by our geographic concentration in Louisiana, the Dallas/Fort Worth metroplex and
Houston;
•
the ability to sustain and continue our organic loan and deposit growth, and manage that growth
effectively;
•
market declines in industries to which we have exposure, such as the volatility in energy prices and
downturns in the energy industry that impact certain of our borrowers and investments that operate
within, or are backed by collateral associated with, the energy industry;
•
volatility and direction of interest rates and market prices, which could reduce our net interest margins,
asset valuations and expense expectations;
•
interest rate risk associated with our business;
•
changes in the levels of loan prepayments and the resulting effects on the value of our loan portfolio;
•
increased competition in the financial services industry, particularly from regional and national
institutions and emerging non-bank competitors;
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1
•
increased credit risk in our assets and increased operating risk caused by a material change in
commercial, consumer and/or real estate loans as a percentage of our total loan portfolio;
•
changes in the value of collateral securing our loans;
•
deteriorating asset quality and higher loan charge-offs, and the time and effort required to resolve
problem assets;
•
the failure of assumptions underlying the establishment of and provisions made to our allowance for
credit losses;
•
changes in the availability of funds resulting in increased costs or reduced liquidity;
•
our ability to maintain important deposit customer relationships and our reputation;
•
a determination or downgrade in the credit quality and credit agency ratings of the securities in our
securities portfolio;
•
increased asset levels and changes in the composition of assets and the resulting impact on our capital
levels and regulatory capital ratios;
•
our ability to prudently manage our growth and execute our strategy;
•
risks associated with our acquisition and de novo branching strategy;
•
the loss of senior management or operating personnel and the potential inability to hire qualified
personnel at reasonable compensation levels;
•
legislative or regulatory developments, including changes in the laws, regulations, interpretations or
policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters;
•
government intervention in the U.S. financial system;
•
changes in statutes and government regulations or their interpretations applicable to us, including
changes in tax requirements and tax rates;
•
natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or
domestic calamities, epidemics and pandemics such as coronavirus, and other matters beyond our
control; and
•
other risks and uncertainties listed from time to time in our reports and documents filed with the U.S.
Securities and Exchange Commission (“SEC”).
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary
statements included in this Annual Report. If one or more events related to these or other risks or uncertainties materialize,
or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.
Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement
speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which
will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements.
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2
Summary of Risks Factors
Risks Relating to our Business
•
Our business and operations may be adversely affected by weak economic conditions.
•
Our geographic concentration imposes risk.
•
We face significant competition to attract and retain customers.
•
Our success is largely dependent upon our ability to successfully execute our business strategy.
•
We rely heavily on our executive management team and other key employees, and our ability to attract and
retain profitable bankers is critical to the success of our business strategy.
•
We have identified a material weakness in our internal control over financial reporting. Failure to remediate,
improve and maintain the quality of internal control over financial reporting could result in material
misstatements in our financial statements and could materially and adversely affect our ability to provide
timely and accurate financial information about the Company.
•
We may not be able to adequately measure and limit our credit risk.
•
Our loan portfolio is largely comprised of commercial loans, which may subject us to increased credit risk.
•
Negative changes in the economy affecting real estate values and liquidity could impair loan collateral.
•
Large loans to certain borrowers could have a significant adverse impact on our asset quality.
•
Our allowance for credit losses may prove to be insufficient to absorb losses on our loan portfolio.
•
Our small-to-midsized business customers have fewer resources to weather adverse developments.
•
Our ability to maintain our reputation is critical to the success of our business.
•
We may not be able to maintain our historical rate of growth, or we may not be able to manage the risks
associated with our anticipated growth and expansion.
•
Future acquisitions could expose us to financial, execution and operational risks.
•
Interest rate shifts could have an adverse effect on our business.
•
The markets in which we operate are susceptible to hurricanes and other natural disasters.
•
Disruptions in the secondary mortgage market could reduce our ability to resell residential mortgage loans.
•
New lines of business, products, product enhancements or services may subject us to additional risks.
•
A lack of liquidity could impair our ability to fund operations, and our ability to raise capital or utilize
alternative sources of funding may be limited.
•
We have a concentration of deposit accounts with state and local municipalities.
•
The fair value of our investment securities can fluctuate due to factors outside of our control.
•
We need to maintain an effective system of disclosure controls and procedures and internal control over
financial reporting.
•
Our financial results depend on management’s selection of accounting methods, assumptions, and estimates.
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3
•
We have a continuing need for technological change.
•
We rely on third parties to provide key components of our business infrastructure.
•
We could be subject to losses, regulatory action or reputational harm due to fraudulent and negligent acts on
the part of loan applicants, our employees and vendors.
•
Unauthorized access, cyber-crime and other threats to data security.
•
We are subject to environmental liability risk associated with our lending activities.
Risks Related to the Regulation of Our Industry
•
We operate in a highly regulated environment, which imposes compliance costs, subjects us to stringent
capital requirements and risks relating to noncompliance.
•
Federal and state banking agencies periodically conduct examinations of our business.
•
New activities and expansion require regulatory approvals.
•
Potential limitations on incentive compensation may adversely affect our ability to attract and retain our
highest performing employees.
•
The Board of Governors of the Federal Reserve System (the “Federal Reserve”) may require us to commit
capital resources to support the Bank.
•
We are subject to laws regarding the privacy, security and protection of personal information.
Risks Associated with our Common Stock
•
The market price of our common stock may be subject to substantial fluctuations, and the prevailing market
price of our common stock could impair our ability to raise capital.
•
The rights of our common shareholders are subordinate to the rights of other interest holders.
•
Our dividend policy may change without notice.
•
A takeover could be difficult due to our corporate governance documents and certain laws.
•
An investment in Business First’s common stock is not an insured deposit and is subject to risk of loss.
The above summary is subject in its entirety to the more complete discussion of risk factors set for forth in “ITEM 1A. Risk
Factors”.
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4
PART I
ITEM 1. Business.
General
Business First Bancshares, Inc. is a financial holding company headquartered in Baton Rouge, Louisiana, and the
parent company of b1BANK, formerly known as Business First Bank, a Louisiana state banking association and
community-based financial institution that offers a full array of banking products and services. We currently operate
throughout the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, from a network of banking centers and
loan production offices.
Since our founding in 2006, our mission has not changed – we seek to be the financial institution of choice for our
markets’ small-to-midsized businesses and their owners and employees. To achieve this goal, we focus on recruiting,
retaining and empowering talented bankers who are intimately familiar with and well respected in the communities that
they serve, and on providing market-leading products and services that add value to our customers’ businesses. We are
currently one of the largest Louisiana-based financial institutions. As of December 31, 2024, on a consolidated basis, we
had total assets of $7.9 billion, total loans of $6.0 billion, total deposits of $6.5 billion and shareholders’ equity of $799.5
million.
Our common stock is listed on the Nasdaq Global Select Market under the symbol “BFST”.
Our Business Strategy
We believe a bank should be measured by the value it adds to its customers’ businesses. We hold that our
customers’ needs are best met through local bankers with deep market experience who are empowered with decision-
making authority and supported by centralized risk management practices and advanced technology. We understand our
competitive strengths and pursue disciplined growth through the careful selection of markets and our position within those
markets. Our expansion strategy primarily consists of identifying and recruiting talented teams of bankers in desirable
markets and providing them with a platform to better serve their clients.
We believe there is an area stretching from the Dallas/Fort Worth metroplex to Jackson, Mississippi, along the
I-20 corridor and from Houston, Texas to Mobile, Alabama, along the I-10/12 corridors whose small-to-midsized
businesses and high net worth individuals are underserved relative to other parts of the country and are well-suited for our
commercial and private banking products and services. We intend to leverage our competitive strengths to take advantage
of what we believe are significant growth opportunities both within our existing footprint and in this larger region. Our
growth strategy includes:
•
Expanding Presence in Existing Markets. While we maintain a strong position in almost all of our
markets, we are continually working to strengthen our presence in our existing markets. As community
bankers, we know that relationships are at the heart of our business, and we are always looking to
identify and recruit talented bankers within, as well as outside of, our existing markets. Additionally, we
constantly stress deposit growth to our bankers as our ability to grow our loan portfolio within our
markets is limited by our ability to fund those loans. In keeping with our branch-lite model, we may
consider adding more banking centers or complementary offices in strategic locations in our markets.
•
Opportunistic Market Expansion. We are well-positioned to expand along the I-10/12 and I-20 corridors,
East Texas markets to the west, and into the Jackson and Gulfport/Biloxi, Mississippi markets to the east,
as well as growing our markets in the Dallas/Fort Worth metroplex and Houston. We believe these
markets have attractive demographics and a significant concentration of small-to-midsized businesses
and high net worth individuals that are historically underserved by the banking industry. We intend to
focus on growing into these markets as we identify specific opportunities to recruit talented and
entrepreneurial teams of local bankers who fit our culture and banking strategy. Prior to the expansion
into the Houston market from the TCBI merger, each of our expansions into new markets to date has
been accomplished organically.
•
Disciplined Acquisition Strategy. While we will remain focused on organic expansion, we will continue
to identify and evaluate opportunities for strategic business acquisitions as they arise from time to time.
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5
We have historically maintained a disciplined and conservative approach to strategic acquisitions, with
our acquisitions to date being (i) the acquisition of American Gateway Financial Corporation within our
home market of Baton Rouge in 2015; (ii) the acquisition of Minden Bancorp, Inc. within our second
oldest market, Northwest Louisiana, on January 1, 2018; (iii) the acquisition of Richland State Bancorp,
Inc., which is in the Northeast Louisiana region, on December 1, 2018; (iv) the acquisition of Pedestal
Bancshares, Inc., which operated in southern Louisiana, on May 1, 2020; (v) the acquisition of Smith
Shellnut Wilson, LLC, which operates out of the Jackson, Mississippi area, on April 1, 2021; (vi) the
acquisition of Texas Citizens Bancorp, Inc., which operates in Houston, Texas, on March 1, 2022; (vii)
the acquisition of Waterstone LSP, LLC, which operates in Katy, Texas, on January 31, 2024; and (viii)
the acquisition of Oakwood Bancshares, Inc., which operates in the Dallas, Texas area, on October 1,
2024, the last two of which are described in further detail below. We will carefully consider acquisition
opportunities that we believe are consistent with our strategic vision and provide attractive risk-adjusted
returns to our shareholders.
Recent Acquisition Activity
Waterstone LSP, LLC ("Waterstone"). On January 31, 2024, we completed the acquisition, through b1BANK, of
Waterstone, headquartered in Katy, Texas. Waterstone offers community banks and small businesses a range of small
business administration ("SBA") lending services including planning, pre-qualification, packaging, closing and
disbursements, servicing and liquidations. Upon consummation of the acquisition, we paid $3.3 million in cash to the
former owners of Waterstone.
Oakwood Bancshares, Inc. ("Oakwood"). On October 1, 2024, we consummated the merger of Oakwood, the
parent bank holding company for Oakwood Bank, with and into us, with us continuing as the surviving corporation
pursuant to the terms of that certain Agreement and Plan of Reorganization (the "Reorganization Agreement"), dated April
25, 2024, by and between us and Oakwood. Immediately following consummation of the Oakwood acquisition, Oakwood
Bank merged with and into us, with us surviving the merger. Pursuant to the terms of the Reorganization Agreement, upon
consummation of the Oakwood acquisition, we issued 3,973,134 shares of our common stock to the former shareholders of
Oakwood. As of September 30, 2024, Oakwood had $863.6 million in total assets, $700.2 million in loans and $741.3 in
total deposits.
Our Competitive Strengths
We believe the following competitive strengths differentiate us from our peers and position us for future growth:
•
Sophisticated Business Lending Capabilities. Unlike traditional community banks, we specifically target
business customers with complex needs that require a degree of business lending expertise that is
typically found only at larger institutions. We primarily target small-to-midsized businesses with credit
needs between $1 million and $10 million, whose banking needs are typically too complex for traditional
community banks but are not large enough to attract personalized attention and service from larger
institutions. In addition to offering the real estate lending typically available from a community bank, we
began focusing heavily on our commercial and industrial (“C&I”) products after the economic downturn
in 2008 and have developed extensive C&I expertise across our markets. C&I lending requires
experienced bankers with a deep understanding of our customers’ businesses and their banking needs,
which we believe is well-suited for our “high touch” approach to banking. We believe that we have
developed an expertise in this small-to-midsized business banking niche that is historically underserved,
positioning us for meaningful growth going forward. We have also built treasury and cash management
programs that cater to our target customers.
•
True Community Banking Model. Despite being located in Louisiana’s largest metropolitan areas and in
the two largest metropolitan areas in the state of Texas, we have a true community banking mindset. That
means relationship-based banking by bankers who live and work in our markets. Our market presidents
and their teams are trained in credit underwriting and asset/liability management, as we view them as
comprehensive bankers rather than just credit producers. The experience and talent of our market
presidents and their respective banking teams allow us to decentralize significant decision-making
authority while maintaining disciplined credit practices. In our experience, developing credit
underwriting expertise “on the front lines” promotes quality loan generation and maximizes efficiency.
Further, our emphasis on asset/liability management training allows our local banking teams to
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6
understand the importance of quality core deposit funding, which we believe is vital to our continued
loan growth. In this sense, we view b1BANK as a network of true community banks, not as a typical
regional financial institution that makes important credit and strategic decisions at the corporate level
without input from its local bankers. In addition, our executive team is located throughout the state of
Louisiana, rather than all being in Baton Rouge, providing the bank with a more informed view of our
footprint and the best uses of our capital across our footprint.
•
Entrepreneurial Culture. We have worked hard to build a team of self-starters who are passionate about
the business of banking. We have found success recruiting bankers at much larger institutions who are
frustrated by excess bureaucracy, overly centralized decision-making, and an escalated focus on the
pursuit of larger business banking clients that larger banks perceive as more profitable than the small-to-
midsized businesses we target. Likewise, we have successfully recruited bankers at peer or smaller
institutions that do not have the available resources or operating platform to appropriately serve the more
sophisticated banking needs of the small-to-midsized businesses in our markets. Our executive team is
young and energetic. We believe their collaborative and cohesive approach to working relationships
permeates every level of our organization, creating synergies that leave us well-positioned for future
growth and helps us attract and retain other talented and entrepreneurial bankers as members of our team.
•
History of Disciplined Expansion. Since our founding in 2006, we have grown rapidly across the state of
Louisiana, into the Dallas/Fort Worth metroplex and, into Houston. Each of our expansions were initiated
with careful identification and recruitment of local banking teams and thoughtful consideration of each
market’s different industries and credit exposures. Our banking centers are carefully situated in locations,
typically downtowns and suburban centers, optimized for small-to-midsized business customers and high
net worth individuals. This disciplined approach to expansion and growth entails not only recruiting the
right bankers in the right markets, but in continuing to focus on the customer base that we are optimized
to serve rather than chasing larger relationships as we grow. Over the years, the magnitude of our large
banking relationships has changed very little, but the number of our large relationships has grown
significantly. In order to continue to serve our customers as they grow without taking undue risk, we
have developed a strong participation network that we believe underscores the strength of our
underwriting process and the quality of our portfolio. We believe that it is important to keep sight of
where our strengths lie and not pursue growth blindly.
•
Strong Platform for Growth. As a necessary complement to our style of sophisticated community
banking, we have made significant investments to build a strong operational platform to empower our
individual markets to thrive, to create operational efficiencies across our diverse markets, and to position
us for future growth without commensurate growth in operational expenses. We have invested heavily in
risk management personnel and modeling capabilities in recent years – we believe our underwriting
capabilities are second to none in our markets, and our strong participation network and asset quality
metrics are evidence of those capabilities. We invest in technology, which we believe will allow us to
maintain staffing that is skewed towards the production side of our business and to accommodate future
growth without commensurate increases in operating expenses. We believe our investments in
technology will also allow us to maintain our “high tech/high touch” approach without the need for an
extensive network of brick and mortar locations.
Our Markets
Our banking operations are currently organized into three regions in Louisiana, which include the largest
metropolitan areas in the state, the Dallas/Fort Worth metroplex, and Houston, which we service through our banking
centers and loan production offices. We will continue to look for talented teams of bankers in markets and potential
acquisitions that fit our model going forward.
Our Products and Services
b1BANK is an independent financial institution that is engaged in substantially all of the business operations
customarily conducted by financial institutions in Louisiana and Texas. We offer, among other products, checking, savings
and money market accounts, certificates of deposit, commercial and consumer loans, mortgage loans, real estate loans, and
other installment and term loans. In addition, b1BANK offers our customers wealth management products, drive-through
banking facilities, automated teller machines, night depository, personalized checks, credit cards, debit cards, internet
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banking, electronic funds transfers through ACH services, domestic and foreign wire transfers, traveler’s checks, cash
management, vault services, loan and deposit sweep accounts, SBA products, interest-rate swaps and lock box services.
Lending Activities
As a business-focused community-based financial institution, we offer a variety of business-related loans,
including commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured
by owner occupied commercial properties), term loans, equipment financing, acquisition, expansion and development
loans, borrowing base loans, real estate construction loans, homebuilder loans, letters of credit and other loan products to
small-to-midsized businesses, real estate developers, mortgage lenders, manufacturing and industrial companies and other
businesses. We also offer various consumer loans to individuals and professionals including residential real estate loans,
home equity loans, installment loans, unsecured and secured personal lines of credit, and standby letters of credit. Lending
activities originate from the efforts of our bankers, with an emphasis on lending to small-to-midsized businesses, their
owners and employees, and individuals located in our market areas. Although all lending involves a degree of risk, we
work to mitigate these risks through conservative underwriting policies and consistent monitoring of credit quality
indicators.
Commercial and Industrial Loans. We make C&I loans, including commercial lines of credit, working capital
loans, term loans, equipment financing, asset acquisition, expansion and development loans, borrowing base loans,
accounts receivable factoring, agricultural financing, letters of credit and other loan products, primarily in our target
markets that are underwritten on the basis of the borrower’s ability to service the debt from income. We typically take as
collateral a lien on general business assets including, among other things, available real estate, accounts receivable,
promissory notes, inventory and equipment and generally obtain a personal guaranty of the borrower or principal. Our C&I
loans generally have variable interest rates and terms that typically range from one-to-five years depending on factors such
as the type and size of the loan, the financial strength of the borrower/guarantor and the age, type and value of the
collateral. Fixed rate C&I loan maturities are generally short-term, with one-to-five year maturities, or include periodic
interest rate resets. Our underwriting policy does allow for exceptions in which the term and amortization of a C&I loan
may be longer than five years; however, the term and amortization must be consistent with the useful life and depreciation
rates of the underlying collateral and an underwriting exception will be noted. In general, C&I loans may involve increased
credit risk and, therefore, typically yield a higher return than commercial real estate loans. The increased risk in C&I loans
derives from the expectation that such loans generally are serviced principally from the operations of the business, and
those operations may not be successful. Any interruption or discontinuance of operating cash flows from the business,
which may be influenced by events not under the control of the borrower such as economic events and changes in
governmental regulations, could materially affect the ability of the borrower to repay the loan. In addition, the collateral
securing C&I loans generally includes moveable property such as equipment and inventory, which may decline in value
more rapidly than we anticipated, exposing us to increased credit risk. As a result of these additional complexities,
variables and risks, C&I loans require extensive underwriting and servicing.
Construction and Development Loans. Our construction portfolio includes loans to small-to-midsized businesses
to construct owner-user properties, 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 in our market areas.
Construction and development loans are generally made with a term of one-to-two years with interest paid monthly. Our
underwriting policy does allow for exceptions in which the term of a construction and development loan may be longer
than two years; however, the term must be realistic and consistent with the borrower’s documented ability to repay. The
ratio of the loan principal to the value of the collateral, as established by independent appraisal, typically will not exceed
regulatory supervisory guidelines. Loan proceeds are disbursed based on the percentage of completion and only after the
project has been inspected by an experienced construction lender or third-party inspector. Risks associated with
construction and development loans include fluctuations in the value of real estate, project completion risk and change in
market trends. We are also exposed to risk based on the ability of the construction loan borrower to finance the loan or sell
the property upon completion of the project, which may be affected by changes in secondary market terms and criteria for
permanent financing since the time that we funded the loan.
Commercial Real Estate Loans. We offer real estate loans for commercial property that is owner-occupied as well
as commercial property owned by real estate investors. Commercial loans that are secured by owner-occupied commercial
real estate and primarily collateralized by operating cash flows are also included in this category of loan. Commercial real
estate loan terms are generally five years or less and amortization is generally limited to 25 years or less, although
payments may be structured on a longer amortization basis in unusual cases. The interest rates on our commercial real
estate loans may be fixed or adjustable, although rates typically are not fixed for a period exceeding five years. We
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generally charge an origination fee for our services. We typically require personal guarantees from the principal owners of
the business supported by a review of the principal owners’ personal financial statements and global debt service
obligations. Risks associated with commercial real estate loans include fluctuations in the value of real estate, the overall
strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination and the quality of the
borrower’s management. We make efforts to limit our risk by analyzing borrowers’ cash flow and collateral value. The real
estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied
and non—owner occupied offices/warehouses/production facilities, office buildings, hotels, mixed-use residential/
commercial properties, retail centers and multi-family properties. Our commercial real estate loan portfolio presents a
higher risk profile than our consumer real estate and consumer loan portfolios.
Residential Real Estate Loans. We offer first and second lien 1-4 family mortgage loans, as well as home equity
lines of credit, in each case primarily on owner-occupied primary residences. Our retail consumer real estate lending
products are offered primarily to consumer customers within our geographic markets. Although our consumer real estate
loan portfolio presents lower levels of risk than our commercial, commercial real estate and construction loan portfolios,
we are exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in
the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or
other personal hardship.
Consumer Loans. While our focus is on service to small-to-midsized businesses, we also make a variety of loans
to individuals for personal, family and household purposes, including secured and unsecured installment and term loans.
Our consumer loans, which are underwritten primarily based on the borrower’s financial condition and, in some cases, are
unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by
numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real
estate or personal property securing the consumer loan, if any.
Credit Policies and Procedures
General. We adhere to what we believe are disciplined underwriting standards, but also remain cognizant of the
need to serve the credit needs of customers in our primary market areas by offering flexible loan solutions in a responsive
and timely manner. We maintain asset quality through an emphasis on local market knowledge, long-term customer
relationships, consistent and thorough underwriting for all loans and a conservative credit culture. We also seek to maintain
a broadly diversified loan portfolio across customer, product and industry types. Our lending policies do not provide for
any loans that are highly speculative, subprime, or that have high loan-to-value ratios. These components, together with
active credit management, are the foundation of our credit culture, which we believe is critical to enhancing the long-term
value of our organization to our customers, employees, shareholders and communities.
Credit Concentrations. In connection with the management of our credit portfolio, we actively manage the
composition of our loan portfolio, including credit concentrations. Our loan approval policies establish concentration limits
with respect to industry and loan product type to enhance portfolio diversification. In general, loan product concentration
levels, our commercial real estate concentrations, and industry concentration levels are monitored monthly and reviewed by
the Bank’s board of directors.
Loan Approval Process. We seek to achieve an appropriate balance between prudent, disciplined underwriting and
flexibility in our decision-making and responsiveness to our customers. As of December 31, 2024, the Board set the “in-
house” household lending limit at $60.0 million with an additional borrower “in-house” lending limit of $20.0 million as of
such date. Our credit underwriters are based throughout our footprint and service all of our markets from those locations.
Our credit approval policies provide for various levels of officer and senior management lending authority for new
credits and renewals, which are based on position, capability and experience. We approve loans under four types of
authority, Matrix (which includes Executive and Directors’ Loan Committees), Incremental, Small Business, and
Consumer authority. All commercial loans require a minimum of two approvers (the banker and at least one other
individual with higher authority). When using the Matrix authority, senior lenders have authority up to $500,000, market
leaders have authority up to $750,000, regional market presidents have authority up to $1.5 million, the chief banking
officer and regional credit officers have authority up to $2.5 million, regional chairmen have authority up to $2.0 million
and the Chief Executive Officer, President, Chief Financial Officer, and Chief Credit Officer each have authority up to $2.5
million. A combination of the Chief Banking Officer and Chief Credit Officer (or their assigns) may approve up to $10.0
million. All relationships exceeding $10.0 million are approved by the Executive Loan Committee. All relationships
exceeding $60.0 million or borrowers exceeding $20.0 million are required to be approved by the Director’s Loan
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Committee, which is comprised of board members. Loans may be approved using the Incremental authority when the
relationship has already been approved using the Matrix authority, with senior lenders being able to approve up to
$250,000, market leaders being able to approve up to $350,000, regional presidents and higher authorities up to $1.5
million, cumulatively. Consumer loans which present an aggregate lending exposure under $10.0 million are approved on a
transactional basis by appropriate consumer lending personnel using credit underwriting software which recommends
approval or decline based on Bank policy guidelines. Loans exceeding the noted amounts or loans with policy exceptions
must be approved by an appropriate override authority (including Senior or Executive level management or Loan
Committee authority), which we believe provides platform scalability and furthers our fair lending compliance efforts.
These parameters are reviewed periodically by the Bank’s board of directors. We believe that our credit approval process
provides for thorough underwriting and efficient decision making.
Credit Risk Management. Credit risk management involves a partnership between our executive team and our
market presidents. Loan officers, credit administration personnel and senior management proactively support collection
activities. Our evaluation and compensation program includes significant goals, such as the percentages of past due loans
and charge-offs to total loans in the officer’s portfolio and at the banking center level. We believe this motivates loan
officers and management to focus on the origination and maintenance of high-quality credits consistent with our strategic
focus on asset quality. Our policies require rapid notification of delinquency and prompt initiation of collection actions.
We maintain a list of loans, the “Watch List”, that receive additional attention if we believe there may be a
potential credit risk. The Risk Committee of the Board reviews a list of loans under foreclosure proceedings while the
Impairment Committee reviews a list of impaired loans exceeding $500,000 as well as the list of Classified borrowers with
exposures of $250,000 or greater. Impairment Committee minutes are reviewed by the Risk Committee. Loan officers are
encouraged to bring potential credit issues to the attention of credit administration personnel, and loan grades are updated
as deemed appropriate. Quarterly, our internal loan review department analyzes specific segments of the loan portfolio.
Additionally, we periodically have an independent, third-party review performed on our loan portfolio. This review
includes analysis of the borrower’s and guarantor’s financial condition, the Bank’s collateral position, and other credit risk
factors. Results of the review as well as management responses are presented to the Bank’s Risk Committee. Finally, we
perform stress testing on key segments of our portfolio in which we evaluate the impact of declining economic conditions
on the portfolio based on previous recessionary periods. The reporting and reviews provide management with additional
information for assessing our asset quality.
Deposits
Our deposits serve as the primary funding source for lending, investing and other general banking purposes. We
offer business accounts and cash management services, including business checking and savings accounts, and treasury
management services. We also provide a full range of deposit products and services, including a variety of checking and
savings accounts, certificates of deposit, money market accounts, debit cards, remote deposit capture, online banking,
mobile banking, e-Statements, bank-by-mail and direct deposit services. We solicit deposits through our relationship-
driven team of dedicated and accessible bankers and through community-focused marketing and have recently
implemented an incentive bonus program with our bankers to encourage deposit growth. We also seek to cross-sell deposit
products at loan origination.
Given the diverse nature of our banking location network and our relationship-driven approach to our customers,
we believe our deposit base is comparatively less sensitive to interest rate variations than our competitors. Nevertheless, we
attempt to competitively price our deposit products to promote core deposit growth. As a business-focused bank offering
comprehensive business banking services, we encourage our customers to bank their deposits with us and believe that the
quality of our lending relationships and personalized service helps us in these efforts.
Wealth Solutions Services
We offer wealth management and other fiduciary and private banking services targeted to high net worth
individuals, including professionals, business owners, families and professional service companies and other financial
service companies. In addition to fiduciary and investment management fee income, we believe these services enable us to
build new relationships and expand existing relationships to grow our deposits and loans. Through our wealth management
line of business, we offer financial planning, retirement services and investment management by a team of seasoned
advisors providing access to a wide range of certificates of deposits, mutual funds, annuities, individual retirement
accounts, money market accounts and other financial products. Our private banking products and services are offered at all
of our banking centers.
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Other Products and Services
In addition to traditional banking activities and the other products and services specified above, we provide a
broad array of financial services to our customers, including debit and credit card products, treasury and cash management
services, merchant services, employee and payroll benefits solutions (including payroll cards and bank-at-work benefits)
automated clearing house services, lock-box services, remote deposit capture services, receivables factoring, correspondent
banking services (offered by our Financial Institutions Group), SBA products, interest-rate swaps and other treasury
services.
Subsidiaries
Business First Bancshares, Inc. has two direct, wholly-owned subsidiaries: b1BANK, formerly known as Business
First Bank, and Coastal Commerce Statutory Trust I. In addition, b1BANK has four direct, wholly-owned subsidiaries,
Business First Insurance, LLC, Smith Shellnut Wilson ("SSW"), Waterstone, and b1Securities, which are indirect
subsidiaries of Business First Bancshares, Inc. Business First Insurance, LLC is currently inactive and does not engage in
any material business activities.
Competition
The banking and financial services industry is highly competitive, and we compete with a wide range of financial
institutions within our markets, including local, regional and national commercial banks and credit unions. We also
compete with mortgage companies, brokerage firms, consumer finance companies, mutual funds, securities firms,
insurance companies, third-party payment processors, fintech companies and other financial intermediaries for certain of
our products and services. Some of our competitors are not subject to the regulatory restrictions and level of regulatory
supervision applicable to us.
Interest rates on loans and deposits, as well as prices on fee-based services, are typically significant competitive
factors within banking and financial services industry. Many of our competitors are much larger financial institutions that
have greater financial resources than we do and compete aggressively for market share. These competitors attempt to gain
market share through their financial product mix, pricing strategies and banking center locations. Other important
competitive factors in our industry and markets include office locations and hours, quality of customer service, community
reputation, continuity of personnel and services, capacity and willingness to extend credit, and ability to offer sophisticated
banking products and services. While we seek to remain competitive with respect to fees charged, interest rates and pricing,
we believe that our broad and sophisticated commercial banking product suite, our high-quality customer service culture,
and our positive reputation and community relationships will enable us to compete successfully within our markets and
enhance our ability to attract and retain customers.
Human Capital Resources
Our mission is to be the financial institution of choice for enterprises, their owners, and employees. Accordingly,
we aim to attract, develop, and retain employees who can drive financial and strategic growth objectives and build long-
term shareholder value while upholding our Guiding Principles of a relationship-driven team, thoughtful, disciplined
decision-making, meaningful communication, doing the right thing the right way; and striving to be the best through
continual improvement. Key items that drive our human capital resources are described below.
Structure. As of December 31, 2024, we proudly employ 849 full-time and 23 part-time employees (for a total of
872 employees). Our employees reside coast to coast, with personnel located in Louisiana, Mississippi, Texas, and 10 other
states with remote employees. Full-time equivalents (FTEs) as of December 31, 2024, were 859, which includes employees
from the Oakwood acquisition that closed on October 1, 2024.
All banking centers and loan production offices are in Louisiana and Texas, and our subsidiary registered
investment advisor (RIA), SSW, is in Mississippi. Our Chief Human Resources Officer reports directly to the Chief of
Staff and manages all aspects of the employee experience, including talent acquisition, diversity and inclusion, learning and
development, talent management, compensation, and benefits.
The board of directors is regularly updated on our talent development and human capital management strategies.
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Productivity. We carefully manage the size of our workforce and reallocate resources as needed. For 2024, we
managed an average of $7.0 million in loans held for investment and $7.6 million in deposits per FTE.
Diversity. We have an organization-wide focus to improve recruitment and retention of women and ethnic
minorities. In 2024, we completed a third year of our Intern Insights Program, which focuses on creating a pipeline
between young diverse talent and the banking industry. Specifically, recruiting efforts focused on junior year finance and
accounting majors at Southern University and A&M College in Baton Rouge, a historically black university, for our Intern
Insights Program. Furthermore, in 2024, we continued the use of online exit surveys to provide feedback and help increase
retention of women and ethnic minorities. As of December 31, 2024, our colleagues had the following attributes:
Female
Minority(3)
Employees
580 total (67.4%)
152 total (26.0%)
Officials and Managers(1)
116 total (59.0%)
27 total (23.0%)
Executive Officers(2)
3 total (50.0%)
0 total (0.0%)
(1)
Based on EEO-1 job classifications.
(2)
Based on b1BANK’s Executive Team.
(3)
Includes Hispanic/Latino, Black/African American, Asian, American Indian/Alaska Native, Native Hawaiian/Other Pacific Islander
In addition to our continued Diversity Equity and Inclusion (“DEI”) efforts, we have emphasized merit-based
promotions to promote from within, and foster talent development of our best human capital resources.
Compensation and Benefits. We provide competitive pay, benefits, and services that meet the varying needs of our
employees. Compensation and benefits include market-competitive pay, health insurance options, a health reimbursement
account (HRA), a flexible spending account (FSA), dependent care, employer-paid life insurance, voluntary life insurance,
dental and vision insurance, employer-paid short-term disability, employer-paid long-term disability, employee assistance
programs, employee discounts on our products, critical illness insurance, accident insurance, hospital indemnity insurance,
pet insurance, identity and fraud protection, MetLife legal plan, paid time off, (including paid volunteer leave), training and
professional development opportunities, and an employer-paid financial wellness program.
Periodic and objective reviews of compensation and benefits by grade level and position are conducted to ensure
similar positions are paid comparatively and to solidify that we continuously provide a competitive and valuable offering to
satisfy the well-being and needs of our employees.
Attraction, Development and Retention. We measure the success of our talent acquisition strategy on quality of
acquisition, diversity in the workplace, and the retention of our employees. Each of these metrics is tracked for all key
business lines. Sourcing tools are reviewed and modified as needed to ensure that we experience continued improvement.
In 2024, our Talent Development team made significant strides in enhancing and expanding our training
initiatives. Our goals were to directly benefit our clients by elevating service standards through strategic development
programs. Key among these was the integration of Submittable, which is an online platform used to streamline the
submission and review processes into our internal application for external learning and development programs. This
innovative platform revolutionized how employees applied for external development programs, streamlining our
application process, and improving how managers and executives review and provide feedback on applications.
Further advancements were made in our “Learning b1: Manager Orientation” program, which underwent
significant improvements with the introduction of personalized coaching sessions. These sessions provided targeted
guidance to enhance leadership skills among managers, leading to more efficient teams and, consequently, better internal
and external client interactions and service quality. Additionally, our specialized training programs, namely the
“Transaction Dispute Reporting for the Frontline” and the “Mastering Currency Transaction Reports: Compliance and Best
Practices,” significantly enhanced client service and compliance standards. These programs equipped our staff with
essential skills for efficient dispute handling and deepened their understanding of critical compliance areas such as CTR’s,
thereby ensuring secure, compliant client transactions and maintaining client trust in us.
In 2024, we continued the enhancement in our Emergenetics training program. This enhancement is aimed at
maximizing the impact of cognitive and behavioral diversity in leadership and team collaboration. By refining the
Emergenetics training, we enabled our leaders to more effectively understand and utilize each team member’s unique
strengths. This approach fostered a more dynamic, inclusive, and effective leadership style, significantly impacting our
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ability to exceed client expectations through superior team performance and decision-making. The enhancement of this
innovative training program underscored our ongoing commitment to organizational excellence and superior client service.
Our average tenure is 6.6 years of service. During 2024, we had 64 internal employee promotions, 114 external
hires, and 11 rehired employees. Employee turnover for 2024 was 13.3%.
Available Information
The Company files reports and other information with the Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934, as amended. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information about issuers, like the Company, who file electronically with the SEC.
The address of that site is http://www.sec.gov.
Documents filed by the Company with the SEC are available from the Company without charge (except for
exhibits to the documents). You may obtain documents filed by the Company with the SEC by requesting them in writing
or by telephone from the Company at the following address:
Business First Bancshares, Inc.
500 Laurel Street, Suite 101
Baton Rouge, Louisiana 70801
Attention: Saundra Strong, Corporate Secretary
Telephone: (225) 248-7600
www.b1bank.com
Documents filed by the Company with the SEC are also available on the Company’s website, www.b1bank.com.
Information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is
not part of this Annual Report on Form 10-K.
Supervision and Regulation
General
The U.S. banking industry is highly regulated under federal and state law. Consequently, our growth and earnings
performance will be affected not only by management decisions and general and local economic conditions, but also by the
statutes administered by, and the regulations and policies of, various governmental regulatory authorities. These authorities
include the Federal Reserve, Federal Deposit Insurance Corporation (“FDIC”), Consumer Financial Protection Bureau
(“CFPB”), Louisiana Office of Financial Institutions (“OFI”), Internal Revenue Service (“IRS”) and state taxing
authorities. The effect of these statutes, regulations and policies, and any changes to such statutes, regulations and policies,
can be significant and cannot be predicted.
The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system, facilitate the
conduct of sound monetary policy and promote fairness and transparency for financial products and services. The system
of supervision and regulation applicable to us and our subsidiaries establishes a comprehensive framework for their
respective operations and is intended primarily for the protection of the FDIC’s Deposit Insurance Fund, the Bank’s
depositors and the public, rather than our shareholders or creditors. The description below summarizes certain elements of
the applicable bank regulatory framework. This description is not intended to describe all laws and regulations applicable
to us and our subsidiaries, and the description is qualified in its entirety by reference to the full text of the statutes,
regulations, policies, interpretive letters and other written guidance that are described herein.
Business First Bancshares, Inc.
As a financial holding company, the Company is permitted to engage in, and be affiliated with companies
engaging in, a broader range of activities than those permitted for a bank holding company that has not elected to become a
financial holding company. Bank holding companies are generally restricted to engaging in the business of banking,
managing or controlling banks and certain other activities determined by the Federal Reserve to be related closely to
banking. Financial holding companies may also engage in activities that are considered to be financial in nature, as well as
those incidental or complementary to financial activities, including certain insurance underwriting activities. The Company
and the Bank must each remain well capitalized and well managed and the Bank must receive a Community Reinvestment
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Act (“CRA”) rating of at least “satisfactory” at its most recent examination in order for us to maintain our status as a
financial holding company. In addition, the Federal Reserve has the power to order a financial holding company or its
subsidiaries to terminate any activity or terminate its ownership or control of any subsidiary, when it has a reasonable cause
to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of that financial holding company.
As a bank holding company with respect to the Bank, the Company is also subject to regulation under the Bank
Holding Company Act of 1956 (the "BHC Act") and to supervision, examination and enforcement by the Federal Reserve.
The BHC Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in
which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement
actions for violations of laws and regulations. The Federal Reserve’s jurisdiction also extends to any company that we
directly or indirectly control, such as any nonbank subsidiaries and other companies in which we own a controlling
investment.
Financial Services Industry Reform. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the "Dodd-Frank Act") was enacted. The Dodd-Frank Act broadly affected the financial services industry by
implementing changes to the financial regulatory landscape aimed at strengthening the sound operation of the financial
services sector.
In addition, the Dodd-Frank Act addressed many investor protection, corporate governance and executive
compensation matters affecting publicly-traded companies. However, the Jumpstart our Business Startups Act of 2012 (the
"JOBS Act") provided certain exceptions to these requirements for so long as a publicly-traded qualifies as an emerging
growth company. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) revised
certain aspects of the Dodd-Frank Act. Among other things, EGRRCPA exempts banks with less than $10 billion in assets
(and total trading assets and trading liabilities of 5% or less of total assets) from Volcker Rule requirements relating to
proprietary trading and clarifies definitions pertaining to Highly Volatile Commercial Real Estate (“HVCRE”), which
require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings. Further
changes effected by the passage of EGRRCPA are discussed below.
Revised Rules on Regulatory Capital. Regulatory capital rules pursuant to the Basel III requirements, released in
July 2013 and effective January 1, 2015, implemented higher minimum capital requirements for bank holding companies
and banks. These rules include a new common equity Tier 1 ("CET1") capital requirement and establish criteria that
instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital. The
revised capital rules require banks and bank holding companies to maintain a minimum CET1 capital ratio of 4.5% of risk-
based assets, a total Tier 1 capital ratio of 6.0% of risk-based assets, a total capital ratio of 8.0% of risk-based assets and a
leverage ratio of 4.0% of average assets.
The capital rules also require banks to maintain a CET1 capital ratio of 6.5%, a total Tier 1 capital ratio of 8.0%, a
total capital ratio of 10.0% and a leverage ratio of 5.0% to be deemed “well capitalized” for purposes of certain rules and
prompt corrective action requirements. The risk-based ratios include a “capital conservation buffer” of 2.5% above its
minimum risk-based capital requirements that must be composed of common equity Tier 1 capital. This buffer helps to
ensure that banking organizations conserve capital when it is most needed, allowing them to better weather periods of
economic stress. The buffer is measured relative to risk-weighted assets. An institution would be subject to limitations on
certain activities including payment of dividends, share repurchases and discretionary bonuses to executive officers if its
capital level is below the buffered ratio. As of December 31, 2024, the Company’s capital meets or exceeds these capital
requirements, including the buffer.
On September 17, 2019, the FDIC and other federal bank regulatory agencies approved the community bank
leverage ratio (“CBLR”) framework as part of the directive under Section 201 of the EGRRCPA. This framework became
effective January 1, 2020, and is available to the Bank and Company as an alternative to the Basel III risk-based capital
framework. The community bank leverage ratio requirement is currently 9.0% after being temporarily reduced under the
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CBLR framework is an optional framework that
is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for
qualifying community banking organizations that opt into the framework. We have not elected to use the CBLR framework
since the year ended December 31, 2020.
Imposition of Liability for Undercapitalized Subsidiaries. Bank regulators are required to take prompt corrective
action to resolve problems associated with insured depository institutions whose capital declines below certain levels. In
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the event an institution becomes undercapitalized, it must submit a capital restoration plan. The capital restoration plan will
not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the
subsidiary’s compliance with the capital restoration plan up to a certain specified amount. Any such guarantee from a
depository institution’s holding company is entitled to a priority of payment in bankruptcy.
The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5.0% of the
institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be adequately
capitalized. The bank regulators have greater power in situations where an institution becomes significantly or critically
undercapitalized or fails to submit a capital restoration plan. For example, a bank holding company controlling such an
institution can be required to obtain prior Federal Reserve approval of proposed dividends, or might be required to consent
to a consolidation or to divest the troubled institution or other affiliates.
Acquisitions by Bank Holding Companies. The BHC Act, requires every bank holding company to obtain the prior
approval of the Federal Reserve before it acquires all or substantially all of the assets of any bank, or ownership or control
of any voting shares of any bank or bank holding company if after such acquisition it would own or control, directly or
indirectly, more than 5.0% of the voting shares of such bank or bank holding company. In approving bank or bank holding
company acquisitions by bank holding companies, the Federal Reserve is required to consider, among other things, the
effect of the acquisition on competition, the financial condition, managerial resources and future prospects of the bank
holding company and the banks concerned, the convenience and needs of the communities to be served (including the
record of performance under the CRA), the effectiveness of the applicant in combating money laundering activities and the
extent to which the proposed acquisition would result in greater or more concentrated risks to the stability of the U.S.
banking or financial system. Our ability to make future acquisitions will depend on our ability to obtain approval for such
acquisitions from the Federal Reserve. The Federal Reserve could deny our application based on the above criteria or other
considerations. For example, we could be required to sell banking centers as a condition to receiving regulatory approval,
which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of a proposed acquisition.
Control Acquisitions. Federal and state laws, including the BHC Act and the Change in Bank Control Act (the
"CBCA"), impose additional prior notice or approval requirements and ongoing regulatory requirements on any investor
that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or bank holding company.
Whether an investor “controls” a depository institution is based on all of the facts and circumstances surrounding the
investment. As a general matter, an investor is deemed to control a depository institution or other company if the investor
owns or controls 25.0% or more of any class of voting securities. Subject to rebuttal, an investor is presumed to control a
depository institution or other company if the investor owns or controls 10.0% or more of any class of voting securities and
either the depository institution or company is a public company or no other person will hold a greater percentage of that
class of voting securities after the acquisition. If an investor’s ownership of our voting securities were to exceed certain
thresholds, the investor could be deemed to “control” us for regulatory purposes, which could subject such investor to
regulatory filings or other regulatory consequences. The requirements of the BHC Act and the CBCA could limit our
access to capital and could limit parties who could acquire shares of our common stock.
Regulatory Restrictions on Dividends; Source of Strength. As a bank holding company, the Company is subject to
certain restrictions on dividends under applicable banking laws and regulations. The Federal Reserve has issued a
supervisory letter that provides that a bank holding company should not pay dividends unless: (1) its net income over the
last four quarters (net of dividends paid) has been sufficient to fully fund the dividends; (2) the prospective rate of earnings
retention appears to be consistent with the capital needs, asset quality and overall financial condition of the bank holding
company and its subsidiaries; and (3) the bank holding company will continue to meet minimum required capital adequacy
ratios. Failure to comply with the supervisory letter could result in a supervisory finding that the bank holding company is
operating in an unsafe and unsound manner. In addition, the Company’s ability to pay dividends may also be limited as a
result of the capital conservation buffer under the Basel III regulatory capital framework. In the current financial and
economic environment, the Federal Reserve Board has indicated that bank holding companies should carefully review their
dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and
capital are very strong. The Federal Reserve may further restrict the payment of dividends by engaging in supervisory
action to restrict dividends or by requiring us to maintain a higher level of capital than would otherwise be required under
the Basel III minimum capital requirements.
Under longstanding Federal Reserve policy which has been codified by the Dodd-Frank Act, the Company is
expected to act as a source of financial strength to, and to commit resources to support, the Bank. This support may be
required at times when we may not be inclined to provide it. In addition, any capital loans that the Company makes to the
Bank are subordinate in right of payment to deposits and to certain other indebtedness of the Bank. As discussed above, in
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certain circumstances, the Company could also be required to guarantee the capital restoration plan of the Bank, if it
became undercapitalized for purposes of the Federal Reserve’s prompt corrective action regulations. In the event of our
bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank under a capital
restoration plan would be assumed by the bankruptcy trustee and entitled to a priority of payment.
In the event of a bank holding company’s bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the trustee
will be deemed to have assumed and will be required to cure immediately any deficit under any commitment by the debtor
holding company to any of the federal banking agencies to maintain the capital of an insured depository institution, and any
claim for breach of such obligation will generally have priority over most other unsecured claims.
Scope of Permissible Activities. Under the BHC Act, the Company is prohibited from acquiring a direct or indirect
interest in or control of more than 5.0% of the voting shares of any company that is not a bank or financial holding
company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks
or furnishing services to or performing services for its subsidiary banks, except that the Company may engage in, directly
or indirectly, and may own shares of companies engaged in certain activities found by the Federal Reserve to be so closely
related to banking or managing and controlling banks as to be a proper incident thereto. These activities include, among
others, operating a mortgage, finance, credit card or factoring company; performing certain data processing operations;
providing investment and financial advice; acting as an insurance agent for certain types of credit-related insurance; leasing
personal property on a full-payout, nonoperating basis; and providing certain stock brokerage and investment advisory
services. In approving acquisitions or the addition of activities, the Federal Reserve considers, among other things, whether
the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, that outweigh such possible adverse effects as undue
concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.
Notwithstanding the foregoing, the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization
Act of 1999, effective March 11, 2000 (the "GLB Act"), amended the BHC Act and eliminated the barriers to affiliations
among banks, securities firms, insurance companies and other financial service providers. The GLB Act permitted bank
holding companies to become financial holding companies and thereby affiliate with securities firms and insurance
companies and engage in other activities that are financial in nature. The GLB Act defines “financial in nature” to include,
among other things, securities underwriting, dealing and market making; sponsoring mutual funds and investment
companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve has
determined to be closely related to banking. No regulatory approval will be required for a financial holding company to
acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental
to activities that are financial in nature, as determined by the Federal Reserve. We elected to become a financial holding
company in 2020.
Safe and Sound Banking Practices. Bank holding companies are not permitted to engage in unsafe and unsound
banking practices. The Federal Reserve’s Regulation Y, for example, generally requires a bank holding company to
provide the Federal Reserve with prior notice of any redemption or repurchase of its own equity securities, if the
consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is
equal to 10.0% or more of the bank holding company’s consolidated net worth. The Federal Reserve may oppose the
transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate any law or
regulation. In certain circumstances, the Federal Reserve could take the position that paying a dividend would constitute an
unsafe or unsound banking practice.
The Federal Reserve has broad authority to prohibit activities of bank holding companies and their nonbanking
subsidiaries which represent unsafe and unsound banking practices, result in breaches of fiduciary duty or which constitute
violations of laws or regulations, and can assess civil money penalties or impose enforcement action for such activities. The
penalties can exceed $1,000,000 for each day the activity continues.
Anti-tying Restrictions. Bank holding companies and their affiliates are prohibited from tying the provision of
certain services, such as extensions of credit, to other nonbanking services offered by a bank holding company or its
affiliates.
b1BANK
The Bank is a commercial bank chartered under the laws of the State of Louisiana. In addition, its deposits are
insured by the FDIC to the maximum extent permitted by law. As a result, the Bank is subject to extensive regulation,
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supervision and examination by the Louisiana Office of Financial Institutions and the FDIC. Finally, we are also subject to
secondary oversight by state banking authorities in other states in which we may maintain banking offices. The bank
regulatory agencies have the power to enforce compliance with applicable banking laws and regulations. These
requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and
amount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and
other activities of the Bank.
Capital Adequacy Requirements. The FDIC and Louisiana Office of Financial Institutions monitor the capital
adequacy of the Bank by using a combination of risk-based guidelines and leverage ratios similar to those applied at the
holding company level. These agencies consider the bank’s capital levels when taking action on various types of
applications and when conducting supervisory activities related to the safety and soundness of the bank and the banking
system. Under the revised capital rules which became effective on January 1, 2015, the Bank is required to maintain four
minimum capital standards: (1) a leverage capital ratio of at least 4.0%, (2) a common equity Tier 1 risk-based capital ratio
of 4.5%, (3) a Tier 1 risk-based capital ratio of at least 6.0%, and (4) a total risk-based capital ratio of at least 8.0%.
The Basel III framework also implements a requirement for all FDIC-insured banks to maintain a capital
conservation buffer above the minimum capital requirements to avoid certain restrictions on capital distributions and
discretionary bonus payments to executive officers. The capital conservation buffer must be composed solely of common
equity Tier 1 capital and effectively requires banking organizations to maintain regulatory risk-based capital ratios at least
2.5% above the minimum risk-based capital requirements set forth above.
These capital requirements are minimum requirements. The FDIC or Louisiana Office of Financial Institutions
may also set higher capital requirements if warranted by the risk profile of the Bank, economic conditions impacting its
markets or other circumstances particular to the bank. For example, FDIC guidance provides that higher capital may be
required to take adequate account of, among other things, interest rate risk and the risks posed by concentrations of credit,
nontraditional activities or securities trading activities. In addition, the FDIC’s prompt corrective action regulations
discussed below, in effect, increase the minimum regulatory capital ratios for banking organizations. Failure to meet capital
guidelines could subject the Bank to a variety of enforcement remedies, including issuance of a capital directive,
restrictions on business activities and other measures under the FDIC’s prompt corrective action regulations.
Pursuant to section 201(b) of EGRRCPA, the federal bank regulatory agencies adopted a final rule in 2019
imposing a minimum community bank leverage ratio requirement of 9.0%, which was reduced on a temporary basis under
the CARES Act in 2020-2021.
As previously mentioned, the Company and Bank elected to adopt the CBLR framework for the year ended
December 31, 2020 and elected to revert to the risk weighted ratios for the years ended December 31, 2024, 2023, 2022
and 2021.
Corrective Measures for Capital Deficiencies. The federal banking regulators are required by the Federal Deposit
Insurance Act (the "FDI Act") to take “prompt corrective action” with respect to capital-deficient institutions that are
FDIC-insured. For this purpose, a financial institution is placed in one of the following five capital tiers: “well capitalized,”
“adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” The
institution’s capital tier depends upon how its capital levels compare with various relevant capital measures and certain
other factors, as established by regulation.
To be well capitalized, a financial institution must have a total risk-based capital ratio of at least 10.0%, a Tier 1
risk-based capital ratio of at least 8.0%, a common equity Tier 1 risk-based capital ratio of at least 6.5%, and a leverage
ratio of at least 5.0%, and must not be subject to any written agreement, order or directive requiring it to maintain a specific
capital level for any capital measure. As of December 31, 2024, the Bank met the requirements to be categorized as well
capitalized under the prompt corrective action framework currently in effect.
Banks that are adequately, but not well, capitalized may not accept, renew or rollover brokered deposits except
with a waiver from the Federal Reserve and are subject to restrictions on the interest rates that can be paid on its deposits.
The FDIC’s prompt corrective action regulations also generally prohibit a bank from making any capital distributions
(including payment of a dividend) or paying any management fee to its parent holding company if the bank would
thereafter be undercapitalized. Undercapitalized institutions are also subject to growth limitations, may not accept, renew or
rollover brokered deposits, and are required to submit a capital restoration plan. The agencies may not accept such a plan
without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring
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the bank’s capital. Significantly undercapitalized depository institutions may be subject to a number of requirements and
restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks. Generally, subject to a narrow exception, the FDIC
must appoint a receiver or conservator for an institution that is critically undercapitalized. The capital classification of a
bank also affects the frequency of regulatory examinations, the bank’s ability to engage in certain activities and the deposit
insurance premiums paid by the bank.
Branching. Under Louisiana law, the Bank is permitted to establish additional branch offices within Louisiana,
subject to the approval of the Louisiana Office of Financial Institutions. As a result of the Dodd-Frank Act, the Bank may
also establish additional branch offices outside of Louisiana, subject to prior regulatory approval, so long as the laws of the
state where the branch is to be located would permit a state bank chartered in that state to establish a branch. Any new
branch, whether located inside or outside of Louisiana, must also be approved by the FDIC, as the Bank’s primary federal
regulator. The Bank may also establish offices in other states by merging with banks or by purchasing branches of other
banks in other states, subject to certain restrictions.
Restrictions on Transactions with Affiliates and Insiders. Transactions between the Bank and its nonbanking
subsidiaries and/or affiliates, including the Company, are subject to Section 23A and 23B of the Federal Reserve Act and
Regulation W. In general, Section 23A of the Federal Reserve Act imposes limits on the amount of such transactions, and
also requires certain levels of collateral for loans to affiliated parties. It also limits the amount of advances to third parties
which are collateralized by the securities or obligations of the Company or its subsidiaries. Covered transactions with any
single affiliate may not exceed 10.0% of the capital stock and surplus of the Bank, and covered transactions with all
affiliates may not exceed, in the aggregate, 20.0% of the Bank’s capital and surplus. For a bank, capital stock and surplus
refers to the bank’s Tier 1 and Tier 2 capital, as calculated under the risk-based capital guidelines, plus the balance of the
allowance for credit losses excluded from Tier 2 capital. The Bank’s transactions with all of its affiliates in the aggregate
are limited to 20.0% of the foregoing capital. “Covered transactions” are defined by statute to include a loan or extension of
credit to an affiliate, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise
exempted by the Federal Reserve) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a
loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. In addition, in connection with
covered transactions that are extensions of credit, the Bank may be required to hold collateral to provide added security to
the Bank, and the types of permissible collateral may be limited. The Dodd-Frank Act generally enhances the restrictions
on transactions with affiliates, including an expansion of what types of transactions are covered transactions to include
credit exposures related to derivatives, repurchase agreement and securities lending arrangements and an increase in the
amount of time for which collateral requirements regarding covered transactions must be satisfied.
Affiliate transactions are also subject to Section 23B of the Federal Reserve Act which generally requires that
certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the
Bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons. The Federal
Reserve has also issued Regulation W which codifies prior regulations under Sections 23A and 23B of the Federal Reserve
Act and interpretive guidance with respect to affiliate transactions.
The restrictions on loans to directors, executive officers, principal shareholders and their related interests
(collectively referred to herein as “insiders”) contained in Section 22(h) of the Federal Reserve Act and in Regulation O
promulgated by the Federal Reserve apply to all insured institutions and their subsidiaries and bank holding companies.
These restrictions include limits on loans to one borrower and conditions that must be met before such a loan can be made.
There is also an aggregate limitation on all loans to insiders and their related interests. Generally, the aggregate of these
loans cannot exceed the institution’s total unimpaired capital and surplus, although a bank’s regulators may determine that
a lesser amount is appropriate. Loans to senior executive officers of a bank are even further restricted. Insiders are subject
to enforcement actions for accepting loans in violation of applicable restrictions.
Restrictions on Distribution of Bank Dividends and Assets. The Bank is subject to certain restrictions on dividends
under federal and state laws, regulations and policies. In general, the Bank may pay dividends to the Company without the
approval of the Louisiana Office of Financial Institutions so long as the amount of the dividend does not exceed the Bank’s
net profits earned during the current year combined with its retained net profits of the immediately preceding year. The
Bank is required to obtain the approval of the Louisiana Office of Financial Institutions for any amount in excess of this
threshold. In addition, under federal law, the Bank may not pay any dividend to the Company if it is undercapitalized or the
payment of the dividend would cause it to become undercapitalized. The FDIC may further restrict the payment of
dividends by engaging in supervisory action to restrict dividends or by requiring the Bank to maintain a higher level of
capital than would otherwise be required to be adequately capitalized for regulatory purposes. Under the Basel III
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regulatory capital framework, the failure to maintain an adequate capital conservation buffer, as discussed above, may also
result in dividend restrictions. Moreover, if, in the opinion of the FDIC, the Bank is engaged in an unsound practice (which
could include the payment of dividends), the FDIC may require, generally after notice and hearing, the Bank to cease such
practice. The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate
level would be an unsafe banking practice. The FDIC has also issued policy statements providing that insured depository
institutions generally should pay dividends only out of current operating earnings.
Further, in the event of a liquidation or other resolution of an insured depository institution, the claims of
depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any
obligation of the institution to its shareholders, including any depository institution holding company (such as us) or any
shareholder or creditor thereof.
Incentive Compensation Guidance. The federal banking agencies have issued comprehensive guidance on
incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do
not undermine the safety and soundness of those organizations by encouraging excessive risk-taking. The incentive
compensation guidance sets expectations for banking organizations concerning their incentive compensation arrangements
and related risk-management, control and governance processes. The incentive compensation guidance, which covers all
employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a
group, is based upon three primary principles: (1) balanced risk-taking incentives, (2) compatibility with effective controls
and risk management and (3) strong corporate governance. Any deficiencies in compensation practices that are identified
may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or take
other actions. In addition, under the incentive compensation guidance, a banking organization’s federal supervisor may
initiate enforcement action if the organization’s incentive compensation arrangements pose a risk to the safety and
soundness of the organization. Further, a provision of the Basel III capital standards described above would limit
discretionary bonus payments to bank executives if the institution’s regulatory capital ratios fail to exceed certain
thresholds. A number of federal regulatory agencies proposed rules that would require enhanced disclosure of incentive-
based compensation arrangements initially in April 2011, and again in April and May 2016, but the rules have not been
finalized and would mostly apply to banking organizations with over $50 billion in total assets. The scope and content of
the U.S. banking regulators’ policies on executive compensation are continuing to develop and are likely to continue
evolving in the future.
Audit Reports. For insured institutions with total assets of $1.0 billion or more, financial statements prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”), management’s certifications signed by our and
the Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the
financial statements, and an attestation by the auditors regarding the Bank’s internal controls must be submitted. For
institutions with total assets of more than $3.0 billion, independent auditors may be required to review quarterly financial
statements. FDICIA requires that the Bank have an independent audit committee, consisting of outside directors only, or
that we have an audit committee that is entirely independent. The committees of such institutions must include members
with experience in banking or financial management, must have access to outside counsel and must not include
representatives of large customers. The Bank’s audit committee consists entirely of independent directors.
Deposit Insurance Assessments. The FDIC insures the deposits of federally insured banks up to prescribed
statutory limits for each depositor through the Deposit Insurance Fund and safeguards the safety and soundness of the
banking and thrift industries. The maximum amount of deposit insurance for banks and savings institutions is $250,000 per
depositor. The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of
default as measured by regulatory capital ratios and other supervisory factors and is calculated based on an institution’s
average consolidated total assets minus average tangible equity.
We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. At
least semiannually, the FDIC will update its loss and income projections for the Deposit Insurance Fund and, if needed,
will increase or decrease assessment rates, following notice-and-comment rulemaking, if required. If there are additional
bank or financial institution failures or if the FDIC otherwise determines to increase assessment rates, the Bank may be
required to pay higher FDIC insurance premiums. Any future increases in FDIC insurance premiums may have a material
and adverse effect on our earnings.
Financial Modernization. Under the GLB Act, banks may establish financial subsidiaries and engage, subject to
limitations on investment, in activities that are financial in nature, other than insurance underwriting as principal, insurance
company portfolio investment, real estate development, real estate investment, annuity issuance and merchant banking
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activities. To do so, a bank must be well capitalized, well managed and have a CRA rating from its primary federal
regulator of satisfactory or better. Subsidiary banks of financial holding companies or banks with financial subsidiaries
must remain well capitalized and well managed in order to continue to engage in activities that are financial in nature
without regulatory actions or restrictions. Such actions or restrictions could include divestiture of the “financial in nature”
subsidiary or subsidiaries. In addition, a financial holding company or a bank may not acquire a company that is engaged in
activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a
CRA rating of satisfactory or better. Neither we nor the Bank maintains a financial subsidiary.
Brokered Deposit Restrictions. Insured depository institutions that are categorized as adequately capitalized
institutions under the FDI Act and corresponding federal regulations cannot accept, renew or roll over brokered deposits,
without receiving a waiver from the FDIC, and are subject to restrictions on the interest rates that can be paid on any
deposits. The EGRRCPA exempted reciprocal deposits from the definition of brokered deposits. Insured depository
institutions that are categorized as undercapitalized capitalized institutions under the FDI Act and corresponding federal
regulations may not accept, renew, or roll over brokered deposits. The Bank is not currently subject to such restrictions.
Concentrated Commercial Real Estate Lending Regulations. The federal banking regulatory agencies have
promulgated guidance governing financial institutions with concentrations in commercial real estate lending. The guidance
provides that a bank has a concentration in commercial real estate lending if (1) total reported loans for acquisition,
construction, land development, and other land represent 100.0% or more of total risk-based capital or (2) total reported
loans secured by multi-family and nonfarm nonresidential properties and loans for acquisition, construction, land
development, and other land represent 300.0% or more of total risk-based capital and the bank’s commercial real estate
loan portfolio has increased 50% or more during the prior 36 months. Owner occupied loans are excluded from this second
category. If a concentration is present, management must employ heightened risk management practices that address,
among other things, Board and management oversight and strategic planning, portfolio management, development of
underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of
increased capital levels as needed to support the level of commercial real estate lending. Our acquisition, construction, land
development, and other land portfolio is currently over the regulatory guidance percentage threshold due to the timing of
draws on several larger construction and development projects and our portfolio secured by multi-family and nonfarm
nonresidential properties and loans for acquisition, construction, land development, and other land is within the percentage
threshold.
Community Reinvestment Act. The CRA and the regulations issued thereunder are intended to encourage banks to
help meet the credit needs of their entire assessment area, including low and moderate income neighborhoods, consistent
with the safe and sound operations of such banks. These regulations also provide for regulatory assessment of a bank’s
record in meeting the needs of its assessment area when considering applications to establish branches, merger applications
and applications to acquire the assets and assume the liabilities of another bank. The Financial Institution Reform Recovery
and Enforcement Act (the "FIRREA") requires federal banking agencies to make public a rating of a bank’s performance
under the CRA. In the case of a bank holding company, the CRA performance record of the banks involved in the
transaction are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets
of a bank or to merge with any other bank holding company. An unsatisfactory CRA record could substantially delay
approval or result in denial of an application. The Bank received a “satisfactory” rating in its most recent CRA examination
in April, 2023.
Consumer Laws and Regulations. The Bank is subject to numerous laws and regulations intended to protect
consumers in transactions with the Bank. These laws include, among others, laws regarding unfair, deceptive and abusive
acts and practices, usury laws, and other federal consumer protection statutes. These federal laws include the Electronic
Fund Transfer Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act,
the Real Estate Procedures Act of 1974, the S.A.F.E. Mortgage Licensing Act of 2008, the Truth in Lending Act and the
Truth in Savings Act, among others. Many states and local jurisdictions have consumer protection laws analogous, and in
addition, to those enacted under federal law. These laws and regulations mandate certain disclosure requirements and
regulate the manner in which financial institutions must deal with customers when taking deposits, making loans and
conducting other types of transactions. Failure to comply with these laws and regulations could give rise to regulatory
sanctions, customer rescission and registration rights, action by state and local attorneys general and civil or criminal
liability.
In addition, the Dodd-Frank Act created the CFPB. The CFPB has broad authority to regulate the offering and
provision of consumer financial products. The Dodd-Frank Act gives the CFPB authority to supervise and examine
depository institutions with more than $10.0 billion in assets for compliance with these federal consumer laws. The
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authority to supervise and examine depository institutions with $10.0 billion or less in assets for compliance with federal
consumer laws remains largely with those institutions’ primary regulators. However, the CFPB may participate in
examinations of these smaller institutions on a “sampling basis” and may refer potential enforcement actions against such
institutions to their primary regulators. Accordingly, the CFPB may participate in examinations of the Bank, which
currently has assets of less than $10.0 billion, and could supervise and examine our other direct or indirect subsidiaries that
offer consumer financial products or services. The CFPB also has supervisory and examination authority over certain
nonbank institutions that offer consumer financial products. The Dodd-Frank Act identifies a number of covered nonbank
institutions, and also authorizes the CFPB to identify additional institutions that will be subject to its jurisdiction. In
addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those
regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules
adopted by the CFPB against certain institutions.
Mortgage Lending Rules. The Dodd-Frank Act authorized the CFPB to establish certain minimum standards for
the origination of residential mortgages, including a determination of the borrower’s ability to repay. Under the Dodd-
Frank Act and related rules, financial institutions may not make a residential mortgage loan unless they make a “reasonable
and good faith determination” that the consumer has a “reasonable ability” to repay the loan. The Dodd-Frank Act allows
borrowers to raise certain defenses to foreclosure but provides a full or partial safe harbor from such defenses for loans that
are “qualified mortgages.” The rules define “qualified mortgages,” imposing both underwriting standards – for example, a
borrower’s debt-to-income ratio may not exceed 43.0% – and limits on the terms of their loans. Certain loans, including
interest-only loans and negative amortization loans, cannot be qualified mortgages. EGRRCPA, among other matters,
expanded the definition of qualified mortgages for banks with less than $10 billion in assets.
Anti-Money Laundering and OFAC. Under federal law, including the Bank Secrecy Act (the "BSA"), and the
USA PATRIOT Act of 2001, certain financial institutions, such as the Bank, must maintain anti-money laundering
programs that include established internal policies, procedures and controls; a designated BSA officer; an ongoing
employee training program; and testing of the program by an independent audit function. Financial institutions are also
prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards
for due diligence and customer identification especially in their dealings with foreign financial institutions and foreign
customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard
against money laundering and to report any suspicious transactions, and law enforcement authorities have been granted
increased access to financial information maintained by financial institutions. The Financial Crimes Enforcement Network
("FinCEN"), issued final rules under the BSA in July 2016 that clarify and strengthen the due diligence requirements for
banks with regard to their customers.
The Office of Foreign Assets Control("OFAC") administers laws and Executive Orders that prohibit U.S. entities
from engaging in transactions with certain prohibited parties. OFAC publishes lists of persons and organizations suspected
of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons.
Generally, if a bank identifies a transaction, account or wire transfer relating to a person or entity on an OFAC list, it must
freeze the account or block the transaction, file a suspicious activity report and notify the appropriate authorities.
Bank regulators routinely examine institutions for compliance with these obligations and they must consider an
institution’s compliance in connection with the regulatory review of applications, including applications for bank mergers
and acquisitions. Failure of a financial institution to maintain and implement adequate programs to combat money
laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant laws and regulations,
could have serious legal, reputational and financial consequences for the institution.
Privacy. The federal banking regulators have adopted rules that limit the ability of banks and other financial
institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require
disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain
personal information to a non-affiliated third party. These regulations affect how consumer information is transmitted
through financial services companies and conveyed to outside vendors. In addition, consumers may also prevent disclosure
of certain information among affiliated companies that is assembled or used to determine eligibility for a product or
service, such as that shown on consumer credit reports and asset and income information from applications. Consumers
also have the option to direct banks and other financial institutions not to share information about transactions and
experiences with affiliated companies for the purpose of marketing products or services. In addition to applicable federal
privacy regulations, the Bank is subject to certain state privacy laws.
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Federal Home Loan Bank (“FHLB”) System. The FHLB system, of which the Bank is a member, consists of 11
regional FHLBs governed and regulated by the Federal Housing Finance Board ("FHFB"). The FHLBs serve as reserve or
credit facilities for member institutions within their assigned regions. The reserves are funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB system. The FHLBs make loans (i.e., advances) to members
in accordance with policies and procedures established by the FHLB and the Boards of directors of each regional FHLB.
As a system member, according to currently existing policies and procedures, the Bank is entitled to borrow from
the Dallas FHLB provided it posts acceptable collateral. The Bank is also required to own a certain amount of capital stock
in the FHLB. The Bank is in compliance with the stock ownership rules with respect to such advances, commitments and
letters of credit and collateral requirements with respect to home mortgage loans and similar obligations. All loans,
advances and other extensions of credit made by the FHLB to the Bank are secured by a portion of the respective mortgage
loan portfolio, certain other investments and the capital stock of the FHLB held by the Bank.
Enforcement Powers. The bank regulatory agencies have broad enforcement powers, including the power to
terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or
receiver. Failure to comply with applicable laws, regulations and supervisory agreements, breaches of fiduciary duty or the
maintenance of unsafe and unsound conditions or practices could subject us or our subsidiaries, including the Bank, as well
as their respective officers, directors, and other institution-affiliated parties, to administrative sanctions and potentially
substantial civil money penalties. For example, the regulatory authorities may appoint the FDIC as conservator or receiver
for a banking institution (or the FDIC may appoint itself, under certain circumstances) if any one or more of a number of
circumstances exist, including, without limitation, the fact that the banking institution is undercapitalized and has no
reasonable prospect of becoming adequately capitalized, fails to become adequately capitalized when required to do so,
fails to submit a timely and acceptable capital restoration plan or materially fails to implement an accepted capital
restoration plan.
Effect of Governmental Monetary Policies
The commercial banking business is affected not only by general economic conditions but also by U.S. fiscal
policy and the monetary policies of the Federal Reserve. Some of the instruments of monetary policy available to the
Federal Reserve include changes in the discount rate on member bank borrowings, the fluctuating availability of
borrowings at the “discount window,” open market operations, the imposition of and changes in reserve requirements
against member banks’ deposits and certain borrowings by banks and their affiliates and assets of foreign branches. These
policies influence to a significant extent the overall growth of bank loans, investments, and deposits and the interest rates
charged on loans or paid on deposits. We cannot predict the nature of future fiscal and monetary policies or the effect of
these policies on our operations and activities, financial condition, results of operations, growth plans or future prospects.
Impact of Current Laws and Regulations
The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost
of our operations and thus has a negative impact on our profitability. There has also been a notable expansion in recent
years of financial service providers that are not subject to the examination, oversight, and other rules and regulations to
which we are subject. Those providers, because they are not so highly regulated, may have a competitive advantage over us
and may continue to draw large amounts of funds away from traditional banking institutions, with a continuing adverse
effect on the banking industry in general.
Cybersecurity
We are subject to guidance and standards, as directed by federal law and prescribed by federal regulators, which
necessitate the responsibility to secure nonpublic, confidential customer and consumer information and provide notice to
such entities in the event their data is disclosed due to a security breach. Under certain circumstances, federal and state
regulators must also be notified in the event of a data breach as mandated by applicable state laws and federal regulations.
Financial institutions are expected to comply with such guidance and standards and to accordingly establish and employ
appropriate information security and cybersecurity programs and associated risk management processes.
Cybersecurity risks are expected to increase due to the rapid evolution and sophistication of cybersecurity attacks
and the accessibility of resources required for their execution. In turn, Congress, multiple states, and federal regulators
frequently issue new guidance and standards and are currently considering the enactment of additional or enhanced laws or
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regulations which could impose increased obligations for companies responsible for the safeguarding of nonpublic,
customer and consumer information, specifically financial institutions.
On November 23, 2021, federal banking agencies issued a joint final rule requiring financial institutions to
provide notification to their primary federal regulator as soon as possible and no later than 36 hours after a “computer-
security incident” has been determined to be a “notification event,” as those terms are defined under the final rule.
Additionally, the rule requires bank service providers to contact each affected banking organization customer as soon as
possible once the bank service provider determines it has experienced a computer-security incident that has materially
disrupted or degraded, or is reasonably likely to materially disrupt or degrade, covered services provided to such banking
organizations for four or more hours.
On May 16, 2024, the SEC adopted an amendment to Regulation S-P requiring a covered institution to provide
notice as soon as practicable, but not later than 30 days after becoming aware that an incident involving unauthorized
access to or use of customer information has occurred or is reasonably likely to have occurred. The notice must include
details about the incident, the breached data, and how affected individuals can respond to the breach to protect themselves.
Future Legislation and Regulatory Reform
From time to time, various legislative and regulatory initiatives related to financial institutions are introduced in
Congress and state legislatures. New regulations and statutes are regularly proposed that contain wide-ranging proposals
for altering the structures, regulations and competitive relationships of financial institutions operating in the United States.
We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our
business may be affected by any new regulation or statute. Future legislation, regulation and policies, and the effects of that
legislation and regulation and those policies, may have a significant influence on our operations and activities, financial
condition, results of operations, growth plans or future prospects and the overall growth and distribution of loans,
investments and deposits. Such legislation, regulation and policies have had a significant effect on the operations and
activities, financial condition, results of operations, growth plans and future prospects of commercial banks in the past and
are expected to continue to do so.
ITEM 1A. Risk Factors.
In evaluating our business, you should consider carefully the factors described below. The occurrence of one or
more of these events could significantly and adversely affect our business, prospects, financial condition, results of
operations and cash flows. You should also consider the cautionary statement regarding the use of forward-looking
statements elsewhere in this Report.
Risks Relating to our Business
As a business operating in the financial services industry, our business and operations may be adversely affected in
numerous and complex ways by weak economic conditions.
Our businesses and operations, which primarily consist of lending money to customers in the form of loans,
borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and
economic conditions in the United States. Uncertainty about federal fiscal monetary and related policies, the medium and
long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers, and
investors in the United States. Changes in any of the policies are influenced by macroeconomic conditions and other factors
that are beyond our control. In addition, economic conditions in foreign countries, including global political hostilities or
public health outbreaks and uncertainty over the stability of foreign currencies, could affect the stability of global financial
markets, which could hinder domestic economic growth.
Adverse economic conditions in the United States and in foreign countries, including adverse conditions resulting
from natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic
calamities, epidemics and pandemics such as coronavirus, and other matters beyond our control, and the government policy
responses to such conditions, could have an adverse effect on our business, financial conditions, results of operations and
prospects.
All of these factors could be detrimental to our business, and the interplay between these factors can be complex
and unpredictable.
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The geographic concentration of our business in the state of Louisiana, in the Dallas/Fort Worth metroplex and
Houston, imposes risks and may magnify the consequences of any regional or local economic downturn affecting our
markets, including any downturn in the real estate sector.
We conduct our operations exclusively in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston.
As of December 31, 2024, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/
or conduct business in our markets and the substantial majority of our secured loans were secured by collateral located in
our markets. Accordingly, we are exposed to risks associated with a lack of geographic diversification as any regional or
local economic downturn that affects our markets, our existing or prospective borrowers, or property values in our markets
may affect us and our profitability more significantly and more adversely than our competitors whose operations are less
geographically focused.
The economic conditions in our markets are highly dependent on the real estate sector as well as the technology,
financial services, insurance, transportation, manufacturing and energy sectors. Any downturn or adverse development in
these sectors, particularly the real estate and energy sectors in our markets, could have a material adverse impact on our
business, financial condition and results of operations, and future prospects. Any adverse economic developments, among
other things, could negatively affect the volume of loan originations, increase the level of nonperforming assets, increase
the rate of foreclosure losses on loans, and reduce the value of our loans.
We face significant competition to attract and retain customers, which could impair our growth, decrease our
profitability or result in loss of market share.
We operate in the highly competitive banking industry and face significant competition for customers from bank
and non-bank competitors, particularly regional and nationwide institutions, in originating loans, attracting deposits and
providing other financial services. Our competitors are generally larger and may have significantly more resources, greater
name recognition, and more extensive and established branch networks or geographic footprints than we do. Because of
their scale, many of these competitors can be more aggressive than we can on loan and deposit pricing. Also, many of our
non-bank competitors have fewer regulatory constraints and may have lower cost structures. We expect competition to
continue to intensify due to financial institution consolidation; legislative, regulatory and technological changes; and the
emergence of alternative banking sources.
Our ability to compete successfully will depend on a number of factors, including, among other things:
•
our ability to develop, maintain and build long-term customer relationships based on top quality service, high
ethical standards and safe, sound assets;
•
our scope, relevance and pricing of products and services offered to meet customer needs and demands;
•
the rate at which we introduce new products and services relative to our competitors;
•
customer satisfaction with our level of service;
•
our ability to expand our market position;
•
industry and general economic trends; and
•
our ability to keep pace with technological advances and to invest in new technology.
Increased competition could require us to increase the rates we pay on deposits or lower the rates we offer on
loans, which could reduce our profitability. Our failure to compete effectively in our primary markets could cause us to
lose market share and could have an adverse effect on our business, financial condition and results of operations.
Our success is largely dependent upon our ability to successfully execute our business strategy, and failure to
successfully execute our business strategy could have an adverse effect on our business, financial condition and results
of operations.
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Our success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our
management team to execute on our long-term business strategy, which requires them to, among other things:
•
attract and retain experienced and talented bankers in each of our markets;
•
maintain adequate funding sources, including by continuing to attract stable, low-cost deposits;
•
increase our operating efficiency and profitability;
•
implement new technologies to enhance the client experience, keep pace with our competitors and improve
efficiency;
•
attract and maintain commercial banking relationships with well-qualified businesses, real estate developers
and investors with proven track records in our market areas;
•
attract sufficient loans that meet prudent credit standards, including in our commercial and industrial and
owner-occupied commercial real estate loan categories;
•
maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking
regulations;
•
obtain federal and state regulatory approvals;
•
manage our credit, interest rate and liquidity risk;
•
develop new, and grow our existing, streams of noninterest income;
•
oversee the performance of third party service providers that provide material services to our business; and
•
maintain expenses in line with their current projections.
Failure to achieve these strategic goals could adversely affect our ability to successfully implement our business
strategies and could negatively impact our business, growth prospects, financial condition and results of operations.
Furthermore, if we do not manage our growth effectively, our business, financial condition, results of operations and future
prospects could be negatively affected, and we may not be able to continue to implement our business strategy and
successfully conduct our operations.
We rely heavily on our executive management team and other key employees, and an unexpected loss of their service
could have an adverse effect on our business, financial condition and results of operations.
Our success depends in large part on the performance of our key personnel, as well as on our ability to attract,
motivate and retain highly qualified senior and middle management and other skilled employees. Competition for
employees is intense, and the process of locating key personnel with the combination of skills and attributes required to
execute our business plan may be lengthy. We may not be successful in retaining our key employees, and the unexpected
loss of services of one or more of our key personnel could have an adverse effect on our business because of their skills,
knowledge of our primary markets, years of industry experience and the difficulty of promptly finding qualified
replacement personnel. If the services of any of our key personnel should become unavailable for any reason, we may not
be able to identify and hire qualified persons on terms acceptable to us, or at all, which could have an adverse effect on our
business, financial condition and results of operations.
Our ability to attract and retain profitable bankers is critical to the success of our business strategy, and any failure to
do so could have a material adverse effect on our business, financial condition and results of operations.
Our ability to retain and grow our loans, deposits and fee income depends upon the business generation
capabilities, reputation and relationship management skills of our bankers. If we were to lose the services of any of our
bankers, including profitable bankers employed by banks that we may acquire, to a new or existing competitor or
otherwise, we may not be able to retain valuable relationships and some of our customers could choose to use the services
of a competitor instead of our services.
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Our growth strategy also relies on our ability to attract and retain additional profitable bankers. We may face
difficulties in recruiting and retaining bankers of our desired caliber, including as a result of competition from other
financial institutions. In particular, many of our competitors are significantly larger with greater financial resources, and
may be able to offer more attractive compensation packages and broader career opportunities. Additionally, we may incur
significant expenses and expend significant time and resources on training, integration and business development before we
are able to determine whether a new banker will be profitable or effective. If we are unable to attract and retain profitable
bankers, or if our bankers fail to meet our expectations in terms of customer relationships and profitability, we may be
unable to execute our business strategy, which could have an adverse effect on our business, financial condition and results
of operations.
We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
Our business depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed
to the risk that the principal of, or interest on, a loan will not be repaid timely or at all or that the value of any collateral
supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to
the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from
changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers. The
creditworthiness of a borrower is affected by many factors including local market conditions and general economic
conditions. If the overall economic climate in the United States, generally, or our market areas, specifically, experiences
material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease
in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require
significant additional provisions for credit losses. Additional factors related to the credit quality of commercial loans
include the quality of the management of the business and the borrower’s ability both to properly evaluate changes in the
supply and demand characteristics affecting our market for products and services and to effectively respond to those
changes. Additional factors related to the credit quality of commercial real estate loans include tenant vacancy rates and the
quality of management of the property.
Our risk management practices, such as monitoring the concentration of our loans within specific industries and
our credit approval, review and administrative practices, may not adequately reduce credit risk, and our credit
administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions
affecting customers and the quality of the loan portfolio. In addition, many of our loans are made to small and midsized
businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers. A
failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults,
foreclosures and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses,
each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have
an adverse effect on our business, financial condition and results of operations.
Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to our other
mortgage loans.
Our loan portfolio includes owner-occupied and non-owner-occupied commercial real estate loans for individuals
and businesses for various purposes, which are secured by commercial properties, as well as real estate acquisition,
construction and development loans. As of December 31, 2024, approximately $3.2 billion, or 52.7% of our loan portfolio
is secured by commercial and construction real estate. These loans typically involve repayment dependent upon income
generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses
and debt service, which may be adversely affected by changes in the economy or local market conditions. These loans
expose us to greater credit risk than loans secured by residential real estate because the collateral securing these loans
typically cannot be liquidated as easily as residential real estate because there are fewer potential purchasers of the
collateral. Additionally, non-owner-occupied commercial real estate loans generally involve relatively large balances to
single borrowers or related groups of borrowers. Accordingly, charge-offs on non-owner-occupied commercial real estate
loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. Unexpected
deterioration in the credit quality of our commercial real estate loan portfolio would require us to increase our provision for
credit losses, which would reduce our profitability, and could adversely affect our business, financial condition, results of
operations and prospects.
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Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy
affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in
loan and other losses.
The market value of real estate can fluctuate significantly in a short period of time. As of December 31, 2024,
approximately $4.0 billion, or 67.5%, of our total loans were comprised of loans with real estate as a primary or secondary
component of collateral. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our
markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect our
business, financial condition, and results of operations. Negative changes in the economy affecting real estate values and
liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our
ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than
the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses could have adverse
effect on our business, financial condition and results of operations. If real estate values decline, it is also more likely that
we would be required to increase our allowance for credit losses, which could have an adverse effect on our business,
financial condition and results of operations.
We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying
real estate, subjecting us to the costs and potential risks associated with the ownership of the real property.
Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our
investment and may thereafter, own and operate such property, in which case, we would be exposed to the risks inherent in
the ownership of real estate. As of December 31, 2024, we held approximately $5.5 million in other real estate owned
(“OREO”). The amount that we, as a mortgagee, may realize after a default is dependent upon factors outside of our
control, including, but not limited to general or local economic conditions, environmental cleanup liability, assessments,
interest rates, real estate tax rates, operating expenses of the mortgaged properties, ability to obtain and maintain adequate
occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters. Our inability to manage
the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of OREO,
could have an adverse effect on our business, financial condition and results of operations.
A large portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or
other commercial collateral, the deterioration in value of which could expose us to credit losses and could adversely
affect our business, financial condition and results of operations.
As of December 31, 2024, approximately $1.9 billion, or 31.2%, of our total loans were commercial loans to
businesses. In general, these loans are collateralized by general business assets, including, among other things, accounts
receivable, inventory and equipment and most are backed by a personal guaranty of the borrower or principal. These
commercial loans are typically larger in amount than loans to individuals and, therefore, have the potential for larger losses
on a single loan basis. Additionally, the repayment of commercial loans is subject to the ongoing business operations of the
borrower. The collateral securing such loans generally includes movable property, such as equipment and inventory, which
may decline in value more rapidly than we anticipate exposing us to increased credit risk. In addition, a portion of our
customer base, including customers in the energy and real estate business, may be exposed to volatile businesses or
industries which are sensitive to commodity prices or market fluctuations, such as energy prices. Accordingly, negative
changes in commodity prices and real estate values and liquidity could impair the value of the collateral securing these
loans. Significant adverse changes in the economy or local market conditions in which our commercial lending customers
operate could cause rapid declines in loan collectability and the values associated with general business assets resulting in
inadequate collateral coverage that may expose us to credit losses and could adversely affect our business, financial
condition and results of operations.
Our portfolio contains a number of large loans to certain borrowers, and deterioration in the financial condition of
these large loans could have a significant adverse impact on our asset quality.
Our growth over the past several years has been partially attributable to our ability to originate and retain
relatively large loans given our asset size. As of December 31, 2024, our average loan size (including unfunded
commitments) was approximately $447,000. Further, as of December 31, 2024, our 10 largest borrowing relationships
ranged from approximately $23.0 million to $95.2 million (including unfunded commitments) and averaged approximately
$44.6 million in total commitments. Along with other risks inherent in our loans, such as the deterioration of the underlying
businesses or property securing these loans, the higher average size of our loans presents a risk to our lending operations.
Because we have a large average loan size, if only a few of our largest borrowers become unable to repay their loan
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obligations as a result of economic or market conditions or personal circumstances, our nonperforming loans and our
provision for credit losses could increase significantly, which could have an adverse effect on our business, financial
condition and results of operations.
Our allowance for credit losses may prove to be insufficient to absorb losses inherent in our loan portfolio, which could
have a material adverse effect on our business, financial condition and results of operations.
We maintain an allowance for credit losses that represents management’s judgment of probable losses and risks
inherent in our loan portfolio, including unfunded commitments. As of December 31, 2024, our allowance for credit losses
totaled $58.5 million, which represents approximately 0.98% of our total loans held for investment. The level of the
allowance reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of
the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral. The
allowance also incorporates our current views on our current risk management practices, which may change in the future.
Additionally, the allowance incorporates historical industry loss data as part of the estimate. The determination of the
appropriate level of the allowance for credit losses is inherently highly subjective and requires us to make significant
estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.
Inaccurate management assumptions, deterioration of economic conditions affecting borrowers, new information regarding
existing loans, identification or deterioration of additional problem loans, acquisition of problem loans and other factors,
both within and outside of our control, may require us to increase our allowance for credit losses. In addition, our
regulators, as an integral part of their periodic examination, review our methodology for calculating, and the adequacy of,
our allowance for credit losses and may direct us to make additions to the allowance based on their judgments about
information available to them at the time of their examination. Further, if actual charge-offs in future periods exceed the
amounts allocated to the allowance for credit losses, we may need additional provisions for credit losses to restore the
adequacy of our allowance for credit losses. Finally, the measure of our allowance for credit losses is dependent on the
adoption and interpretation of accounting standards. The Financial Accounting Standards Board (“FASB”) issued a new
credit impairment model, the Current Expected Credit Loss (“CECL”) model, which became applicable to us on January 1,
2023. CECL requires financial institutions to estimate and develop a provision for credit losses at origination for the
lifetime of the loan, as opposed to reserving for incurred or probable losses up to the balance sheet date. Upon adoption of
the guidance on January 1, 2023, we recognized an $827,000 reduction to retained earnings, after recording the relating
deferred tax asset adjustment at our adjusted tax rate. Under the CECL model, credit deterioration would be reflected in the
income statement in the period of origination or acquisition of the loan, with changes in expected credit losses due to
further credit deterioration or improvement reflected in the periods in which the expectation changes. Moreover, the CECL
model is heavily dependent on macroeconomic forecasts, with changes in those forecasts potentially requiring material
increases to our level of allowance for credit losses which could adversely affect our business, financial condition, results
of operations, and capital.
The small-to-midsized businesses that we lend to may have fewer resources to weather adverse business developments,
which may impair a borrower’s ability to repay a loan, and such impairment could have a material adverse effect on our
business, financial condition and results of operations.
We focus our business development and marketing strategy primarily on small-to-midsized businesses, who
frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need
substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of
which may impair a borrower’s ability to repay a loan. In addition, the success of a small-to-midsized business often
depends on the management skills, talents and efforts of one or two people or a small group of people, and the death,
disability or resignation of one or more of these people could have an adverse impact on the business and its ability to
repay its loan. If general economic conditions negatively impact the markets in which we operate and small-to-midsized
businesses are adversely affected or our borrowers are otherwise harmed by adverse business developments, this, in turn,
could have a material adverse effect on our business, financial condition and results of operations.
The borrowing needs of our customers may increase, especially during a challenging economic environment, which
could result in increased borrowing against our contractual obligations to extend credit.
A commitment to extend credit is a formal agreement to lend funds to a customer as long as there is no violation
of any condition established under the agreement. The actual borrowing needs of our customers under these credit
commitments have historically been lower than the contractual amount of the commitments. A significant portion of these
commitments expire without being drawn upon. Because of the credit profile of our customers, we typically have a
substantial amount of total unfunded credit commitments, which is not reflected on our balance sheet. As of December 31,
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2024, we had $1.4 billion in unfunded credit commitments to our customers. Actual borrowing needs of our customers may
exceed our expectations, especially during a challenging economic environment when our customers’ companies may be
more dependent on our credit commitments due to the lack of available credit elsewhere, the increasing costs of credit, or
the limited availability of financings from venture firms. This could adversely affect our liquidity, which could impair our
ability to fund operations and meet obligations as they become due and could have a material adverse effect on our
business, financial condition and results of operations.
Our ability to maintain our reputation is critical to the success of our business.
Our business plan emphasizes relationship banking. We have benefited from strong relationships with and among
our customers. As a result, our reputation is one of the most valuable components of our business. Our growth over the past
several years has depended on attracting new customers from competing financial institutions and increasing our market
share, primarily by the involvement in our primary markets and word-of-mouth advertising, rather than on growth in the
market for banking services in our primary markets. As such, we strive to enhance our reputation by recruiting, hiring and
retaining employees who share our core values of being an integral part of the communities we serve and delivering
superior service to our customers. If our reputation is negatively affected by the actions of our employees or otherwise, our
existing relationships may be damaged. We could lose some of our existing customers, including groups of large customers
who have relationships with each other, and we may not be successful in attracting new customers. Any of these
developments could have an adverse effect on our business, financial condition and results of operations.
Our business has grown rapidly, and we may not be able to maintain our historical rate of growth, which could have an
adverse effect on our ability to successfully implement our business strategy.
Our business has grown rapidly. Financial institutions that grow rapidly can experience significant difficulties as a
result of rapid growth. Furthermore, our primary strategy focuses on organic growth, supplemented by acquisitions of
banking teams or other financial institutions. We may be unable to execute on aspects of our growth strategy to sustain our
historical rate of growth or we may be unable to grow at all. More specifically, we may be unable to generate sufficient
new loans and deposits within acceptable risk and expense tolerances, obtain the personnel or funding necessary for
additional growth or find suitable banking teams or acquisition candidates. Various factors, such as economic conditions
and competition, may impede or prohibit the growth of our operations, the opening of new branches, and the
consummation of acquisitions. Further, we may be unable to attract and retain experienced bankers, which could adversely
affect our growth. The success of our strategy also depends on our ability to effectively manage growth, which is
dependent upon a number of factors, including our ability to adapt existing credit, operational, technology and governance
infrastructure to accommodate expanded operations. If we fail to build infrastructure sufficient to support rapid growth or
fail to implement one or more aspects of our strategy, we may be unable to maintain historical earnings trends, which could
have an adverse effect on our business, financial condition and results of operations.
We may not be able to manage the risks associated with our anticipated growth and expansion through de novo
branching.
Our business strategy includes evaluating strategic opportunities to grow through de novo branching, and we
believe that banking location expansion has been meaningful to our growth since inception. De novo branching carries with
it certain potential risks, including significant startup costs and anticipated initial operating losses; an inability to gain
regulatory approval; an inability to secure the services of qualified senior management to operate the de novo banking
location and successfully integrate and promote our corporate culture; poor market reception for de novo banking locations
established in markets where we do not have a preexisting reputation; challenges posed by local economic conditions;
challenges associated with securing attractive locations at a reasonable cost; and the additional strain on management
resources and internal systems and controls. Failure to adequately manage the risks associated with our anticipated growth
through de novo branching could have an adverse effect on our business, financial condition and results of operations.
We may pursue acquisitions in the future, which could expose us to financial, execution and operational risks that
could have an adverse effect on our business, financial condition, results of operations and growth prospects.
Although we generally plan to continue to grow our business organically, we may from time to time consider
acquisition opportunities that we believe complement our activities and have the ability to enhance our profitability. Our
acquisition activities could be material to our business and involve a number of risks, including those associated with:
•
the identification of suitable candidates for acquisition;
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•
the diversion of management attention from the operation of our existing business to identify, evaluate
and negotiate potential transactions;
•
the ability to attract funding to support additional growth within acceptable risk tolerances;
•
the use of inaccurate estimates and judgments to evaluate credit, operations, management and market
risks with respect to the target institution or assets;
•
the ability to maintain asset quality;
•
the adequacy of due diligence and the potential exposure to unknown or contingent liabilities related to
the acquisition
•
the retention of customers and key personnel, including bankers;
•
the timing and uncertainty associated with obtaining necessary regulatory approvals;
•
the incurrence of an impairment of goodwill associated with an acquisition and adverse effects on our
results of operations
•
the ability to successfully integrate acquired businesses; and
•
the maintenance of adequate regulatory capital.
The market for acquisition targets is highly competitive, which may adversely affect our ability to find acquisition
candidates that fit our strategy and standards at acceptable prices. We face significant competition in pursuing acquisition
targets from other banks and financial institutions, many of which possess greater financial, human, technical and other
resources than we do. Our ability to compete in acquiring target institutions will depend on our available financial
resources to fund the acquisitions, including the amount of cash and cash equivalents we have and the liquidity and value
of our common stock. In addition, increased competition may also drive up the acquisition consideration that we will be
required to pay in order to successfully capitalize on attractive acquisition opportunities. To the extent that we are unable to
find suitable acquisition targets, an important component of our growth strategy may not be realized.
Acquisitions of financial institutions also involve operational risks and uncertainties, such as unknown or
contingent liabilities with no available manner of recourse, exposure to unexpected problems such as asset quality, the
retention of key employees and customers, and other issues that could negatively affect our business. We may not be able
to complete future acquisitions or, if completed, we may not be able to successfully integrate the operations, technology
platforms, management, products and services of the entities that we acquire or to realize our attempts to eliminate
redundancies. The integration process may also require significant time and attention from our management that would
otherwise be directed toward servicing existing business and developing new business. Failure to successfully integrate the
entities we acquire into our existing operations in a timely manner may increase our operating costs significantly and could
have an adverse effect on our business, financial condition and results of operations. Further, acquisitions typically involve
the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net
income per common share may occur in connection with any future acquisition, and the carrying amount of any goodwill
that we currently maintain or may acquire may be subject to impairment in future periods.
Interest rate shifts could have an adverse effect on our business, financial condition, results of operations and growth
prospects.
The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like
most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income,
or the difference between the interest income we earn on loans, investments and other interest-earning assets, and the
interest we pay on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or
decrease our net interest income, because different types of assets and liabilities may react differently, and at different
times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly, or to a greater
degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly,
when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling
interest rates could reduce net interest income. As of December 31, 2024, 45.0% of our earning assets and 67.5% of our
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interest-bearing liabilities were variable rate. As of December 31, 2024, our modeled interest sensitivity is modestly asset
sensitive. Should the assumptions in the model occur, we estimate our net interest income to experience a minor increase if
rates rise, and a minor decrease if rates decline. However, it is likely that customer and market responses would differ from
those in the model, and there is no guarantee that actual results will match modeled results.
Interest rates increased rapidly during 2022 and 2023 to levels that we have not experienced in recent history.
Interest rates subsequently declined in 2024, but have not returned to pre-2022 levels. An increase or stabilization in
interest rates could have a number of effects on our business, which may include reduced loan demand, increased
delinquencies and increased loan paydowns and payoffs. Conversely, a decrease in the general level of interest rates may
affect us through, among other things, increased prepayments on our loan portfolio and increased competition for deposits.
Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination
volume, loan portfolio and our overall results. Although our asset-liability management strategy is designed to control and
mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of
our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the
money supply, international disorder and instability in domestic and foreign financial markets.
The markets in which we operate are susceptible to hurricanes and other natural disasters and adverse weather, which
could result in a disruption of our operations and increases in credit losses.
A significant portion of our business is generated from markets that have been, and may continue to be, damaged
by major hurricanes, floods, tropical storms, tornadoes and other natural disasters and adverse weather. Natural disasters
can disrupt our operations, cause widespread property damage, and severely depress the local economies in which we
operate. If the economies in our primary markets experience an overall decline as a result of a natural disaster, adverse
weather, or other disaster, demand for loans and our other products and services could be reduced. In addition, the rates of
delinquencies, foreclosures, bankruptcies and losses on loan portfolios may increase substantially, as uninsured property
losses or sustained job interruption or loss may materially impair the ability of borrowers to repay their loans. Moreover,
the value of real estate or other collateral that secures the loans could be materially and adversely affected by a disaster. A
disaster could, therefore, result in decreased revenue and credit losses that could have an adverse effect on our business,
financial condition and results of operations.
We earn income by originating residential mortgage loans for resale in the secondary mortgage market, and disruptions
in that market could reduce our operating income.
Historically, we have earned income by originating mortgage loans for sale in the secondary market. A historical
focus of our loan origination and sales activities has been to enter into formal commitments and informal agreements with
larger banking companies and mortgage investors. Under these arrangements, we originate single family mortgages that are
priced and underwritten to conform to previously agreed criteria before loan funding and are delivered to the investor
shortly after funding. However, in the recent past, disruptions in the secondary market for residential mortgage loans have
limited the market for, and liquidity of, most mortgage loans other than conforming Federal National Mortgage Association
("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac") loans. The effects of these disruptions in
the secondary market for residential mortgage loans may reappear.
In addition, because government-sponsored entities like Fannie Mae and Freddie Mac, who account for a
substantial portion of the secondary market, are governed by federal law, any future changes in laws that significantly
affect the activity of these entities could, in turn, adversely affect our operations. In September 2008, Fannie Mae and
Freddie Mac were placed into conservatorship by the federal government. The federal government has for many years
considered proposals to reform Fannie Mae and Freddie Mac, but the results of any such reform and their impact on us are
difficult to predict. To date, no reform proposal has been enacted.
These disruptions may not only affect us but also the ability and desire of mortgage investors and other banks to
purchase residential mortgage loans that we originate. As a result, we may not be able to maintain or grow the income we
receive from originating and reselling residential mortgage loans, which would reduce our operating income. Additionally,
we may be required to hold mortgage loans that we originated for sale, increasing our exposure to interest rate risk and the
value of the residential real estate that serves as collateral for the mortgage loan.
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New lines of business, products, product enhancements or services may subject us to additional risks.
From time to time, we implement new lines of business, or offer new products and product enhancements as well
as new services within our existing lines of business and we will continue to do so in the future. There are substantial risks
and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In
implementing, developing or marketing new lines of business, products, product enhancements or services, we may invest
significant time and resources, although we may not assign the appropriate level of resources or expertise necessary to
make these new lines of business, products, product enhancements or services successful or to realize their expected
benefits. Further, initial timetables for the introduction and development of new lines of business, products, product
enhancements or services may not be achieved, and price and profitability targets may not prove feasible. External factors,
such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the ultimate
implementation of a new line of business or offerings of new products, product enhancements or services. Furthermore,
any new line of business, product, product enhancement or service could have a significant impact on the effectiveness of
our system of internal controls. Failure to successfully manage these risks in the development and implementation of new
lines of business or offerings of new products, product enhancements or services could have an adverse impact on our
business, financial condition or results of operations.
A lack of liquidity could impair our ability to fund operations, which could have an adverse effect on our business,
financial condition and results of operations.
Liquidity is essential to our business, and we monitor our liquidity and manage our liquidity risk at the holding
company and bank levels. We rely on our ability to generate deposits and effectively manage the repayment and maturity
schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our
operations. An inability to raise funds through deposits, borrowings, the sale of our investment securities, the sale of loans,
and other sources could have a substantial negative effect on our liquidity. Our most important source of funds is deposits.
Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff. If
customers move money out of bank deposits and into other investments such as money market funds, we would lose a
relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
Other primary sources of funds consist of cash flows from operations, maturities and sales of investment
securities, and proceeds from the issuance and sale of our equity and debt securities to investors. Additional liquidity is
provided by the ability to borrow from the Federal Reserve Bank (“FRB”) of Atlanta and the FHLB of Dallas. We also
borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts
adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect
us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative
views and expectations about the prospects for the financial services industry. Our access to funding sources could also be
affected by a decrease in the level of our business activity as a result of a downturn in our primary market area or by one or
more adverse regulatory actions against us.
Recent increases in interest rates have resulted in large unrealized losses in our investment securities portfolio.
Selling securities with an unrealized loss would result in the realization of such losses, which would negatively impact
regulatory capital, among other effects. Accordingly, investment securities with unrealized losses may have diminished
utility as a source of liquidity prior to maturity.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet
our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of
which could have a material adverse impact on our liquidity and could, in turn, have an adverse effect on our business,
financial condition and results of operations. In addition, because our primary asset at the holding company level is the
Bank, our liquidity at the holding company level depends primarily on our receipt of dividends from the Bank. If the Bank
is unable to pay dividends to us for any reason, we may be unable to satisfy our holding company level obligations, which
include funding operating expenses and debt service.
We have a concentration of deposit accounts with state and local municipalities that is a material source of our funding,
and the loss of these deposits or significant fluctuations in balances held by these public bodies could force us to fund
our business through more expensive and less stable sources.
As of December 31, 2024, $758.2 million, or approximately 11.6%, of our total deposits consisted of deposit
accounts of public bodies, such as state or local municipalities, or public funds. These types of deposits are often secured
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and typically fluctuate on a seasonal basis due to timing differences between tax collection and expenditures. Municipal
deposits are also generally more sensitive to interest rates and may require competitive rates at placement and subsequent
rollover dates, which may make it more difficult for the Bank to attract and retain public and municipal deposits.
Withdrawals of deposits or significant fluctuation in a material portion of our largest public fund depositors could force us
to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely
affecting our net interest margin and results of operations. We may also be forced, as a result of any withdrawal of deposits,
to rely more heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of
any of these events could have an adverse effect on our business, financial condition and results of operations.
We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, we may not be able to
maintain regulatory compliance, which could have an adverse effect on our business, financial condition and results of
operations.
We face significant capital and other regulatory requirements as a financial institution. We may need to raise
additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and
business needs, which could include the possibility of financing acquisitions. In addition, we, on a consolidated basis, and
b1BANK, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity in
such amounts as the regulators may require from time to time. Importantly, regulatory capital requirements could increase
from current levels, which could require us to raise additional capital or reduce our operations. Even if we satisfy all
applicable regulatory capital minimums, our regulators could ask us to maintain capital levels which are significantly in
excess of those minimums. Our ability to raise additional capital depends on conditions in the capital markets, economic
conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions
and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure you that we
will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet
regulatory requirements, we could be subject to enforcement actions, which could have an adverse effect on our business,
financial condition and results of operations.
We utilize alternative sources of funding, which may become more expensive or may not be available in the future,
which could have an adverse effect on our business, financial condition and results of operations.
Along with its core deposits, the Bank utilizes alternative funding methods, including brokered and wholesale
time deposits, short- and long-term borrowings through a correspondent bank, FHLB advances, Bank Term Funding
Program (“BTFP”), securities sold under agreements to repurchase and Federal Funds Purchased borrowings. As of
December 31, 2024, brokered and wholesale deposits, including reciprocal deposits, comprised 18.1% of our total deposits,
and our borrowings comprised 60.4% of our total shareholders’ equity. As a result of the rise in interest rates during 2022
and 2023, these funding sources have become significantly more expensive than in past years. If we continue to use these
alternative funding methods, our interest expense will decline. If these funding sources become more expensive or difficult
to access, our net interest income may decline, our liquidity and ability to make new loans may be impaired, or we may fail
to meet regulatory capital requirements, any of which could have an adverse effect on our business, financial condition and
results of operations.
The fair value of our investment securities can fluctuate due to factors outside of our control.
As of December 31, 2024, the fair value of our investment securities portfolio was approximately $893.5 million,
which included a net unrealized loss of approximately $79.9 million. Factors beyond our control can significantly influence
the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For
example, fixed-rate securities are generally subject to decreases in market value when interest rates rise. The Federal Open
Market Committee raised the target federal funds rate several times in 2022 and 2023 and reduced them three times in
2024. In addition to market interest rates, other factors that could cause adverse changes to the fair value of our securities
include, but are not limited to, rating agency actions with respect to the securities, defaults by the issuer with respect to the
underlying securities, and continued instability in the capital markets. Any of these factors, among others, could cause
other-than-temporary impairments and realized or unrealized losses in future periods and declines in other comprehensive
income, which could have an adverse effect on our business, results of operations, financial condition and future prospects.
The process for determining whether impairment of a security is other-than-temporary often requires complex, subjective
judgments about whether there has been a significant deterioration in the financial condition of the issuer, whether
management has the intent or ability to hold a security for a period of time sufficient to allow for any anticipated recovery
in fair value, the future financial performance and liquidity of the issuer and any collateral underlying the security, and
other relevant factors.
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If we fail to maintain an effective system of disclosure controls and procedures and internal control over financial
reporting, we may not be able to accurately report our financial results or prevent fraud.
Ensuring that we have adequate disclosure controls and procedures, including internal controls over financial
reporting, in place so we can produce accurate financial statements on a timely basis is costly and time-consuming and
needs to be reevaluated frequently. As a public company, we are subject to the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). Our internal controls, disclosure controls and procedures are
based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the
system are met, due to certain inherent limitations. Any failure or circumvention of our controls and procedures; failure to
comply with regulations related to controls and procedures could have a material adverse effect on our reputation, business,
financial condition and results of operations.
We have identified a material weakness in our internal control over financial reporting. Failure to remediate, improve
and maintain the quality of internal control over financial reporting could result in material misstatements in our
financial statements and could materially and adversely affect our ability to provide timely and accurate financial
information about the Company, which could harm our reputation and share price.
In January 2025, we identified control deficiencies involving the design and operation of information technology
general controls (“ITGCs”) around change management segregation of duties with respect to certain information
technology (“IT”) systems that support our financial reporting process, which we have outsourced to a third party service
provider. Specifically, user access controls at our third party service provider lacked sufficient segregation of duties as
multiple end users had the ability to both install changes into the production environment and develop application source
code via permissions inherited through group membership. Management concluded that these control deficiencies
constituted a material weakness in our internal control over financial reporting, as the identified deficiencies could have
had a direct or indirect impact on some of our financial reporting controls that relied on certain IT system reports. For
further discussion of this material weakness, see “Item 9A, Controls and Procedures.”
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial
statements will not be prevented or detected on a timely basis. Management cannot be certain that other deficiencies or
material weaknesses will not arise or be identified or that the Company will be able to correct and maintain adequate
controls over financial processes and reporting in the future.
Management, with oversight from the Audit Committee, is committed to maintaining a strong internal control
environment, and has taken, and will continue to take, actions necessary to remediate the material weakness. The identified
material weakness in our internal control over financial reporting will not be considered remediated until the remediated
controls operate for a sufficient period of time and can be tested and concluded by management to be designed and
operating effectively. Our remediation efforts include working with our third party service provider to ensure that it has
taken steps to address its user access controls that led to the change management segregation of duties deficiencies.
Accordingly, we cannot provide any assurance that our remediation efforts will be successful or that our internal control
over financial reporting will be effective as a result of these efforts. As we continue to evaluate operating effectiveness and
monitor improvements to our internal control over financial reporting, we may take additional measures to address control
deficiencies or modify our remediation efforts.
Unsuccessful remediation efforts could result in material misstatements in, or restatements of, the Company’s
financial statements, could cause the Company to fail to meet its reporting obligations and/or could cause investors to lose
confidence in the Company’s reported financial information, which would adversely affect the trading price of the
Company’s common stock and harm the Company’s reputation. In addition, such failures could result in violations of
applicable securities laws, an inability to meet Nasdaq listing requirements, a default in covenants under the Company’s
credit facilities, and/or exposure to lawsuits, investigations or other legal proceedings.
Our financial results depend on management’s selection of accounting methods and certain assumptions and estimates.
Our financial condition and results of operations are based on our consolidated financial statements, which have
been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and with general
practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires
us to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of
contingent assets and liabilities and the reported amount of related revenues and expenses. Certain accounting policies
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inherently are based to a greater extent on estimates, assumptions and judgments of management and, as such, have a
greater possibility of producing results that could be materially different than originally reported. They require management
to make subjective or complex judgments, estimates or assumptions, and changes in those estimates or assumptions could
have a significant impact on our consolidated financial statements. These critical accounting policies and estimates include
acquired loans and allowance for credit losses and purchase accounting adjustments (other than loans). Because of the
uncertainty of estimates involved in these matters, we may be required to significantly increase our allowance for credit
losses or sustain credit losses that are significantly higher than the reserve provided, or otherwise incur charges that could
have a material adverse effect on our business, financial condition and results of operations.
From time to time, the FASB and the SEC change the financial accounting and reporting standards or the
interpretation of such standards that govern the preparation of our consolidated financial statements which could affect our
critical accounting policies and critical accounting estimates and assumptions made by management. These changes are
beyond our control, can be difficult to predict, and could materially impact how we report our financial condition and
results of operations.
We have a continuing need for technological change, and we may not have the resources to effectively implement new
technology, or we may experience operational challenges when implementing new technology.
The financial services industry is undergoing rapid technological changes with frequent introductions of new
technology-driven products and services. In addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. Our future success will depend, at least in part, upon our ability
to address the needs of our customers by using technology to provide products and services that will satisfy customer
demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand
our products and service offerings. We may experience operational challenges as we implement these new technology
enhancements or products, which could result in us not fully realizing the anticipated benefits from such new technology or
require us to incur significant costs to remedy any such challenges in a timely manner.
Many of our larger competitors have substantially greater resources to invest in technological improvements. As a
result, they may be able to offer additional or superior products compared to those that we will be able to provide, which
would put us at a competitive disadvantage. Accordingly, we may lose customers seeking new technology-driven products
and services to the extent we are unable to provide such products and services.
We rely on third parties to provide key components of our business infrastructure, and a failure of these parties to
perform for any reason could disrupt our operations.
Third parties provide key components of our business infrastructure such as data processing, internet connections,
network access, core application processing, statement production and account analysis. Our business depends on the
successful and uninterrupted functioning of our information technology and telecommunications systems and third-party
servicers. The failure of these systems, or the termination of a third-party software license or service agreement on which
any of these systems is based, could interrupt our operations. Because our information technology and telecommunications
systems interface with and depend on third-party systems, we could experience service denials if demand for such services
exceeds capacity or such third-party systems fail or experience interruptions. Replacing vendors or addressing other issues
with our third-party service providers could entail significant delay and expense. If we are unable to efficiently replace
ineffective service providers, or if we experience a significant, sustained or repeated, system failure or service denial, it
could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and
subject us to additional regulatory scrutiny and possible financial liability, any of which could have an adverse effect on
our business, financial condition and results of operations.
We could be subject to losses, regulatory action or reputational harm due to fraudulent and negligent acts on the part of
loan applicants, our employees and vendors.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, and the terms
of any such transaction, we may rely on information furnished by or on behalf of clients and counterparties, including
financial statements, property appraisals, title information, employment and income documentation, account information
and other financial information. We may also rely on representations of clients and counterparties as to the accuracy and
completeness of that information and, with respect to financial statements, on reports of independent auditors. Any such
misrepresentation or incorrect or incomplete information, whether fraudulent or inadvertent, may not be detected prior to
funding. In addition, one or more of our employees or vendors could cause a significant operational breakdown or failure,
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either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our loan
documentation, operations or systems. Whether a misrepresentation is made by the applicant or another third party, we
generally bear the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is
typically unsellable or subject to repurchase if it is sold prior to detection of the misrepresentation. The sources of the
misrepresentations may also be difficult to locate, and we may be unable to recover any of the monetary losses we may
suffer as a result of the misrepresentations. Any of these developments could have an adverse effect on our business,
financial condition and results of operations.
Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm our
reputation, and otherwise have an adverse effect on our business, financial condition and results of operations.
We necessarily collect, use and hold personal and financial information concerning individuals and businesses
with which we have a banking relationship. Threats to data security, including unauthorized access, and cyber-attacks,
rapidly emerge and change, exposing us to additional costs for protection or remediation and competing time constraints to
secure our data in accordance with customer expectations and statutory and regulatory privacy and other requirements. It is
difficult or impossible to defend against every risk being posed by changing technologies, as well as criminals intent on
committing cyber-crime. Increasing sophistication of cyber-criminals and terrorists make keeping up with new threats
difficult and could result in a breach. Controls employed by our information technology department and our other
employees and vendors could prove inadequate. We could also experience a breach due to intentional or negligent conduct
on the part of employees or other internal sources, software bugs or other technical malfunctions, or other causes. As a
result of any of these threats, our customer accounts may become vulnerable to account takeover schemes or cyber-fraud.
Our systems and those of our third party vendors may also become vulnerable to damage or disruption due to
circumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters,
network failures, and viruses and malware.
A breach of our security that results in unauthorized access to our data could expose us to a disruption or
challenges relating to our daily operations as well as to data loss, litigation, damages, fines and penalties, significant
increases in compliance costs, and reputational damage, any of which could have an adverse effect on our business, results
of operations, financial condition, and future prospects.
We are subject to environmental liability risk associated with our lending activities.
In the course of our business, we may purchase real estate, or we may foreclose on and take title to real estate. As
a result, we could be subject to environmental liabilities with respect to these properties. We may be held liable to a
governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by
these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or
toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could
be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law
claims by third parties based on damages and costs resulting from environmental contamination emanating from the
property. Any significant environmental liabilities could cause an adverse effect on our business, financial condition and
results of operations.
We are subject to claims and litigation pertaining to intellectual property.
Banking and other financial services companies, such as ours, rely on technology companies to provide
information technology products and services necessary to support their day-to-day operations. Technology companies
frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.
In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. Competitors of
our vendors, or other individuals or companies, may from time to time claim to hold intellectual property sold to us by our
vendors. Such claims may increase in the future as the financial services sector becomes more reliant on information
technology vendors. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims
by potential or actual litigants, we may have to engage in protracted litigation. Such litigation is often expensive, time-
consuming, disruptive to our operations and distracting to management. If we are found to infringe one or more patents or
other intellectual property rights, we may be required to pay substantial damages or royalties to a third party. In certain
cases, we may consider entering into licensing agreements for disputed intellectual property, although no assurance can be
given that such licenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also
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significantly increase our operating expenses. If legal matters related to intellectual property claims were resolved against
us or settled, we could be required to make payments in amounts that could have an adverse effect on our business,
financial condition and results of operations.
If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it
could require charges to earnings.
Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we
acquired in connection with the purchase of another financial institution. We review goodwill for impairment at least
annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be
impaired.
Our goodwill impairment test is performed annually and was completed as of October 1, 2024. The annual test did
not indicate any impairment as of the testing date. We estimate the fair value of the reporting unit compared to its carrying
value including goodwill. If the carrying amount of the reporting unit goodwill exceeds the fair value of that goodwill, an
impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of
operations in the periods in which they become known. Following the testing date, management determined no triggering
event had occurred through December 31, 2024. As of December 31, 2024, our goodwill totaled $121.6 million. While we
have not recorded any impairment charges since we initially recorded the goodwill, there can be no assurance that our
future evaluations of our existing goodwill or goodwill we may acquire in the future will not result in findings of
impairment and related write-downs, which could adversely affect our business, financial condition and results of
operations.
Risks Related to the Regulation of Our Industry
We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate
governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them,
could have an adverse effect on our business, financial condition and results of operations.
We are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our
operations. These laws and regulations are not intended to protect our shareholders. Rather, these laws and regulations are
intended to protect customers, depositors, the Deposit Insurance Fund and the overall financial stability of the United
States, and not shareholders or counterparties. These laws and regulations, among other matters, prescribe minimum capital
requirements, impose limitations on the business activities in which we can engage, limit the dividend or distributions that
the Bank can pay to us, restrict the ability of institutions to guarantee our debt, and impose certain specific accounting
requirements on us that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our
capital than GAAP would require. Compliance with laws and regulations can be difficult and costly, and changes to laws
and regulations often impose additional compliance costs. Our failure to comply with these laws and regulations, even if
the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business
activities, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price
of our securities. Further, any new laws, rules and regulations could make compliance more difficult or expensive. All of
these laws and regulations, and the supervisory framework applicable to our industry, could have a material adverse effect
on our business, financial condition, and results of operations.
If we do not meet minimum capital requirements, we will be subject to prompt corrective action by federal bank
regulatory agencies. Prompt corrective action can include progressively more restrictive constraints on operations,
management and capital distributions. Failure to meet the capital conservation buffer will result in certain limitations on
dividends, capital repurchases, and discretionary bonus payments to executive officers. We have submitted a
comprehensive capital plan to our regulators for review. Even if we satisfy the objectives of our capital plan and meet
minimum capital requirements, it is possible that our regulators may ask us to raise additional capital. For additional
discussion regarding our capital requirements, please see “PART I – ITEM 1. Business – Supervision and Regulation –
b1BANK – Capital Adequacy Requirements.”
Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws
and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of
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such examinations could have an adverse effect on our business, financial condition, results of operations and
prospects.
The Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Federal Deposit Insurance
Corporation (the "FDIC"), and the Louisiana Office of Financial Institutions (the "Louisiana OFI") periodically conduct
examinations of various aspects of our business, including our compliance with laws and regulations. If, as a result of an
examination, a federal or state banking agency were to determine that our financial condition, capital resources, asset
quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or
that we or the Bank were in violation of any law or regulation, it may take a number of different remedial actions as it
deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action
to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially
enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against us or the Bank
or our respective officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be
corrected or there is an imminent risk of loss to depositors, to terminate the Bank’s deposit insurance and place it into
receivership or conservatorship. Any such regulatory action could have a material adverse effect on our business, results of
operations, financial condition and prospects.
We are subject to stringent capital requirements, which may result in lower returns on equity, require us to raise
additional capital, limit growth opportunities or result in regulatory restrictions.
The Dodd-Frank Act required the federal banking agencies to establish stricter risk-based capital requirements and
leverage limits to apply to banks and bank holding companies. See “PART I – ITEM 1. Business – Supervision and
Regulation – Business First Bancshares, Inc. – Revised Rules on Regulatory Capital.” If we do not meet minimum capital
requirements, we will be subject to prompt corrective action by federal bank regulatory agencies. Prompt corrective action
can include progressively more restrictive constraints on operations, management and capital distributions.
Failure to meet the capital conservation buffer will result in certain limitations on dividends, capital repurchases,
and discretionary bonus payments to executive officers. We have submitted a comprehensive capital plan to our regulators
for review. Even if we satisfy the objectives of our capital plan and meet minimum capital requirements, it is possible that
our regulators may ask us to raise additional capital. For additional discussion regarding our capital requirements, please
see “PART I – ITEM 1. Business – Supervision and Regulation – b1BANK – Capital Adequacy Requirements.”
New activities and expansion require regulatory approvals, and failure to obtain them may restrict our growth.
From time to time, we may complement and expand our business by pursuing strategic acquisitions of financial
institutions and other complementary businesses. Generally, we must receive state and federal regulatory approval before
we can acquire an FDIC-insured depository institution or related business. In determining whether to approve a proposed
acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, our
financial condition, our future prospects, and the impact of the proposal on U.S. financial stability. The regulators also
review current and projected capital ratios and levels, the competence, experience and integrity of management and its
record of compliance with laws and regulations, the convenience and needs of the communities to be served, including the
acquiring institution’s record of compliance under the CRA and the effectiveness of the acquiring institution in combating
money laundering activities. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We
may also be required to sell branches as a condition to receiving regulatory approval, which condition may not be
acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.
In addition to the acquisition of existing financial institutions, as opportunities arise, we plan to continue de novo
branching as a part of our organic growth strategy. De novo branching and any acquisitions carry with them numerous
risks, including the inability to obtain all required regulatory approvals. The failure to obtain these regulatory approvals for
potential future strategic acquisitions and de novo branches could impact our business plans and restrict our growth.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering
statutes and regulations.
The BSA, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among
other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency
transaction reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant
civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with
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the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and
Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of
Foreign Assets Control. To comply with regulations, guidelines and examination procedures in this area, we have dedicated
significant resources to our anti-money laundering program. If our policies, procedures and systems are deemed deficient,
we could be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay
dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including
acquisitions and de novo branching. Failure to maintain and implement adequate programs to combat money laundering
and terrorist financing could also have serious reputational consequences for us.
We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure
to comply with these laws could lead to a wide variety of sanctions.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations
impose nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal
agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s
performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including
damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on
expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an
institution’s performance under fair lending laws in private class action litigation. Such actions could have a material
adverse effect on our business, financial condition, results of operations and prospects.
The performance of a financial institution under the CRA in meeting the credit needs of its community is a factor
that must be taken into consideration when the federal banking agencies evaluate applications related to mergers and
acquisitions, as well as branch opening and relocations. If we are unable to maintain at least a “satisfactory” CRA rating,
our ability to complete the acquisition of another financial institution or open a new branch will be adversely impacted. If
we receive an overall CRA rating of less than “satisfactory”, our regulators would not re-evaluate our rating until our next
CRA examination, which may not occur for one or more years, and it is possible that a low CRA rating would not improve
in the future.
Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans, increase our
risk of liability with respect to such loans, or increase the time and expense associated with the foreclosure process or
prevent us from foreclosing at all.
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered
“predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling
unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that
the borrowers will be able to repay the loans irrespective of the value of the underlying property. It is our policy not to
make predatory loans, but these laws create the potential for liability with respect to our lending and loan investment
activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us
to reduce the average percentage rate or the points and fees on loans that we do make.
Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time
and expense associated with the foreclosure process or prevent us from foreclosing at all. While historically the states in
which we operate have had foreclosure laws that are favorable to lenders, a number of states in recent years have either
considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to
foreclose on properties in default, and we cannot be certain that the states in which we operate will not adopt similar
legislation in the future. If new state or federal laws or regulations are ultimately enacted that significantly raise the cost of
foreclosure or raise outright barriers, such could have an adverse effect on our business, financial condition and results of
operations.
The expanding body of federal, state and local regulations and/or the licensing of loan collections or other aspects of
our business and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance
and subject us to litigation.
Loan collection is subject to extensive regulation by federal, state and local governmental authorities as well as to
various laws and judicial and administrative decisions imposing requirements and restrictions on those activities. The
volume of new or modified laws and regulations has increased in recent years and, in addition, some individual
municipalities have begun to enact laws that restrict loan collection activities including delaying or temporarily preventing
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foreclosures or forcing the modification of certain mortgages. If regulators impose new or more restrictive requirements,
we may incur additional significant costs to comply with such requirements which may further adversely affect us. In
addition, were we to be subject to regulatory investigation or regulatory action regarding our loan modification and
foreclosure practices, it could have an adverse effect on our business, financial condition and results of operations.
In addition, we have sold loans to third parties. In connection with these sales, we or certain of our subsidiaries or
legacy companies make or have made various representations and warranties, breaches of which may result in a
requirement that we repurchase the loans, or otherwise make whole or provide other remedies to counterparties. These
aspects of our business or our failure to comply with applicable laws and regulations could possibly lead to: civil and
criminal liability; loss of licensure; damage to our reputation in the industry; fines and penalties and litigation, including
class action lawsuits; and administrative enforcement actions. Any of these outcomes could materially and adversely affect
us.
Potential limitations on incentive compensation contained in proposed federal agency rulemaking may adversely affect
our ability to attract and retain our highest performing employees.
In April 2011 and May 2016, the FDIC, other federal banking agencies and the SEC jointly published proposed
rules designed to implement provisions of the Dodd-Frank Act prohibiting incentive compensation arrangements that
would encourage inappropriate risk taking at covered financial institutions, which includes a bank or bank holding
company with $1 billion or more in assets, such as the Bank and the Company. It cannot be determined at this time whether
or when a final rule will be adopted and whether compliance with such a final rule will substantially affect the manner in
which we structure compensation for our executives and other employees. Depending on the nature and application of the
final rules, we may not be able to successfully compete with certain financial institutions and other companies that are not
subject to some or all of the rules to retain and attract executives and other high performing employees. If this were to
occur, relationships that we have established with our customers may be impaired, which could in turn adversely impact
our business, financial condition and results of operations.
Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.
The deposits of the Bank are insured by the FDIC up to legal limits and, accordingly, subject it to the payment of
FDIC deposit insurance assessments. The Bank’s regular assessments are determined by the level of its assessment base
and its risk classification, which is based on its regulatory capital levels and the level of supervisory concern that it poses.
Moreover, the FDIC has the unilateral power to change deposit insurance assessment rates and the manner in which deposit
insurance is calculated and also to charge special assessments to FDIC-insured institutions. The FDIC utilized all of these
powers during the financial crisis for the purpose of restoring the reserve ratios of the Deposit Insurance Fund. Any future
special assessments, increases in assessment rates or premiums, or required prepayments in FDIC insurance premiums
could reduce our profitability or limit our ability to pursue certain business opportunities, which could materially and
adversely affect our business, financial condition, and results of operations. We experienced an increase in FDIC insurance
premiums in 2023 due to increased regulatory rates.
The Federal Reserve may require us to commit capital resources to support the Bank.
Under longstanding Federal Reserve policy which has been codified by the Dodd-Frank Act, we are expected to
act as a source of financial and managerial strength to the Bank and to commit resources to support the Bank. Under the
“source of strength” doctrine, the Federal Reserve may require us to make capital injections into the Bank at times when
we may not be inclined to do so and may charge us with engaging in unsafe and unsound practices for failure to commit
such resources. Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial
distress.
Such a capital injection may be required at a time when our resources are limited and we may be required to
borrow the funds or to raise additional equity capital to make the required capital injection. In the event of our bankruptcy,
the bankruptcy trustee will assume any commitment by us to a federal bank regulatory agency to maintain the capital of a
subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a
priority of payment over the claims of our general unsecured creditors, including the holders of any note obligations.
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We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our
operations and capital requirements.
The federal banking regulators have issued guidance regarding concentrations in commercial real estate lending
directed at institutions that have particularly high concentrations of commercial real estate loans within their lending
portfolios. This guidance suggests that institutions whose commercial real estate loans exceed certain percentages of capital
should implement heightened risk management practices appropriate to their concentration risk and may be required to
maintain higher capital ratios than institutions with lower concentrations in commercial real estate lending. As of
December 31, 2024, we were within the 300.0% regulatory guideline for commercial real estate, as well as the 100.0%
regulatory guideline for construction, land development, and other land loans due to the timing of draws on several larger
construction and development projects. We have documented procedures and systems in place to manage and monitor our
commercial real estate exposures in excess of regulatory guidelines. It should be noted, however, that increases in our
commercial real estate lending, particularly as we expand into metropolitan markets and make more of these loans, could
subject us to additional supervisory analysis. We cannot guarantee that any risk management practices we implement will
be effective to prevent losses relating to our commercial real estate portfolio. Management has implemented controls to
monitor our commercial real estate lending concentrations, but we cannot predict the extent to which this guidance will
impact our operations or capital requirements. Management has implemented controls to monitor our commercial real
estate lending concentrations as well as the progress of commercial real estate construction projects with loans exceeding
$1.0 million, but we cannot predict the extent to which this guidance will impact our operations or capital requirements.
We are subject to laws regarding the privacy, information security and protection of personal information and any
violation of these laws or another incident involving personal, confidential or proprietary information of individuals
could damage our reputation and otherwise adversely affect our operations and financial condition.
Our business requires the collection and retention of large volumes of customer data, including personally
identifiable information in various information systems that we maintain and in those maintained by third parties with
whom we contract to provide data services. We also maintain important internal company data such as personally
identifiable information about our employees and information relating to our operations. We are subject to complex and
evolving laws and regulations governing the privacy and protection of personal information of individuals (including
customers, employees, suppliers and other third parties). For example, our business is subject to the Gramm-Leach-Bliley
Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about
our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our
information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing
by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a
written comprehensive information security program containing appropriate safeguards based on our size and complexity,
the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for
responding to data security breaches. Various state and federal banking regulators and states have also enacted data security
breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in
certain circumstances in the event of a security breach. Ensuring that our collection, use, transfer and storage of personal
information complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to
ensure that all of our clients, suppliers, counterparties and other third parties have appropriate controls in place to protect
the confidentiality of the information that they exchange with us, particularly where such information is transmitted by
electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or
misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to
have the information, or where such information was intercepted or otherwise compromised by third parties), we could be
exposed to litigation or regulatory sanctions under personal information laws and regulations. Concerns regarding the
effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate,
could cause us to lose customers or potential customers for our products and services and thereby reduce our revenues.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may
subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain
operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise
adversely affect our operations and financial condition.
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Risks Associated with our Common Stock
The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to
sell your common shares at the volume, prices and times desired.
Assuming the presence of a public market for our common stock, the market price of our common stock may be
highly volatile, which may make it difficult for you to resell your common shares at the volume, prices and times desired.
There are many factors that may impact the market price and trading volume of our common stock, including, without
limitation:
•
actual or anticipated fluctuations in our operating results, financial condition or asset quality;
•
changes in economic or business conditions;
•
the effects of, and changes in, trade, monetary and fiscal policies, including the interest rate policies of the
Federal Reserve, or in laws or regulations affecting us;
•
the public reaction to our press releases, our other public announcements and our filings with the SEC;
•
changes in accounting standards, policies, guidance, interpretations or principles;
•
the number of securities analysts covering us;
•
publication of research reports about us, our competitors, or the financial services industry generally, or
changes in, or failure to meet, securities analysts’ estimates of our financial and operating performance, or
lack of research reports by industry analysts or ceasing of coverage;
•
changes in market valuations or earnings of companies that investors deem comparable to us;
•
the trading volume of our common stock;
•
future issuances of our common stock or other securities;
•
future sales of our common stock by us or our directors, executive officers or significant shareholders;
•
additions or departures of key personnel;
•
perceptions in the marketplace regarding our competitors and us;
•
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving our competitors or us;
•
other economic, competitive, governmental, regulatory and technological factors affecting our operations,
pricing, products and services; and
•
other news, announcements or disclosures (whether by us or others) related to us, our competitors, our core
market or the financial services industry.
In particular, the realization of any of the risks described in this “Risk Factors” section could have a material
adverse effect on the market price of our common stock and cause the value of your investment to decline. The stock
market and, in particular, the market for financial institution stocks have experienced substantial fluctuations in recent
years, which in many cases have been unrelated to the operating performance and prospects of particular companies. In
addition, significant fluctuations in the trading volume in our common stock may cause significant price variations to
occur. Increased market volatility could have an adverse effect on the market price of our common stock, which could
make it difficult to sell your common shares at the volume, prices and times desired.
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Future sales or the availability for sale of substantial amounts of our common stock in the public market could
adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future
sales of equity securities.
Our articles of incorporation authorize us to issue up to 50,000,000 shares of common stock. As of February 28,
2025, there are 29,552,358 shares of our common stock issued and outstanding. We may issue shares of our common stock
or other securities from time to time for any number of reasons, including as consideration for future acquisitions and
investments and under compensation and incentive plans. If any such acquisition or investment is significant, the number
of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we
may issue may in turn be substantial. We may also grant registration rights covering those securities in connection with any
such acquisitions and investments.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and
sales of our common stock will have on the market price of our common stock. Sales of substantial amounts of our
common stock (including shares of our common stock issued in connection with an acquisition or under a compensation or
incentive plan), or the perception that such sales could occur, may adversely affect prevailing market prices for our
common stock and could impair our ability to raise capital through future sales of our securities.
The rights of our common shareholders are subordinate to the rights of our outstanding subordinated notes and our
outstanding preferred stock and may be subordinate to the rights of the holders of any senior indebtedness or preferred
stock that we may issue in the future.
Shares of our common stock are equity interests and do not constitute indebtedness. As such, shares of our
common stock rank junior to all of our outstanding indebtedness, including our outstanding subordinated notes in the
amount of $100.0 million, our trust preferred securities of $5.0 million, and to other non-equity claims against us and our
assets available to satisfy claims against us, including in our liquidation. Our common stock also ranks junior to the $72.0
million of Series A preferred stock that we issued during 2022.
Our board of directors also has the authority to issue in the aggregate up to 4,928,000 shares of additional
preferred stock, and to determine the terms of each issue of preferred stock and any indebtedness, without shareholder
approval. Accordingly, you should assume that any shares of preferred stock and any indebtedness that we may issue in the
future will also be senior to our common stock. As a result, holders of our common stock bear the risk that our future
issuances of debt or equity securities or our incurrence of other borrowings may negatively affect the market price of our
common stock.
Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions.
Holders of our common stock are entitled to receive only such cash dividends as our board of directors may
declare out of funds legally available for the payment of dividends. Although we have declared a quarterly cash dividend
on our common stock since the second quarter of 2016, we have no obligation to continue paying dividends, and we may
change our dividend policy at any time without notice to our shareholders. We may not pay any dividends on our common
stock if we have not paid the full dividends on our outstanding Series A preferred stock for the most recent quarterly
dividend period. Our ability to pay dividends may also be limited on account of any outstanding indebtedness or preferred
stock we may issue in the future, as we generally are required to make payments on any outstanding indebtedness and
outstanding preferred stock before any dividends can be paid on our common stock. Finally, because our primary asset is
our investment in the stock of the Bank, we are dependent upon dividends from the Bank to pay our operating expenses,
satisfy our obligations and to pay dividends on our common stock, and the Bank’s ability to pay dividends on its common
stock will substantially depend upon its earnings and financial condition, liquidity and capital requirements, the general
economic and regulatory climate and other factors deemed relevant by its board of directors. There are numerous laws and
banking regulations that limit our and the Bank’s ability to pay dividends. See “Dividend Policy” and “PART I – ITEM 1.
Business – Supervision and Regulation – Business First Bancshares, Inc. – Regulatory Restrictions on Dividends.”
Our corporate governance documents, and certain corporate and banking laws applicable to us, could make a takeover
more difficult.
Certain provisions of our articles of incorporation and bylaws, each as amended and restated, and corporate and
federal banking laws, could make it more difficult for a third party to acquire control of our organization or conduct a
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proxy contest, even if those events were perceived by many of our shareholders as beneficial to their interests. These
provisions, and the corporate and banking laws and regulations applicable to us:
•
enable our board of directors to issue additional shares of authorized, but unissued capital stock;
•
enable our board of directors, without shareholder approval, to issue “blank check” preferred stock with
such designations, rights and preferences as may be determined from time to time by the board;
•
enable our board of directors to increase the size of the board and fill the vacancies created by the
increase;
•
do not provide for cumulative voting in the election of directors;
•
enable our board of directors to amend our bylaws without shareholder approval;
•
require the vote of holders of at least 80% of the outstanding shares of our capital stock to modify the
sections of our articles of incorporation addressing limitation of liability and indemnification of our
officers and directors;
•
require the request of holders of at least 25% of the outstanding shares of our capital stock entitled to
vote at a meeting to call a special shareholders’ meeting;
•
establish an advance notice procedure for director nominations and other shareholder proposals; and
•
require prior regulatory application and approval of any transaction involving control of our organization.
These provisions may discourage potential acquisition proposals and could delay or prevent a change in control,
including under circumstances in which our shareholders might otherwise receive a premium over the market price of our
shares. See “Description of our Capital Stock” and “Supervision and Regulation.”
An investment in Business First’s common stock is not an insured deposit and is subject to risk of loss.
Your investment in our common stock is not a bank deposit and is not insured or guaranteed by the FDIC or any
other government agency. Your investment is subject to investment risk, and you must be capable of affording the loss of
your entire investment.
ITEM 1B. Unresolved Staff Comments.
Not applicable.
ITEM 1C. Cybersecurity.
Financial institutions have an obligation to customers, consumers and stakeholders to safeguard the
confidentiality, integrity and availability of nonpublic, sensitive information and the information systems used to store,
transmit or process such information.
Consistent with industry guidelines, such as the National Institute of Standards and Technology Cybersecurity
framework, and regulatory requirements, guidelines and standards, b1BANK’s information security and cybersecurity
programs (collectively, “Program(s)”) have been adapted to fulfill this obligation by establishing and employing
administrative, technical and physical safeguards to maintain a secure and dependable infrastructure and environment.
These Programs focus on identifying and addressing threats to the company and its customers and contribute corporate
decision-making guidance for information security, cybersecurity and risk management objectives.
Defending against information security and cybersecurity (collectively, “Security”) threats demands a
concentrated, collaborative approach and, as such, supplementary programs and processes have been instituted into
governing Security and risk management strategies.
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Global threat intelligence is monitored for potential Security risks or vulnerabilities. These threats are analyzed for
potential impact to the bank and are addressed in accordance with Program requirements. b1BANK’s Chief Information
Security Officer (“CISO”) presents Security reports to the Operating Committee and Risk Committee of b1BANK’s board
of directors on a quarterly basis or as needed. These reports consist of significant Security events and issues, vulnerability
metrics, and material risks. Additional reporting representing the overall state of the Program is presented on at least an
annual basis to the full board of directors, which is responsible for overseeing Security functions and associated initiatives.
Security is embedded into our culture, being promoted through security awareness materials, mandatory testing
campaigns and the mandatory annual review and acknowledgement of corporate Security policies and standards.
Business Continuity and Incident Response plans have been cohesively established and employed to provide
frameworks for responding to and recovering from events such as natural disasters or security events. Our Director of
Business Continuity and CISO, respectively, are responsible for the facilitation of these plans, as needed, and testing each
on at least an annual basis. The owners of these plans are responsible for identifying an appropriate group of cross-
enterprise subject matter experts and convening them to ensure a comprehensive response. These groups, under the
leadership of our Chief Operations Officer (“COO”), provide appropriate internal notifications of material security events
and response activities to our General Counsel, Chief Risk Officer, Chief Executive Officer, and board of directors or other
appropriate corporate executives.
A vendor management program has been developed and employed to manage potential risks for third-party
service providers, suppliers and external partners who have access to our confidential information. The effectiveness of
these processes is verified by independent internal and external audit functions or organizations.
Independent internal and external auditors are engaged to perform Security assessments to determine the
appropriateness and effectiveness of the overall Program. Supplementary self-assessments are performed as needed or as
required by regulatory guidelines. Assessment results are evaluated to determine the scope of risk on the security of the
bank and are addressed in accordance with Program requirements.
Our current CISO maintains appropriate security certifications and has over 20 years of experience in an
information security role. The CISO manages a group dedicated to the security of the bank. This group is responsible for
information technology monitoring and incident response activities, the latter covering the response coordination to cyber-
attacks under the leadership and pursuant to the direction of the CISO. Our CISO reports directly to our COO and oversees,
is assigned the responsibly of and is held accountable for the implementation and monitoring of the Program. Our COO
serves on the Risk Committee of the Board, chaired by a board director.
The Company engages in a continuous, focused risk monitoring process to identify the likelihood and impact of
internal and external threats to our information security systems and data and assesses the sufficiency of the controls in
place to mitigate these threats to acceptable levels on a risk-based basis. The CISO and COO together lead efforts to
design, implement and operate necessary controls commensurate with the materiality and criticality of identified risks and
the sensitivity of the information assets and systems used throughout the bank. To date, no risks from cybersecurity threats,
including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to affect
b1BANK.
ITEM 2. Properties.
Our current principal offices are located at 500 Laurel Street, Baton Rouge, Louisiana. We currently operate out of
our network of banking centers and loan production offices located throughout the State of Louisiana, in the Dallas/Fort
Worth metroplex and Houston. Our office locations are either owned or leased. We believe that our facilities are adequately
covered by insurance and that these facilities are adequate to meet our needs.
ITEM 3. Legal Proceedings.
We are not currently subject to any material legal proceedings. We are from time to time subject to claims and
litigation arising in the ordinary course of business. These claims and litigation may include, among other things,
allegations of violation of banking and other applicable regulations, competition law, labor laws and consumer protection
laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort. We intend to
defend ourselves vigorously against any pending or future claims and litigation.
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At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either
individually or in the aggregate, would have a material adverse effect on our combined results of operations, financial
condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a
material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate
outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even
if resolved in our favor.
ITEM 4. Mine Safety Disclosures.
Not applicable.
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PART II
ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities.
Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol “BFST”. Our common shares
have been traded on the Nasdaq Global Select Market since April 11, 2018. Prior to that date, there was no public trading
market for our common stock. As of February 28, 2025, there were 29,552,358 issued and outstanding shares of our
common stock held of record by approximately 1,040 shareholders. We also had outstanding 179,969 options to purchase
shares of our common stock issued under our equity compensation plans, as described below.
Dividends
In 2016, our board of directors made the determination to begin paying regular quarterly dividends on our
common stock; however, we are not obligated to pay dividends on either our common or preferred stock. Dividends on our
common stock are not payable if we have not paid the full dividends on our Series A preferred stock for the most recently
completed quarterly dividend period. The payment of future dividends and our dividend policy will depend on our
earnings, capital requirements and financial condition, as well as other factors that our board of directors deems relevant.
For additional discussion of legal and regulatory restrictions on the payment of dividends, see “PART I - ITEM 1. Business
– Supervision and Regulation – Business First Bancshares, Inc. – Regulatory Restrictions on Dividends.”
Securities Authorized for Issuance under Equity Compensation Plans
In 2006, our board of directors adopted the 2006 Stock Option Plan pursuant to which we were permitted to issue
stock options to purchase up to 450,000 shares of our common stock, all of which could be issued as either incentive stock
options under Section 422A of the Internal Revenue Code of 1986, as amended, or non-qualified stock options.
In January 2007, our board of directors adopted an amendment to the 2006 Stock Option Plan which increased the
number of available shares under the plan from 450,000 to 1,500,000. Although our 2006 Stock Option Plan expired on
December 22, 2016 and we are no longer permitted to issue additional stock options under this plan, as of December 31,
2024, we had outstanding and unexercised stock options to purchase up to 12,400 shares of our common stock outstanding
that have been issued to our executive officers and key personnel and remain subject to the terms and conditions of the
2006 Stock Option Plan until they are exercised or forfeited.
On June 29, 2017, our shareholders approved the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan
provided for the issuance of up to 500,000 shares of our common stock pursuant to various types of equity grants and
awards, including incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted
stock units, performance units, performance shares and other stock-based awards to eligible participants, which includes
our employees, directors and consultants. In June 2022, our shareholders approved an amendment to the 2017 Plan, which
increased the number of shares of common stock issuable pursuant to equity grants and awards under the plan from
500,000 to 900,000. Additionally, the number of shares issuable under the 2017 Plan was increased by 143,908 shares as a
result of the assumption of options to purchase shares of TCBI common stock that were converted into options to purchase
shares of our common stock in connection with the TCBI acquisition on March 1, 2022. As of December 31, 2024, we had
outstanding and unexercised stock options to purchase up to 15,485 shares of our common stock that have been issued
under the 2017 Plan.
On May 23, 2024, our shareholders approved the 2024 Equity Incentive Plan (the “2024 Plan”) which reserved
645,000 shares of common stock, plus any shares available for issuance under the 2017 Plan and any underlying awards
outstanding under the 2017 Plan as of the effective date of the 2024 Plan that are terminated or canceled without having
been exercised or are forfeited, canceled or repurchased by the Company, for grant, award or issuance to eligible
participants, all of which may be subject to incentive stock option treatment. In addition, the number of shares issuable
under the 2024 Plan was increased by 207,293 shares as a result of the conversion of Oakwood stock options to Company
stock options in connection with the Oakwood acquisition on October 1, 2024. In total, the 2024 Plan has reserved 852,293
shares of common stock for grant, award, or issuance to eligible participants, all of which may be subject to incentive stock
option treatment. As of December 31, 2024, there were 160,336 shares of common stock issued under the 2024 Plan to our
employees, directors or consultants, of which 152,084 shares are subject to outstanding and unexercised stock options to
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47
purchase shares of our common stock, and 484,664 shares of common stock remain available for grant. As of May 23,
2024, there will be no future awards made under the 2017 Plan.
The following table summarizes information as of December 31, 2024 relating to the number of securities to be
issued upon the exercise of the outstanding options and warrants and their weighted-average exercise price.
Number of
Securities to Be
Issued Upon
Exercise
of Outstanding
Options
Weighted-
Average
Exercise Price of
Outstanding
Options
Number of
Securities
Remaining
Available
For Future
Issuance
Under Equity
Compensation
Plans
Equity compensations plans approved by security
holders
179,969
$
21.77
484,664
Equity compensation plans not approved by security
holders
-
-
-
Total equity compensation plans
179,969
$
21.77
484,664
Recent Sales of Unregistered Securities
None.
Stock Performance Graph
The following table and graph compares the cumulative total shareholder return on our common stock to the cumulative
total return of the S&P 500 Index and the KBW Nasdaq Regional Bank Index (“KRX”) for the period beginning on
January 1, 2020 through December 31, 2024. The following assumes $100 invested on January 1, 2020 in our common
stock at the closing price of $24.93 per common share, otherwise reflects our stock and the S&P 500 and KRX values as of
close of trading, and assumes the reinvestment of dividends, if any. The historical stock price performance for our common
stock shown on the graph below is not necessarily indicative of future stock performance.
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48
BFST
S&P 500
KRX
12/31/2019
3/31/2020
6/30/2020
9/30/2020
12/31/2020
3/31/2021
6/30/2021
9/30/2021
12/31/2021
3/31/2022
6/30/2022
9/30/2022
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
3/31/2024
6/30/2024
9/30/2024
12/31/2024
0.00
50.00
100.00
150.00
200.00
250.00
Date
BFST
S&P 500
KRX
12/31/2019
$
100.00 $
100.00 $
100.00
3/31/2020
54.55
80.40
59.62
6/30/2020
62.43
96.92
68.30
9/30/2020
61.42
105.57
61.30
12/31/2020
83.77
118.40
91.29
3/31/2021
98.87
125.71
118.41
6/30/2021
95.32
136.46
116.73
9/30/2021
97.64
137.25
120.48
12/31/2021
118.68
152.39
124.74
3/31/2022
102.50
145.38
122.03
6/30/2022
90.28
121.97
107.40
9/30/2022
91.72
116.02
111.62
12/31/2022
94.83
124.79
116.10
3/31/2023
73.89
134.14
95.25
6/30/2023
65.52
145.87
89.78
9/30/2023
82.09
141.09
91.92
12/31/2023
108.47
157.59
115.63
3/31/2024
98.66
174.23
108.87
6/30/2024
96.97
181.69
105.92
9/30/2024
115.02
192.38
122.61
12/31/2024
115.79
197.02
130.90
ITEM 6. [RESERVED]
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49
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion presents management’s analysis of our results of operations and financial condition over each of
the last two most recent fiscal years. The discussion should be read in conjunction with our financial statements and the
notes related thereto which appear elsewhere in this Report.
The following discussion and analysis is to focus on significant changes in the financial condition of Business First
and its subsidiaries from December 31, 2023 to December 31, 2024 and its results of operations for the year ended
December 31, 2024. This discussion and analysis is intended to highlight and supplement information presented elsewhere
in this Report, particularly the consolidated financial statements and related notes appearing in Item 8. This discussion
and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on
certain assumptions that Business First believes are reasonable but may prove to be inaccurate. Certain risks,
uncertainties and other factors, including those set forth under “Forward-Looking Statements,” “Risk Factors” and
elsewhere in this statement, may cause actual results to differ materially from those projected results discussed in the
forward-looking statements appearing in this discussion and analysis. Business First assumes no obligation to update any
of these forward-looking statements. A discussion regarding significant changes in the financial condition of Business First
and its subsidiaries from December 31, 2022 to December 31, 2023 and its results of operations for the year ended
December 31, 2023 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on
March 1, 2024, as amended, which is available on the SEC’s website at www.sec.gov and on the Company’s website,
www.b1bank.com.
Overview
We are a registered financial holding company headquartered in Baton Rouge, Louisiana. Through our wholly-
owned subsidiary, b1BANK, a Louisiana state chartered bank, we provide a broad range of financial services tailored to
meet the needs of small-to-midsized businesses and professionals. Since our inception in 2006, our priority has been and
continues to be creating shareholder value through the establishment of an attractive commercial banking franchise in
Louisiana and across our region. We consider our primary market to include the State of Louisiana, the Dallas/Fort Worth
metroplex and Houston. We currently operate out of banking centers and loan production offices in markets across
Louisiana and Texas. As of December 31, 2024, we had total assets of $7.9 billion, total loans of $6.0 billion, total deposits
of $6.5 billion, and total shareholders’ equity of $799.5 million.
As a financial holding company operating through one reportable operating segment, community banking, we
generate most of our revenues from interest income on loans, customer service and loan fees, and interest income from
securities. We incur interest expense on deposits and other borrowed funds and noninterest expense, such as salaries and
employee benefits and occupancy expenses. We analyze our ability to maximize income generated from interest-earning
assets and expense of our liabilities through our net interest margin. Net interest margin is a ratio calculated as net interest
income divided by average interest-earning assets. Net interest income is the difference between interest income on
interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and
borrowings, which are used to fund those assets.
Changes in the market interest rates and the interest rates we earn on interest-earning assets or pay on interest-
bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing
liabilities and shareholders’ equity, are usually the largest drivers of periodic changes in net interest spread, net interest
margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental
monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply,
political and international conditions, and conditions in domestic and foreign financial markets. Periodic changes in the
volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions
in our markets and across our region, as well as developments affecting the real estate, technology, financial services,
insurance, transportation, manufacturing and energy sectors within our markets.
While we continue to prioritize organic growth, we also seek to capitalize upon other opportunities as they arise.
Below is a summary of recent transactions that have contributed to our growth. For additional information about these
transactions, See “Note 3 – Mergers and Acquisitions” in our audited consolidated financial statements included in Item 8
of this Report.
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50
Bank Term Funding Program (“BTFP”)
On March 12, 2023, the Federal Reserve developed the BTFP, which offered loans to banks with a term of up to one
year. These loans were secured by pledging participating banks’ U.S. treasuries, agency securities, agency mortgage-
backed securities, and other qualifying assets. These pledged securities were valued at par for collateral purposes. The
Bank participated in the BTFP and had outstanding debt of $300.0 million at December 31, 2023. These loans bore a fixed
rate of 4.38% and matured on March 22, 2024, at which time we repaid them in full.
Federal Reserve Bank’s Discount Window
On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $907.7
million and $1.0 billion as of December 31, 2024 and 2023, respectively, through the Federal Reserve discount window.
The Bank has not yet drawn on either of the lines of credit as of the date of this report.
Sale of Leesville Banking Center
On August 31, 2023, we sold the Leesville banking center, located in Leesville, Louisiana, to Merchants & Farmers
Bank & Trust Company headquartered in Leesville, Louisiana, in accordance with the Branch Purchase and Assumption
Agreement dated May 11, 2023. We maintained the loan portfolio and transferred those loans to other nearby banking
centers. The sale included total deposits of $16.3 million and a pre-tax gain of $945,000.
Acquisition of Waterstone
On January 31, 2024, we consummated the acquisition, through b1BANK, of Waterstone, headquartered in Katy,
Texas. Waterstone offers community banks and small businesses a range of SBA lending services including planning, pre-
qualification, packaging, closing and disbursements, servicing, and liquidations. Upon consummation of the acquisition, we
paid $3.3 million in cash to the former owners of Waterstone.
Acquisition of Oakwood
On October 1, 2024, we consummated the merger of Oakwood, the parent bank holding company for Oakwood
Bank, with and into us, with us continuing as the surviving corporation pursuant to the terms of the Reorganization
Agreement. Immediately following the consummation of the Oakwood acquisition, Oakwood Bank merged with and into
us, with us surviving the merger. Pursuant to the terms of the Reorganization Agreement, upon consummation of the
Oakwood acquisition, we issued 3,973,134 shares of our common stock to the former shareholders of Oakwood. As of
September 30, 2024, Oakwood had $863.6 million in total assets, $700.2 million in loans and $741.3 million in total
deposits.
Financial Highlights
The financial highlights as of and for the year ended December 31, 2024 include:
•
Total assets of $7.9 billion, a $1.3 billion, or 19.3%, increase from December 31, 2023.
•
Total loans held for investment of $6.0 billion, a $988.6 million, or 19.8%, increase from December 31,
2023.
•
Total deposits of $6.5 billion, a $1.3 billion, or 24.1%, increase from December 31, 2023.
•
Net income available to common shareholders of $59.7 million, a $5.9 million, or 9.0%, decrease from the
year ended December 31, 2023.
•
Net interest income of $227.4 million, a $12.3 million, or 5.7%, increase from the year ended December 31,
2023.
•
An allowance for credit losses of 0.98% of total loans held for investment, compared to 0.88% as of
December 31, 2023, and a ratio of nonperforming loans to total loans held for investment of 0.42%, compared
to 0.34% as of December 31, 2023.
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51
•
Earnings per common share for the year ended December 31, 2024 of $2.27 per basic common share and
$2.26 per diluted common share, compared to $2.62 per basic common share and $2.59 per diluted common
share for the year ended December 31, 2023.
•
Return to common shareholders on average assets of 0.86% compared to 1.04% for the year ended
December 31, 2023.
•
Return to common shareholders on average common equity of 9.54% compared to 12.36% for the year
ended December 31, 2023.
•
Capital Ratios included Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based
Capital of 9.53%, 9.44%, 10.56% and 12.75%, respectively, compared to Tier 1 Leverage, Common Equity
Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.52%, 9.15%, 10.46% and 12.85% for the year
ended December 31, 2023.
•
Book value per common share of $24.62, an increase of 9.0% from $22.58 at December 31, 2023.
Results of Operations for the Years Ended December 31, 2024 and 2023
Performance Summary
For the year ended December 31, 2024, net income available to common shareholders was $59.7 million, or $2.27
per basic common share and $2.26 per diluted common share, compared to net income available to common shareholders
of $65.6 million, or $2.62 per basic common share and $2.59 per diluted common share, for the year ended December 31,
2023. Return to common shareholders on average assets decreased to 0.86% for the year ended December 31, 2024 from
1.04% for the year ended December 31, 2023. Return to common shareholders on average common equity decreased to
9.54% for the year ended December 31, 2024, as compared to 12.36% for the year ended December 31, 2023.
Net Interest Income
Our operating results depend primarily on our net interest income, calculated as the difference between interest
income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as
deposits and borrowings. Fluctuations in market interest rates impact the yield and rates paid on interest sensitive assets
and liabilities. Changes in the amount and type of interest-earning assets and interest-bearing liabilities also impact net
interest income. The variance driven by the changes in the amount and mix of interest-earning assets and interest-bearing
liabilities is referred to as a “volume change.” Changes in yields earned on interest-earning assets and rates paid on interest-
bearing deposits and other borrowed funds are referred to as a “rate change.”
To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets,
(2) the costs of our deposits and other funding sources, (3) our net interest spread and (4) our net interest margin. Net
interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities.
Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-
bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity also fund interest-earning assets,
net interest margin includes the benefit of these noninterest-bearing sources. We calculate average assets, liabilities, and
equity using a daily average, and average yield/rate utilizing an actual day count convention.
For the year ended December 31, 2024, net interest income totaled $227.4 million, and net interest margin and net
interest spread were 3.48% and 2.55%, respectively. For the year ended December 31, 2023, net interest income totaled
$215.1 million and net interest margin and net interest spread were 3.62% and 2.72%, respectively. The average yield on
the loan portfolio was 7.03%, for the year ended December 31, 2024, compared to 6.65% for the year ended December 31,
2023, and the average yield on total interest-earning assets was 6.35% for the year ended December 31, 2024, compared to
5.95% for the year ended December 31, 2023. For the year ended December 31, 2024, overall cost of funds (which
includes noninterest-bearing deposits) increased 58 basis points compared to the year ended December 31, 2023.
The following table presents, for the periods indicated, an analysis of net interest income by each major category of
interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on
such amounts. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-
bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. Interest earned
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52
on loans that are classified as nonaccrual is not recognized in income; however, the balances are reflected in average
outstanding balances for the period. For the years ended December 31, 2024, 2023 and 2022, interest income not
recognized on nonaccrual loans was not material. Any nonaccrual loans have been included in the table as loans carrying a
zero yield. The average total loans reflected below is net of deferred loan fees and discounts. Acquired loans were recorded
at fair value at acquisition and accrete/amortize discounts and premiums as an adjustment to yield.
For the Years Ended December 31,
2024
2023
2022
Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(Dollars in thousands)
Assets
Interest-earning assets:
Total loans
$ 5,327,466
$
374,555
7.03%
$ 4,859,637
$
323,327
6.65%
$ 4,020,436
$
218,032
5.42%
Securities
921,393
25,259
2.74
898,771
20,125
2.24
956,232
16,503
1.73
Interest-bearing deposits in other
banks
287,474
14,950
5.20
180,997
9,875
5.46
115,016
1,579
1.37
Total interest-earning assets
6,536,333
414,764
6.35
5,939,405
353,327
5.95
5,091,684
236,114
4.64
Allowance for loan losses
(43,931)
(41,665)
(32,093)
Noninterest-earning assets
481,333
444,140
413,917
Total assets
$ 6,973,735
$
414,764
$ 6,341,880
$
353,327
$ 5,473,508
$
236,114
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits
$ 4,427,233
$
165,094
3.73%
$ 3,566,216
$
106,908
3.00%
$ 3,007,882
$
24,413
0.81%
Subordinated debt
99,884
5,394
5.40
105,369
5,323
5.05
106,054
5,108
4.82
Subordinated debt - trust preferred
securities
5,000
447
8.94
5,000
430
8.60
5,000
247
4.94
Bank Term Funding Program
64,754
2,788
4.31
253,706
11,313
4.46
-
-
-
Advances from FHLB
317,462
13,164
4.15
329,726
13,702
4.16
271,025
6,479
2.39
First National Bankers Bank
("FNBB") Line of Credit
-
-
-
-
-
-
2,500
121
4.84
Other borrowings
19,464
494
2.54
21,825
522
2.39
23,197
169
0.73
Total interest-bearing liabilities
4,933,797
187,381
3.80
4,281,842
138,198
3.23
3,415,658
36,537
1.07
Noninterest-bearing liabilities:
Noninterest-bearing deposits
1,285,445
1,412,979
1,539,938
Other liabilities
56,649
44,173
37,533
Total noninterest-bearing
liabilities
1,342,094
1,457,152
1,577,471
Shareholders' equity:
Common shareholders' equity
625,914
530,956
456,388
Preferred equity
71,930
71,930
23,991
Total shareholders' equity
697,844
602,886
480,379
Total liabilities and
shareholders' equity
$ 6,973,735
$ 6,341,880
$ 5,473,508
Net interest rate spread (1)
2.55%
2.72%
3.57%
Net interest income
$
227,383
$
215,129
$
199,577
Net interest margin (2)
3.48%
3.62%
3.92%
Overall cost of funds
3.01%
2.43%
0.74%
_______________________________
(1)
Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
(2)
Net interest margin is equal to net interest income divided by average interest-earning assets.
The following table presents information regarding the dollar amount of changes in interest income and interest
expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities, and
distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates.
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53
For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to
rate.
For the Year Ended December 31, 2024
compared to the Year
Ended December 31, 2023
Increase (Decrease) due to change in
Volume
Rate
Total
(Dollars in thousands)
Interest-earning assets:
Total loans
$
32,891 $
18,337 $
51,228
Securities
620
4,514
5,134
Interest-bearing deposits in other banks
5,537
(462)
5,075
Total increase in interest income
$
39,048 $
22,389 $
61,437
Interest-bearing liabilities:
Interest-bearing deposits
$
32,108 $
26,078 $
58,186
Subordinated debt
(296)
367
71
Subordinated debt - trust preferred securities
-
17
17
Bank Term Funding Program
(8,135)
(390)
(8,525)
Advances from FHLB
(509)
(29)
(538)
Other borrowings
(60)
32
(28)
Total increase in interest expense
23,108
26,075
49,183
Increase (decrease) in net interest income
$
15,940 $
(3,686) $
12,254
For the Year Ended December 31, 2023
compared to the Year
Ended December 31, 2022
Increase (Decrease) due to change in
Volume
Rate
Total
(Dollars in thousands)
Interest-earning assets:
Total loans
$
55,835 $
49,460 $
105,295
Securities
(1,287)
4,909
3,622
Interest-bearing deposits in other banks
3,600
4,696
8,296
Total increase in interest income
$
58,148 $
59,065 $
117,213
Interest-bearing liabilities:
Interest-bearing deposits
$
16,738 $
65,757 $
82,495
Subordinated debt
(35)
250
215
Subordinated debt - trust preferred securities
-
183
183
Bank Term Funding Program
11,313
-
11,313
Advances from FHLB
2,439
4,784
7,223
FNBB Line of Credit
-
(121)
(121)
Other borrowings
(33)
386
353
Total increase in interest expense
30,422
71,239
101,661
Increase (decrease) in net interest income
$
27,726 $
(12,174) $
15,552
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54
Provision for Credit Losses
Our provision for credit losses is a charge to income in order to bring our allowance for credit losses to a level
deemed appropriate by management. For a description of the factors taken into account by management in determining the
allowance for credit losses see “—Financial Condition—Allowance for Credit Losses.” The provision for credit losses was
$10.9 million and $4.5 million for the years ended December 31, 2024 and 2023, respectively. The higher provision during
the year ended December 31, 2024 compared to 2023 relates primarily to the acquisition of Oakwood, and, to a lesser
extent, increases from organic loan growth and non-performing loans.
Noninterest Income (“Other Income”)
Our primary sources of noninterest income are service charges on deposit accounts, debit card and automated teller
machine (“ATM”) fee income, income from bank-owned life insurance, fees and brokerage commissions, loan sales, swap
fee income, and pass-through income from other investments (small business investment company (“SBIC”) partnerships
and financial technology (“Fintech”) funds). The following table presents, for the periods indicated, the major categories of
noninterest income:
For the Years Ended
December 31,
2024
2023
Increase
(Decrease)
(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts
$
10,577 $
9,704 $
873
Debit card and ATM fee income
7,659
6,590
1,069
Bank-owned life insurance income
2,875
2,247
628
Gain on sales of loans
2,973
1,972
1,001
Gain (loss) on sales of investment securities
7
(2,565)
2,572
Fees and brokerage commissions
7,844
7,247
597
Mortgage origination income
238
285
(47)
Correspondent bank income
715
456
259
Gain on sales of other real estate owned
89
646
(557)
Loss on sales of other assets
(15)
(15)
-
Gain on sale of banking center
-
945
(945)
Gain on extinguishment of debt
-
1,458
(1,458)
Swap Fee Income
2,739
964
1,775
Pass-through income from other investments
1,208
1,946
(738)
Other
7,284
4,762
2,522
Total noninterest income
$
44,193 $
36,642 $
7,551
Noninterest income for the year ended December 31, 2024 increased $7.6 million, or 20.6%, to $44.2 million
compared to noninterest income of $36.6 million for the same period in 2023. The components of noninterest income with
significant fluctuations compared to the prior year period were as follows:
Service charges on deposit accounts. We earn fees from our customers for deposit-related services, and these fees
constitute a significant and predictable component of our noninterest income. Service charges on deposit accounts were
$10.6 million for the year ended December 31, 2024, compared to $9.7 million for the 2023, an increase of $873,000, or
9.0%.
Gain on sales of loans. We had gains on sales of loans of $3.0 million in 2024, compared to $2.0 million in 2023, an
increase of $1.0 million, or 50.8%, primarily due to increased SBA loan sale activity.
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55
Gain (loss) on sales of investment securities. We had net gains on the sales of investment securities of $7,000 in
2024, compared to net losses on the sales of $2.6 million in 2023. During the fourth quarter of 2023, we sold $71.5 million
in securities at a loss, with a weighted average book yield of 1.98% and reinvested the funds into high yielding investments
with an average book yield of 5.17%, locking in higher yields and keeping consistent, the duration and overall portfolio
weighted average life.
Gain on sales of other real estate owned. We had net gains on the sales or other real estate owned of $89,000 in
2024, compared to $646,000 in 2023, a decrease of $557,000. The majority of the gains on sale of other real estate in 2023
resulted from the sale of two properties at a total gain of $511,000.
Gain on sale of banking center. We sold a banking center located in Leesville, Louisiana that resulted in a gain of
$945,000 during 2023.
Gain on extinguishment of debt. We extinguished $8.9 million in subordinated debt resulting in a gain on the
extinguishment of debt of $1.5 million during 2023.
Swap fee income. We had swap fee income from back-to-back interest rate swaps in the amount of $2.7 million in
2024, compared to $964,000 during 2023, an increase of $1.8 million, or 184.1%.
Other. This category includes a variety of other income producing activities, including wire transfer fees, insurance
commissions and credit card income. Other income increased $2.5 million, or 53.0%, for the year ended December 31,
2024, compared to the same period in 2023.
Noninterest Expense (“Other Expense”)
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities,
obtaining and retaining customer relationships and providing bank services. The largest component of noninterest expense
is salaries and employee benefits. Noninterest expense also includes operational expenses, such as occupancy expenses,
depreciation and amortization, professional and regulatory fees, including FDIC assessments, data processing expenses,
and advertising and promotion expenses, among others.
The following table presents, for the periods indicated, the major categories of noninterest expense:
For the Years Ended
December 31,
2024
2023
Increase
(Decrease)
(Dollars in thousands)
Salaries and employee benefits
$
103,917 $
90,611 $
13,306
Non-staff expenses:
Occupancy of bank premises
10,944
9,518
1,426
Depreciation and amortization
7,540
6,767
773
Data processing
11,957
9,034
2,923
FDIC assessment fees
3,598
3,645
(47)
Legal and professional fees
3,756
3,173
583
Advertising and promotions
4,878
4,628
250
Utilities and communications
2,883
2,899
(16)
Ad valorem shares tax
4,057
3,160
897
Directors' fees
1,085
1,079
6
Other real estate owned expenses and write-downs
301
687
(386)
Merger and conversion related expenses
1,236
236
1,000
Other
21,500
21,265
235
Total noninterest expense
$
177,652 $
156,702 $
20,950
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56
Noninterest expense for the year ended December 31, 2024 increased $21.0 million, or 13.4%, to $177.7 million
compared to noninterest expense of $156.7 million for the same period in 2023. The components of noninterest expense
with significant fluctuations compared to the prior year period were as follows:
Salaries and employee benefits. Salaries and employee benefits are the largest component of noninterest expense and
include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and
employee benefits were $103.9 million for the year ended December 31, 2024, an increase of $13.3 million, or 14.7%,
compared to the same period in 2023. The increase was primarily due to the acquisitions of Waterstone and Oakwood,
additional hires for new positions and our merit increase cycle. As of December 31, 2024, we had 859 full-time equivalent
employees, compared to 761 full-time equivalents as of December 31, 2023. Salaries and employee benefits included
stock-based compensation expense of $2.5 million and $4.4 million for the years ended December 31, 2024 and 2023,
respectively.
Occupancy of bank premises. Occupancy of bank premises expenses were $10.9 million and $9.5 million for the
years ended December 31, 2024 and 2023, respectively, an increase of $1.4 million, or 15.0%, which is primarily due to the
acquisition of Oakwood.
Data processing. Data processing fees were $12.0 million and $9.0 million for the years ended December 31, 2024
and 2023, respectively, an increase of $2.9 million, or 32.4%.
Merger and conversion related expenses. Merger and conversion related expenses for the year ended December 31,
2024 was primarily to the acquisitions of Waterstone and Oakwood in 2024.
Other. This category includes various operating and administrative expenses including business development
expenses (i.e. travel and entertainment, donations and club dues), insurance, supplies and printing, equipment rent, and
software support and maintenance. Other noninterest expense increased $235,000, or 1.1%, for the year ended
December 31, 2024 compared to the same period in 2023.
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. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
For the year ended December 31, 2024, income tax expense totaled $17.9 million, an decrease of $1.6 million, or
8.2%, compared to $19.5 million for the same period in 2023. For the years ended December 31, 2024 and 2023, our
effective tax rates were 21.6% and 21.6%, respectively.
Financial Condition
Our total assets increased $1.3 billion, or 19.3%, from $6.6 billion as of December 31, 2023 to $7.9 billion as of
December 31, 2024, due primarily from the acquisition of Oakwood, increases in our loan portfolio, as well as our cash and
cash equivalents due to our increase in deposits.
Loan Portfolio
Our primary source of income is interest on loans to individuals, professionals and small-to-midsized businesses in
our markets. Our loan portfolio consists primarily of commercial loans and real estate loans secured by commercial real
estate properties located in our primary market areas. Our loan portfolio represents the highest yielding component of our
earning asset base.
As of December 31, 2024, total loans, excluding mortgage loans held for sale, were $6.0 billion, an increase of
$988.6 million or 19.8%, compared to $5.0 billion as of December 31, 2023. The increase was primarily due to the
acquisition of Oakwood. Additionally, $717,000 and $835,000 in mortgage loans were classified as loans held for sale as
of December 31, 2024 and 2023, respectively.
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57
Total loans held for investment as a percentage of deposits were 91.9% and 95.1% as of December 31, 2024 and
2023, respectively. Total loans held for investment as a percentage of assets were 76.1% and 75.8% as of December 31,
2024 and 2023, respectively.
The following table summarizes our loan portfolio by type of loan as of the dates indicated:
As of December 31, 2024
As of December 31, 2023
Amount
Percent
Amount
Percent
(Dollars in thousands)
Real Estate Loans:
Commercial
Retail and Wholesale
$
580,974
9.7% $
573,725
11.5%
Hospitality
310,576
5.2
249,027
5.0
Healthcare
218,152
3.6
201,098
4.0
Services
170,747
2.9
155,283
3.1
Energy
98,779
1.7
100,523
2.0
Other
1,103,995
18.5
938,272
18.8
Total Commercial
2,483,223
41.6
2,217,928
44.4
Construction
670,502
11.2
669,798
13.4
Residential
884,533
14.8
682,394
13.7
Total Real Estate Loans
4,038,258
67.6
3,570,120
71.5
Commercial
1,868,675
31.2
1,358,838
27.2
Consumer and Other
74,466
1.2
63,827
1.3
Total loans held for investment
$
5,981,399
100.0% $
4,992,785
100.0%
As of December 31, 2024
As of December 31, 2023
Amount
Percent
Amount
Percent
(Dollars in thousands)
Commercial real estate:
Dallas Region
$
778,174
31.3% $
618,608
27.9%
New Orleans Region
466,661
18.8
439,087
19.8
North Louisiana Region
440,238
17.7
418,510
18.9
Capitol Region
246,321
9.9
213,492
9.6
Houston Region
234,959
9.5
243,097
11.0
Southwest Louisiana Region
234,875
9.5
201,538
9.1
Bayou Region
81,995
3.3
83,596
3.8
Total commerical real estate loans
$
2,483,223
100.0% $
2,217,928
100.0%
Real Estate: Commercial loans are extensions of credit secured by owner-occupied and non-owner-occupied
collateral. Repayment is generally dependent on the successful operations of the property. General economic conditions
may impact the performance of these types of loans, including fluctuations in the value of real estate, vacancy rates, and
unemployment trends. Real estate commercial loans also include farmland loans that can be, or are, used for agricultural
purposes. These loans are usually repaid through refinancing, cash flow from the borrower’s ongoing operations,
development of the property, or sale of the property.
Real Estate: Commercial loans increased $265.3 million, or 12.0%, to $2.5 billion as of December 31, 2024, from
$2.2 billion as of December 31, 2023.
Real Estate: Construction loans include loans to small-to-midsized businesses to construct owner-occupied
properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser
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58
extent, loans to individual clients for construction of single-family homes in our market areas. Risks associated with these
loans include fluctuations in the value of real estate, project completion risk and changes in market trends. We are also
exposed to risk based on the ability of the construction loan borrower to finance the loan or sell the property upon
completion of the project, which may be affected by changes in secondary market terms and criteria for permanent
financing since the time we funded the loan.
Real Estate: Construction loans increased $704,000, or 0.1%, to $670.5 million as of December 31, 2024, from
$669.8 million as of December 31, 2023.
Real Estate: Residential loans include first and second lien 1-4 family mortgage loans, as well as home equity lines
of credit, in each case primarily on owner-occupied primary residences. The Company is exposed to risk based on
fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial
condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship.
Real estate residential loans also include multi-family residential loans originated to provide permanent financing for multi-
family residential income producing properties. Repayment of these loans primarily relies on successful rental and
management of the property.
Real Estate: Residential loans increased $202.1 million, or 29.6%, to $884.5 million as of December 31, 2024, from
$682.4 million as of December 31, 2023.
Commercial loans include general commercial and industrial, or C&I, loans, including commercial lines of credit,
working capital loans, term loans, equipment financing, asset acquisition, expansion, and development loans, borrowing
base loans, letters of credit and other loan products, primarily in the Company’s target markets that are underwritten based
on the borrower’s ability to service the debt from income. Commercial loan risk is derived from the expectation that such
loans generally are serviced principally from the operations of the business, and those operations may not be successful.
Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not
under the control of the borrower such as economic events and changes in governmental regulations, could materially
affect the ability of the borrower to repay the loan.
Commercial loans increased $509.8 million, or 37.5%, to $1.9 billion as of December 31, 2024, from $1.4 billion as
of December 31, 2023.
Consumer and other loans include a variety of loans to individuals for personal, family and household purposes,
including secured and unsecured installment and term loans. The risk is based on changes in the borrower’s financial
condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and
fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
Consumer and other loans increased $10.6 million, or 16.7%, to $74.5 million as of December 31, 2024, from $63.8
million as of December 31, 2023.
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59
The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and floating
interest rates in each maturity range as of date indicated are summarized in the following tables:
As of December 31, 2024
One Year or
Less
One
Through
Five
Years
Five
Through
Fifteen
Years
After
Fifteen
Years
Total
(Dollars in thousands)
Real Estate Loans:
Commercial
$
374,129 $ 1,513,009 $
513,999 $
82,086 $ 2,483,223
Construction
320,732
286,326
47,195
16,249
670,502
Residential
143,804
514,596
151,262
74,871
884,533
Total Real Estate Loans
838,665
2,313,931
712,456
173,206
4,038,258
Commercial
919,905
672,153
271,632
4,985
1,868,675
Consumer and Other
44,359
26,830
3,123
154
74,466
Total loans held for investment
$ 1,802,929 $ 3,012,914 $
987,211 $
178,345 $ 5,981,399
Fixed rate loans:
Real Estate Loans:
Commercial
$
134,809 $ 1,141,096 $
349,949 $
12,854 $ 1,638,708
Construction
66,241
132,702
13,892
7,454
220,289
Residential
72,174
422,430
96,826
21,189
612,619
Total Real Estate Loans
273,224
1,696,228
460,667
41,497
2,471,616
Commercial
179,506
351,913
152,841
-
684,260
Consumer and Other
35,067
21,062
2,585
154
58,868
Total fixed rate loans
$
487,797 $ 2,069,203 $
616,093 $
41,651 $ 3,214,744
Floating rate loans:
Real Estate Loans:
Commercial
$
239,320 $
371,913 $
164,050 $
69,232 $
844,515
Construction
254,491
153,624
33,303
8,795
450,213
Residential
71,630
92,166
54,436
53,682
271,914
Total Real Estate Loans
565,441
617,703
251,789
131,709
1,566,642
Commercial
740,399
320,240
118,791
4,985
1,184,415
Consumer and Other
9,292
5,768
538
-
15,598
Total floating rate loans
$ 1,315,132 $
943,711 $
371,118 $
136,694 $ 2,766,655
866
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60
As of December 31, 2023
One Year or
Less
One
Through
Five
Years
Five
Through
Fifteen
Years
After
Fifteen
Years
Total
(Dollars in thousands)
Real Estate Loans:
Commercial
$
251,365 $ 1,256,655 $
620,029 $
89,879 $ 2,217,928
Construction
325,883
278,039
45,910
19,966
669,798
Residential
79,357
401,852
137,283
63,902
682,394
Total Real Estate Loans
656,605
1,936,546
803,222
173,747
3,570,120
Commercial
520,058
594,274
243,744
762
1,358,838
Consumer and Other
35,971
23,520
4,134
202
63,827
Total loans held for investment
$ 1,212,634 $ 2,554,340 $ 1,051,100 $
174,711 $ 4,992,785
Fixed rate loans:
Real Estate Loans:
Commercial
$
156,227 $ 1,067,124 $
450,884 $
17,470 $ 1,691,705
Construction
96,020
187,970
16,388
13,866
314,244
Residential
49,434
344,549
85,731
14,952
494,666
Total Real Estate Loans
301,681
1,599,643
553,003
46,288
2,500,615
Commercial
134,242
331,029
147,388
-
612,659
Consumer and Other
26,867
17,373
3,260
159
47,659
Total fixed rate loans
$
462,790 $ 1,948,045 $
703,651 $
46,447 $ 3,160,933
Floating rate loans:
Real Estate Loans:
Commercial
$
95,138 $
189,531 $
169,145 $
72,409 $
526,223
Construction
229,863
90,069
29,522
6,100
355,554
Residential
29,923
57,303
51,552
48,950
187,728
Total Real Estate Loans
354,924
336,903
250,219
127,459
1,069,505
Commercial
385,816
263,245
96,356
762
746,179
Consumer and Other
9,104
6,147
874
43
16,168
Total floating rate loans
$
749,844 $
606,295 $
347,449 $
128,264 $ 1,831,852
Nonperforming Assets
Loans are considered past due if the required principal and interest payments have not been received as of the date
such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be
unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be
placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is
discontinued, all unpaid accrued interest is generally reversed. Interest income is subsequently recognized only to the
extent cash payments are received in excess of principal due, or interest may be recognized on a cash basis as long as the
remaining book balance of the loan is deemed collectible. Loans are returned to accrual status when all the principal and
interest amounts contractually due are brought current and future payments are reasonably assured.
We have several procedures in place to assist in maintaining the overall quality of our loan portfolio. We have
established underwriting guidelines to be followed by our bankers, and we also monitor our delinquency levels for any
negative or adverse trends. There can be no assurance, however, that our loan portfolio will not become subject to
increasing pressures from deteriorating borrower credit due to general economic conditions.
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61
We believe our conservative lending approach and focused management of nonperforming assets has resulted in
sound asset quality and the timely resolution of problem assets. We had $30.5 million and $18.8 million in nonperforming
assets as of December 31, 2024 and 2023, respectively. We had $25.0 million in nonperforming loans as of December 31,
2024 compared to $17.1 million as of December 31, 2023. The increase in nonperforming assets from December 31, 2023
to December 31, 2024 is primarily due to two lending relationships secured by residential real estate, one secured by
commercial real estate, and one commercial loan that is unsecured.
The following tables present information regarding nonperforming loans at the dates indicated:
As of December 31,
2024
2023
2022
(Dollars in thousands)
Nonaccrual loans
$
24,147
$
16,943
$
11,054
Accruing loans 90 or more days past due
860
127
335
Total nonperforming loans
25,007
17,070
11,389
Other nonperforming assets
-
-
62
Other real estate owned:
Commercial real estate, construction, land and land development
5,197
1,326
1,199
Residential real estate
332
359
173
Total other real estate owned
5,529
1,685
1,372
Total nonperforming assets
$
30,536
$
18,755
$
12,823
Ratio of nonperforming loans to total loans held for investment
0.42%
0.34%
0.25%
Ratio of nonperforming assets to total assets
0.39
0.28
0.21
Ratio of nonaccrual loans to total loans held for investment
0.40
0.34
0.24
As of December 31,
2024
2023
2022
(Dollars in thousands)
Nonaccrual loans by category:
Real Estate Loans:
Commercial
$
3,621 $
3,280 $
2,644
Construction
5,251
3,543
992
Residential
7,078
7,352
4,080
Total Real Estate Loans
15,950
14,175
7,716
Commercial
8,039
2,395
3,150
Consumer and Other
158
373
188
Total
$
24,147 $
16,943 $
11,054
Potential Problem Loans
From a credit risk standpoint, we classify loans in one of four categories: pass, special mention, substandard or
doubtful. Loans classified as loss are charged-off. The classifications of loans reflect a judgment about the risks of default
and loss associated with the loan. Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in
each credit. Our methodology is structured so that specific allocations are increased in accordance with deterioration in
credit quality (and a corresponding increase in risk of loss) or decreased in accordance with improvement in credit quality
(and a corresponding decrease in risk of loss).
Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness;
however, such concerns are not so pronounced that we generally expect to experience significant loss within the short-term.
Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent
as credits with a lower rating.
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62
Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been,
jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or
important weaknesses which exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt
corrective action is therefore required to reduce exposure and to assure that adequate remedial measures are taken by the
borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the
credit is performed.
Credits rated doubtful have all the weaknesses inherent in those rated substandard, with the added characteristic that
the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly
questionable and improbable.
The following tables summarize our internal ratings of loans held for investment as of the dates indicated. See Note 7
of the consolidated financial statements for the presentation of loans in their credit quality categories that is in compliance
with the CECL standard.
As of December 31, 2024
Pass
Special
Mention
Substandard
Doubtful
Total
(Dollars in thousands)
Real Estate Loans:
Commercial
$
2,383,439 $
75,385 $
23,548 $
851 $
2,483,223
Construction
658,364
3,436
8,702
-
670,502
Residential
871,634
3,163
9,485
251
884,533
Total Real Estate Loans
3,913,437
81,984
41,735
1,102
4,038,258
Commercial
1,828,485
25,979
13,911
300
1,868,675
Consumer and Other
74,097
-
369
-
74,466
Total
$
5,816,019 $
107,963 $
56,015 $
1,402 $
5,981,399
As of December 31, 2023
Pass
Special
Mention
Substandard
Doubtful
Total
(Dollars in thousands)
Real Estate Loans:
Commercial
$
2,188,840 $
18,658 $
9,163 $
1,267 $
2,217,928
Construction
661,796
4,087
3,570
345
669,798
Residential
669,391
3,161
9,353
489
682,394
Total Real Estate Loans
3,520,027
25,906
22,086
2,101
3,570,120
Commercial
1,338,339
14,623
5,308
568
1,358,838
Consumer and Other
63,265
100
462
-
63,827
Total
$
4,921,631 $
40,629 $
27,856 $
2,669 $
4,992,785
Allowance for Credit Losses
We maintain an allowance for credit losses, which includes both our allowance for loan losses and reserves for
unfunded commitments, that represents management’s best estimate of the credit losses and risks inherent in the loan
portfolio. In determining the allowance for credit losses, we estimate losses on specific loans, or groups of loans, where the
probable loss can be identified and reasonably determined. The balance of the allowance for credit losses is based on
internally assigned risk classifications of loans, changes in the nature of the loan portfolio, overall portfolio quality,
industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic
conditions on certain historical credit loss rates. For additional discussion of our methodology, please refer to “—Critical
Accounting Estimates—Allowance for Credit Losses.”
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63
In connection with our review of the loan portfolio, we consider risk elements attributable to particular loan types or
categories in assessing the quality of individual loans. Some of the risk elements we consider include:
•
for Real Estate: Commercial loans, the debt service coverage ratio (income from the property in excess of
operating expenses compared to loan payment requirements), operating results of the owner in the case of
owner-occupied properties, the loan to value ratio, the age and condition of the collateral, and the volatility of
income, property value and future operating results typical for properties of that type;
•
for Real Estate: Construction loans, the perceived feasibility of the project including the ability to sell
developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the
quality and nature of contracts for presale or prelease, if any, the experience and ability of the developer, and
the loan to value ratio;
•
for Real Estate: Residential real estate loans, the borrower’s ability to repay the loan, including a consideration
of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition
and marketability of the collateral; and
•
for Commercial loans, the operating results of the commercial, industrial or professional enterprise, the
borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income
and operating results typical for businesses in that category, and the value, nature and marketability of
collateral;
As of December 31, 2024, the allowance for credit losses totaled $58.5 million, or 0.98%, of total loans held for
investment. As of December 31, 2023, the allowance for credit losses totaled $43.7 million, or 0.88%, of total loans held
for investment. As of December 31, 2022, the allowance for credit losses totaled $38.8 million, or 0.84%, of total loans
held for investment.
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64
The following tables present, as of and for the periods indicated, an analysis of the allowance for credit losses and
other related data:
For the Years Ended December 31,
2024
2023
2022
(Dollars in thousands)
Average loans outstanding
$ 5,327,466
$ 4,859,637
$ 4,020,436
Gross loans held for investment outstanding end of period
$ 5,981,399
$ 4,992,785
$ 4,606,176
Allowance for credit losses at beginning of period
$
43,738
$
38,783
$
29,936
Adoption of ASU 2016-13
-
5,857
-
Adjustment for Oakwood purchased credit deterioration loans
8,410
-
-
Provision for credit losses
10,873
4,483
10,667
Charge-offs:
Real Estate:
Commercial
(263)
2,049
51
Construction
2,261
36
16
Residential
297
42
191
Total Real Estate
2,295
2,127
258
Commercial
986
2,813
2,139
Consumer and other
2,392
1,489
424
Total charge-offs
5,673
6,429
2,821
Recoveries:
Real Estate:
Commercial
86
26
50
Construction
515
1
25
Residential
14
18
20
Total Real Estate
615
45
95
Commercial
236
672
739
Consumer and other
329
327
167
Total recoveries
1,180
1,044
1,001
Net charge-offs
4,493
5,385
1,820
Allowance for credit losses at end of period
$
58,528
$
43,738
$
38,783
Ratio of allowance for credit losses to end of period loans held for
investment
0.98%
0.88%
0.84%
Ratio of net charge-offs to average loans
0.08
0.11
0.05
Ratio of allowance for credit losses to nonaccrual loans
242.38
258.15
350.85
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65
For the Years Ended December 31,
2024
2023
2022
Net Charge-
offs
(Recoveries)
Percent of
Average
Loans
Net Charge-
offs
(Recoveries)
Percent of
Average
Loans
Net Charge-
offs
(Recoveries)
Percent of
Average
Loans
(Dollars in thousands)
Real estate:
Commercial
$
(349)
0.00% $
2,023
0.04% $
1
0.00%
Construction
1,746
0.03%
35
0.00%
(9)
0.00%
Residential
283
0.00%
24
0.00%
171
0.00%
Total Real Estate Loans
1,680
0.03%
2,082
0.04%
163
0.00%
Commercial
750
0.01%
2,141
0.05%
1,400
0.04%
Consumer and Other
2,063
0.04%
1,162
0.02%
257
0.01%
Total net charge-offs
(recoveries)
$
4,493
0.08% $
5,385
0.11% $
1,820
0.05%
Although we believe that we have established our allowance for loan losses in accordance with GAAP and that the
allowance for loan losses was adequate to provide for known and estimated losses in the portfolio at all times shown above,
future provisions will be subject to ongoing evaluations of the risks in our loan portfolio. If we experience economic
declines or if asset quality deteriorates, material additional provisions could be required.
The following table shows the allocation of the allowance for credit losses among loan categories and certain other
information as of the dates indicated. The allocation of the allowance for credit losses as shown in the table should neither
be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily
occur in these amounts or in the indicated proportions. The total allowance is available to absorb losses from any loan
category.
For the Years Ended December 31,
2024
2023
2022
Amount
Percent to
Total
Amount
Percent to
Total
Amount
Percent to
Total
(Dollars in thousands)
Real estate:
Commercial
$
23,688
40.5% $
17,882
40.9% $
14,922
38.5%
Construction
8,473
14.5
8,142
18.6
5,905
15.2
Residential
8,394
14.3
5,662
12.9
5,367
13.8
Total real estate
40,555
69.3
31,686
72.4
26,194
67.5
Commercial
17,432
29.8
11,796
27.0
11,950
30.8
Consumer and Other
541
0.9
256
0.6
639
1.7
Total allowance for credit
losses
$
58,528
100.0% $
43,738
100.0% $
38,783
100.0%
Securities
We use our securities portfolio to provide a source of liquidity, an appropriate return on funds invested, manage
interest rate risk, meet collateral requirements, and meet regulatory capital requirements. As of December 31, 2024, the
carrying amount of investment securities totaled $893.5 million, an increase of $14.0 million, or 1.6%, compared to $879.6
million as of December 31, 2023. Securities represented 11.4% and 13.4% of total assets as of December 31, 2024 and
2023, respectively.
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66
Our investment portfolio consists entirely of securities classified as available for sale. As a result, the carrying values
of our investment securities are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as
a component of other comprehensive income in shareholders’ equity. The following tables summarize the amortized cost
and estimated fair value of investment securities as of the dates shown:
As of December 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(Dollars in thousands)
U.S. treasury securities
$
17,631 $
- $
956 $
16,675
U.S. government agencies
10,164
-
576
9,588
Corporate bonds
47,855
348
3,038
45,165
Mortgage-backed securities
584,321
542
47,125
537,738
Municipal securities
313,452
23
29,092
284,383
Total
$
973,423 $
913 $
80,787 $
893,549
As of December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(Dollars in thousands)
U.S. treasury securities
$
17,690 $
- $
1,451 $
16,239
U.S. government agencies
10,258
-
848
9,410
Corporate bonds
49,609
-
5,770
43,839
Mortgage-backed securities
555,148
976
49,814
506,310
Municipal securities
331,273
298
27,798
303,773
Total
$
963,978 $
1,274 $
85,681 $
879,571
All of our mortgage-backed securities are agency securities. We do not hold any Fannie Mae or Freddie Mac
preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, private label collateralized
mortgage obligations, subprime, Alt-A, or second lien elements in our investment portfolio as of December 31, 2024.
The allowance for credit losses encompasses potential expected credit losses related to the securities portfolio. In
order to develop an estimate of credit losses expected for the current securities portfolio, we perform an assessment that
includes reviewing historical loss data for both our portfolio and similar types of investment securities. Additionally, our
review of the securities portfolio for expected credit losses includes an evaluation of factors including the security issuer
bond ratings, delinquency status, insurance or other available credit support, as well as our expectations of the forecasted
economic outlook relevant to these securities. The results of the analysis are evaluated quarterly to confirm that credit loss
estimates are appropriate for the securities portfolio. Based on our assessments, expected credit losses on the investment
securities portfolio as of December 31, 2024 and 2023, was negligible and therefore, no allowance for credit loss was
recorded related to our investment securities.
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67
The following tables set forth the fair value, maturities and approximated weighted average yield based on estimated
annual income divided by the average amortized cost of the securities portfolio as of the dates indicated. The contractual
maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.
As of December 31, 2024
Within One Year
After One Year but
Within Five Years
After Five Years but
Within Ten Years
After Ten Years
Total
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Total
Yield
(Dollars in thousands)
U.S. treasury securities
$
-
-%
$ 16,675
0.80%
$
-
-%
$
-
-%
$ 16,675
0.80%
U.S. government agencies
-
-%
9,588
0.92%
-
-%
-
-%
9,588
0.92%
Corporate bonds
-
-%
6,253
5.00%
38,912
4.90%
-
-%
45,165
4.91%
Mortgage-backed
securities
4,081
2.68%
47,501
2.07%
184,576
2.99%
301,580
3.16%
537,738
3.00%
Municipal securities
24,577
1.44%
93,150
1.76%
105,409
1.96%
61,247
2.97%
284,383
2.07%
Total
$ 28,658
1.61%
$ 173,167
1.82%
$ 328,897
2.89%
$ 362,827
3.13%
$ 893,549
2.74%
As of December 31, 2023
Within One Year
After One Year but
Within Five Years
After Five Years but
Within Ten Years
After Ten Years
Total
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Total
Yield
(Dollars in thousands)
U.S. treasury securities
$
-
-%
$ 16,239
0.80%
$
-
-%
$
-
-%
$ 16,239
0.80%
U.S. government agencies
-
-%
9,410
0.92%
-
-%
-
-%
9,410
0.92%
Corporate bonds
213
-%
2,390
4.78%
41,236
4.61%
-
-%
43,839
4.60%
Mortgage-backed
securities
147
1.28%
46,339
2.06%
191,332
2.68%
268,492
2.73%
506,310
2.65%
Municipal securities
16,766
1.56%
96,739
1.55%
117,092
1.91%
73,176
2.38%
303,773
1.89%
Total
$ 17,126
1.54%
$ 171,117
1.63%
$ 349,660
2.65%
$ 341,668
2.66%
$ 879,571
2.43%
The contractual maturity of mortgage-backed securities, collateralized mortgage obligations and asset-backed
securities is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any
time. Mortgage-backed securities and asset-backed securities 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 paydowns on mortgage-backed securities
tend to cause the average life of the securities to be much different than the stated contractual maturity. During a period of
increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal
and, consequently, the average life of this security will be lengthened. If interest rates begin to fall, prepayments may
increase, thereby shortening the estimated life of this security. The weighted average life of our investment portfolio was
4.63 years with an estimated effective duration of 3.79 years as of December 31, 2024.
As of December 31, 2024 and 2023, we did not own securities of any one issuer for which aggregate adjusted cost
exceeded 10% of the consolidated shareholders’ equity as of such respective dates.
As of December 31, 2024 and 2023, the Company held other equity securities of $41.1 million and $33.9 million,
respectively, comprised mainly of FHLB stock, SBIC’s and financial technology (“Fintech”) fund investments.
Deposits
We offer a variety of deposit accounts having a wide range of interest rates and terms including demand, savings,
money market and time accounts. We rely primarily on competitive pricing policies, convenient locations and personalized
service to attract and retain these deposits.
Total deposits as of December 31, 2024 were $6.5 billion, an increase of $1.3 billion, or 24.1%, compared to $5.2
billion as of December 31, 2023. Total uninsured deposits were $2.8 billion, or 43.4% of deposits as of December 31, 2024
compared to $2.0 billion, or 38.9%, or total deposits as of December 31, 2023. Since it is not reasonably practicable to
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68
provide a precise measure of uninsured deposits, the amounts are estimated and are based on the same methodologies and
assumptions that are used for regulatory reporting requirements for the call report.
Noninterest-bearing deposits as of December 31, 2024 were $1.4 billion compared to $1.3 billion as of December 31,
2023, an increase of $58.0 million, or 4.5%.
Average deposits for the year ended December 31, 2024 were $5.7 billion, an increase of $733.5 million, or 14.7%,
compared to the year ended December 31, 2023 of $5.0 billion. The average rate paid on total interest-bearing deposits
increased over this period from 3.00% for the year ended December 31, 2023 to 3.73% for the year ended December 31,
2024. The increase in average rates was driven by the federal reserve raising interest rates during the years ended
December 31, 2023 and 2022. In addition, the stability and the continued growth of noninterest-bearing demand accounts
served to reduce the cost of deposits to 2.89% for the year ended December 31, 2024 and 2.15% for the year ended
December 31, 2023.
The following table presents the monthly average balances and weighted average rates paid on deposits for the
periods indicated:
For the Years Ended December 31
2024
2023
Average
Balance
Average Rate
Average
Balance
Average Rate
(Dollars in thousands)
Interest-bearing demand accounts
$
611,561
3.36% $
507,782
3.40%
Negotiable order of withdrawal ("NOW") accounts
402,046
2.09%
468,094
1.33%
Limited access money market accounts and savings
2,146,610
3.79%
1,441,836
2.77%
Certificates and other time deposits > $250k
628,929
4.52%
498,054
4.01%
Certificates and other time deposits < $250k
638,087
4.13%
650,450
3.61%
Total interest-bearing deposits
4,427,233
3.73%
3,566,216
3.00%
Noninterest-bearing demand accounts
1,285,445
-%
1,412,979
-%
Total deposits
$
5,712,678
2.89% $
4,979,195
2.15%
The ratio of average noninterest-bearing deposits to average total deposits for the years ended December 31, 2024
and 2023 was 22.5% and 28.4%, respectively.
The following table sets forth the contractual maturities of certain certificates of deposit at December 31, 2024:
Certificates of
Deposit More
Than
$250,000
Certificates of
Deposit of
$100,000
Through
$250,000
(Dollars in thousands)
3 months or less
$
81,665 $
168,219
More than 3 months but less than 6 months
180,467
119,280
More than 6 months but less than 12 months
150,957
128,370
12 months or more
274,512
81,042
Total
$
687,601 $
496,911
Borrowings
We utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment
activities. In addition, we use short-term borrowings to periodically repurchase outstanding shares of our common stock
and for general corporate purposes. Each of these relationships are discussed below.
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69
FHLB advances. The FHLB allows us to borrow on a blanket floating lien status collateralized by certain securities
and loans. As of December 31, 2024 and 2023, total borrowing capacity of $2.0 billion and $1.8 billion, respectively, was
available under this arrangement and $355.9 million and $211.2 million, respectively, was outstanding with a weighted
average stated interest rate of 4.15% as of December 31, 2024 and 3.65% as of December 31, 2023. Our current longest
dated FHLB advance matures within ten years. We utilize these borrowings to meet liquidity needs and to fund certain
fixed rate loans in our portfolio.
The following table presents our FHLB borrowings at the dates indicated.
FHLB
Advances
(Dollars in
Thousands)
December 31, 2024
Amount outstanding at year-end
$
355,875
Weighted average stated interest rate at year-end
4.15%
Maximum month-end balance during the year
$
377,048
Average balance outstanding during the year
$
317,462
Weighted average interest rate during the year
4.15%
December 31, 2023
Amount outstanding at year-end
$
211,198
Weighted average stated interest rate at year-end
3.65%
Maximum month-end balance during the year
$
517,112
Average balance outstanding during the year
$
329,726
Weighted average interest rate during the year
4.16%
Bank Term Funding Program (“BTFP”). On March 12, 2023, the Federal Reserve launched the BTFP, which offered
loans to banks with a term of up to one year. The loans were secured by pledging participating banks’ U.S. treasuries,
agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities were
valued at par for collateral purposes. The Bank participated in the BTFP and had outstanding debt of $300.0 million at
December 31, 2023. These loans bore a fixed interest rate of 4.38% and matured on March 22, 2024, at which time we
repaid them in full.
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70
The following table presents our Bank Term Funding Program borrowings at the date indicated.
BTFP
(Dollars in
Thousands)
December 31, 2024
Amount outstanding at year-end
$
-
Weighted average stated interest rate at year-end
-%
Maximum month-end balance during the year
$
300,000
Average balance outstanding during the year
$
64,754
Weighted average interest rate during the year
4.31%
December 31, 2023
Amount outstanding at year-end
$
300,000
Weighted average stated interest rate at year-end
4.38%
Maximum month-end balance during the year
$
428,000
Average balance outstanding during the year
$
253,706
Weighted average interest rate during the year
4.46%
Subordinated Note Purchase Agreement (“Subordinated Debt”). In December 2018 we issued subordinated notes in
the amount of $25.0 million. The subordinated notes bear a fixed rate of interest at 6.75% until December 31, 2028 and a
floating rate thereafter through maturity in 2033. The balance outstanding at both December 31, 2024 and 2023 was $25.0
million. These subordinated notes were issued for the purpose of paying off our long term advance and line of credit with
First National Bankers' Bank ("FNBB"), for general corporate purposes and to provide Tier 2 capital. The subordinated
notes are redeemable by the Company at its option beginning in 2028.
On March 26, 2021, we issued $52.5 million in subordinated notes. These subordinated notes bear interest at a fixed
rate of 4.25% through March 31, 2026 and a floating rate, based on a benchmark rate plus 354 basis points, thereafter
through maturity in 2031. The balance outstanding at both December 31, 2024 and 2023 was $52.5 million. The
subordinated notes are redeemable by the Company at its option beginning in 2026.
On April 1, 2021, we consummated the acquisition of SSW. Under the terms of the acquisition, we issued $3.9
million in subordinated debt to the former owners of SSW. This subordinated debt bears interest at a fixed rate of 4.75%
through April 1, 2026 and a floating rate, based on a benchmark rate plus 442 basis points, thereafter through maturity in
2031. The balance outstanding at both December 31, 2024 and 2023 was $3.9 million. The subordinated notes are
redeemable by the Company at its option beginning in 2026.
On March 1, 2022, we consummated the acquisition of TCBI. As part of the acquisition, we assumed $26.4 million
in subordinated debt. Of those notes, $10.0 million bears an adjustable interest rate plus 350 basis points, based on a
benchmark rate, adjusting quarterly until maturity on April 11, 2028, and was callable beginning April 11, 2023, $7.5
million bears an adjustable interest rate plus 350 basis points, based on a benchmark rate, adjusting quarterly, until maturity
on December 13, 2028, and was callable beginning December 13, 2023, $8.9 million was called on May 1, 2023 and
ceased bearing interest as of such date. This $8.9 million note was fully extinguished during the year ended December 31,
2023. As part of valuing these three subordinated notes from TCBI, we incurred a fair value adjustment premium of $3.4
million that will accrete over five-to-seven years, with $833,000 and $1.1 million remaining at December 31, 2024 and
December 31, 2023, respectively. We recognized $1.5 million in gains on the extinguishment of this debt during the year
ended December 31, 2023.
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71
The following table presents the Subordinated Debt at the dates indicated.
Subordinated
Debt
(Dollars in
Thousands)
December 31, 2024
Amount outstanding at year-end
$
99,760
Weighted average stated interest rate at year-end
5.69%
Maximum month-end balance during the year
$
99,971
Average balance outstanding during the year
$
99,884
Weighted average interest rate during the year
5.40%
December 31, 2023
Amount outstanding at year-end
$
99,990
Weighted average stated interest rate at year-end
5.72%
Maximum month-end balance during the year
$
110,698
Average balance outstanding during the year
$
105,369
Weighted average interest rate during the year
5.05%
Trust preferred securities. In the Pedestal acquisition, we assumed their obligations of $5.2 million in junior
subordinated debentures, which are associated with $5.0 million in trust preferred securities issued by a trust. Interest on
the junior subordinated debentures is accrued at an annual rate equal to the 3-month LIBOR, as determined in the
agreement, plus 3.05%. Interest is payable quarterly. The agreement indenture governing the debentures allows us to defer
interest payments for up to 20 consecutive quarterly periods. The trust preferred securities do not have a stated maturity
date, however, they are subject to mandatory redemption on September 17, 2033, or upon earlier redemption. We have
guaranteed, on a subordinated basis, distributions and other payments due on the trust preferred securities subject to the
guarantee agreement and the indenture. Principal and interest payments on the junior subordinated debentures are in a
superior position to the liquidation rights of holders of common stock.
Federal Funds Purchased Lines of Credit Relationships
We maintain Federal Funds Purchased Lines of Credit Relationships with the following correspondent banks and
limits as of December 31, 2024:
Fed Funds
Purchase
Limits
(Dollars in
thousands)
TIB National Association
$
55,000
PNC Bank
38,000
FNBB
35,000
First Horizon Bank
17,000
ServisFirst Bank
10,000
Texas Capital
5,000
Total
$
160,000
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72
The following table represents combined Federal Funds Purchased Lines of Credit for all relationships at the dates
indicated.
Fed Funds
Purchased
(Dollars in
Thousands)
December 31, 2024
Amount outstanding at year-end
$
-
Weighted average stated interest rate at year-end
0.00%
Maximum month-end balance during the year
$
-
Average balance outstanding during the year
$
5
Weighted average interest rate during the year
6.46%
December 31, 2023
Amount outstanding at year-end
$
-
Weighted average stated interest rate at year-end
0.00%
Maximum month-end balance during the year
$
14,622
Average balance outstanding during the year
$
474
Weighted average interest rate during the year
1.96%
Liquidity and Capital Resources
Liquidity
Liquidity involves our ability to utilize funds to support asset growth and acquisitions or reduce assets to meet
deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an
ongoing basis and manage unexpected events. For the years ended December 31, 2024 and 2023, liquidity needs were
primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios. In addition, we
utilize, or have available, brokered deposits, purchased funds from correspondent banks, the Federal Reserve discount
window, and overnight advances from the FHLB. As of December 31, 2024 and 2023, we maintained six and five lines of
credit, respectively, with correspondent banks which provided for extensions of credit with an availability to borrow up to
an aggregate of $160.0 million and $145.0 million as of December 31, 2024 and 2023, respectively. There were no funds
under these lines of credit outstanding as of December 31, 2024 and 2023, respectively.
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The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in
which those funds are invested as a percentage of average total assets for the period indicated. Average assets totaled $7.0
billion and $6.3 billion for the years ended December 31, 2024 and 2023, respectively.
For the Years Ended
December 31,
2024
2023
Source of Funds:
Deposits:
Noninterest-bearing
18.4%
22.3%
Interest-bearing
63.5
56.2
Subordinated debt (excluding trust preferred securities)
1.4
1.7
Advances from FHLB
4.6
5.2
Other borrowings
0.4
0.4
Bank Term Funding Program
0.9
4.0
Other liabilities
0.8
0.7
Shareholders' equity
10.0
9.5
Total
100.0%
100.0%
Uses of Funds:
Loans, net of allowance for loan losses
75.8%
76.0%
Securities available for sale
13.2
14.2
Interest-bearing deposits in other banks
4.1
2.8
Other noninterest-earning assets
6.9
7.0
Total
100.0%
100.0%
Average noninterest-bearing deposits to average deposits
22.5%
28.4%
Average loans to average deposits
93.3
97.6
Our primary source of funds is deposits, and our primary use of funds is loans. We do not expect a change in the
primary source or use of our funds in the foreseeable future. Our average loans increased 9.6% for the year ended
December 31, 2024 compared to the same period in 2023. We predominantly invest excess funds in overnight deposits
with the Federal Reserve, securities, interest-bearing deposits at other banks or other short-term liquid investments until
needed to fund loan growth. Our securities portfolio had a weighted average life of 4.63 years and an effective duration of
3.79 years as of December 31, 2024 and a weighted average life of 4.57 years and an effective duration of 3.81 years as of
December 31, 2023.
As of December 31, 2024, we had outstanding $1.4 billion in commitments to extend credit and $50.0 million in
commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2023, we had
outstanding $1.2 billion in commitments to extend credit and $45.2 million in commitments associated with outstanding
standby and commercial letters of credit. Because commitments associated with letters of credit and commitments to
extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding
requirements. See “-Off Balance Sheet Items” below for additional information.
As of December 31, 2024, we had no exposure to future cash requirements associated with known uncertainties or
capital expenditures of a material nature. We had cash and cash equivalents, federal funds sold and securities purchased
under agreements to resell, of $567.6 million and $377.2 million as of December 31, 2024 and 2023, respectively.
Capital Resources
Total shareholders’ equity increased to $799.5 million as of December 31, 2024, compared to $644.3 million as of
December 31, 2023, an increase of $155.2 million, or 24.1%. This increase was primarily due to the acquisition of
Oakwood, which resulted in stock issuance of $103.8 million, net income available to common shareholders of $59.7
million, other comprehensive income of $3.6 million resulting from the after tax effect of unrealized gains in our
investment securities portfolio, and offset by dividends paid on common shares of $14.9 million.
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74
On January 23, 2025, our board of directors declared a quarterly dividend in the amount of $18.75 per preferred
share to the preferred shareholders of record as of February 15, 2025. The dividend was paid on February 28, 2025.
On January 23, 2025, our board of directors declared a quarterly dividend based upon our financial performance for
the three months ended December 31, 2024 in the amount of $0.14 per common share to the common shareholders of
record as of February 15, 2025. The dividend was paid on February 28, 2025.
The declaration and payment of dividends to our shareholders, as well as the amounts thereof, are subject to the
discretion of the Board and depend upon our results of operations, financial condition, capital levels, cash requirements,
future prospects and other factors deemed relevant by the Board. As a holding company, our ability to pay dividends is
largely dependent upon the receipt of dividends from our subsidiary, b1BANK. There can be no assurance that we will
declare and pay any dividends to our shareholders.
Capital management consists of providing equity to support current and future operations. Banking regulators view
capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository
institutions and their holding companies are required to maintain minimum capital relative to the amount and types of
assets they hold. We are subject to regulatory capital requirements at the holding company and bank levels. As of
December 31, 2024 and December 31, 2023, we and b1BANK were in compliance with all applicable regulatory capital
requirements, and b1BANK was classified as “well-capitalized,” for purposes of prompt corrective action regulations. As
we employ our capital and continue to grow our operations, our regulatory 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
applicable regulatory capital standards applicable to us.
The following table presents the actual capital amounts and regulatory capital ratios for us and b1BANK as of the
dates indicated.
As of December 31,
2024
2023
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
Business First
Total capital (to risk weighted assets)
$
878,914
12.75% $
754,990
12.85%
Tier 1 capital (to risk weighted assets)
727,959
10.56%
614,975
10.46%
Common Equity Tier 1 capital (to risk weighted
assets)
651,029
9.44%
538,045
9.15%
Tier 1 Leverage capital (to average assets)
727,959
9.53%
614,975
9.52%
b1BANK
Total capital (to risk weighted assets)
$
857,627
12.45% $
730,117
12.43%
Tier 1 capital (to risk weighted assets)
799,099
11.60%
686,379
11.69%
Common Equity Tier 1 capital (to risk weighted
assets)
799,099
11.60%
686,379
11.69%
Tier 1 Leverage capital (to average assets)
799,099
10.47%
686,379
10.63%
Preferred Stock
On September 1, 2022, we entered into a securities purchase agreement with certain investors pursuant to which we
offered and sold shares of our 7.50% fixed-to-floating rate non-cumulative perpetual preferred stock, with no par value, for
an aggregate purchase price of $72.0 million. The preferred stock was structured to qualify as additional Tier 1 capital
under applicable regulatory capital guidelines. Holders of the preferred stock will be entitled to receive, if, when, and as
declared by our board of directors, non-cumulative cash dividends at a rate of 7.50% for the first five years following
issuance and thereafter at a variable rate equal to the then current 3-month secured overnight financing rate (“SOFR”), reset
quarterly, plus 470 basis points. The preferred stock has a perpetual term and may not be redeemed, except under certain
circumstances, under the first five years of issuance.
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75
Long Term Debt
For information on our subordinated debt, please refer to “Borrowings”.
FHLB Advances
Advances from the FHLB totaled approximately $355.9 million and $211.2 million at December 31, 2024 and 2023,
respectively. As of December 31, 2024, and 2023, the FHLB advances were collateralized by a blanket floating lien on
certain securities and loans, had a weighted average stated rate of 4.15% and 3.65%, respectively, and mature within ten
years. At December 31, 2024, $55.0 million in advances were short term with a rate of 4.38% and none at December 31,
2023.
Bank Term Funding Program (“BTFP”)
On March 12, 2023, the Federal Reserve launched the BTFP, which offered loans to banks with a term of up to one
year. The loans were secured by pledging participating banks’ U.S. treasuries, agency securities, agency mortgage-backed
securities, and any other qualifying assets. These pledged securities were valued at par for collateral purposes. The Bank
participated in the BTFP and had outstanding debt of $300.0 million at December 31, 2023. These loans bore a fixed
interest rate of 4.38% and mature on March 22, 2024, at which time we repaid them in full.
Contractual Obligations
The following tables summarize contractual obligations and other commitments to make future payments as of
December 31, 2024 and 2023 (other than non-maturity deposit obligations), which consist of future cash payments
associated with our contractual obligations pursuant to our FHLB advances, subordinated debt, revolving line of credit, and
non-cancelable future operating leases. Payments related to leases are based on actual payments specified in underlying
contracts. Advances from the FHLB totaled approximately $355.9 million and $211.2 million as of December 31, 2024 and
2023, respectively. As of December 31, 2024 and 2023, the FHLB advances were collateralized by a blanket floating lien
on certain securities and loans, had a weighted average stated rate of 4.15% and 3.65%, respectively, and maturing within
ten years. We participated in the BTFP in March 2023 and as of December 31, 2023, had outstanding debt of $300.0
million, at a fixed rate of 4.38% and set to mature on March 22, 2024. We repaid this debt in full at the time of maturity.
The subordinated debt totaled $99.8 million and $100.0 million as of December 31, 2024 and 2023. Of this subordinated
debt, $25.0 million bears interest at a fixed rate of 6.75% through December 31, 2028 and a floating rate, based on a
benchmark rate plus 369 basis points, thereafter through maturity in 2033, $52.5 million of this subordinated debt bears
interest at a fixed rate of 4.25% through March 31, 2026 and a floating rate, based on a benchmark rate plus 354 basis
points, thereafter through maturity in 2031, $3.9 million of this subordinated debt bears interest at a fixed rate of 4.75%
through April 1, 2026 and a floating rate, based on a benchmark rate plus 442 basis points, thereafter through maturity in
2031. We acquired three separate notes as part of the TCBI acquisition totaling $26.4 million. Of those notes, $10.0 million
bears an adjustable interest rate plus 350 basis points, based on a benchmark rate, adjusting quarterly until maturity on
April 11, 2028, and callable beginning April 11, 2023, $7.5 million bears an adjustable interest rate plus 350 basis points,
based on a benchmark rate, adjusting quarterly, until maturity on December 13, 2028, and callable beginning December 13,
2023, $8.9 million was called on May 1, 2023 and ceased bearing interest as of such date. This $8.9 million note was fully
extinguished during the year ended December 31, 2023. As part of valuing these three subordinated notes from TCBI, we
incurred a fair value adjustment premium of $3.4 million that will accrete over five-to-seven years, with $833,000 and $1.1
million remaining at December 31, 2024 and December 31, 2023, respectively. We recognized $1.5 million in gains on the
extinguishment of this debt during the year ended December 31, 2023.
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76
As of December 31, 2024
1 year or less
More than 1
year
but less than
3
years
3 years or
more
but less than
5
years
5 years or
more
Total
(Dollars in thousands)
Non-cancelable future operating
leases
$
5,888 $
10,864 $
8,202 $
6,844 $
31,798
Time deposits
983,140
385,363
28,410
-
1,396,913
Subordinated debt
-
-
17,500
81,427
98,927
Advances from FHLB
82,560
123,315
75,000
75,000
355,875
Subordinated debt - trust preferred
securities
-
-
-
5,000
5,000
Securities sold under agreements to
repurchase
22,621
-
-
-
22,621
Standby and commercial letters of
credit
43,881
5,885
170
16
49,952
Commitments to extend credit
762,661
373,705
144,823
96,685
1,377,874
Total
$
1,900,751 $
899,132 $
274,105 $
264,972 $
3,338,960
As of December 31, 2023
1 year or less
More than 1
year
but less than
3
years
3 years or
more
but less than
5
years
5 years or
more
Total
(Dollars in thousands)
Non-cancelable future operating
leases
$
4,429 $
7,166 $
6,426 $
5,617 $
23,638
Time deposits
1,027,366
238,222
35,490
21
1,301,099
Subordinated debt
-
-
17,500
81,427
98,927
Advances from FHLB
-
111,198
25,000
75,000
211,198
BTFP
300,000
-
-
-
300,000
Subordinated debt - trust preferred
securities
-
-
-
5,000
5,000
Securities sold under agreements to
repurchase
18,885
-
-
-
18,885
Standby and commercial letters of
credit
43,704
927
546
-
45,177
Commitments to extend credit
625,521
330,138
106,171
112,477
1,174,307
Total
$
2,019,905 $
687,651 $
191,133 $
279,542 $
3,178,231
Off-Balance Sheet Items
In the normal course of business, we enter into various transactions which, in accordance with GAAP, are not
included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers.
These transactions include commitments to extend credit and standby and commercial letters of credit which involve, to
varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated
balance sheets.
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77
Our commitments associated with outstanding standby and commercial letters of credit and commitments to extend
credit expiring by period as of the date indicated are summarized in the tables above. Because commitments associated
with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect
the actual future cash funding requirements.
Standby and commercial letters of credit are conditional commitments issued by us to guarantee the performance of a
customer to a third party. In the event of nonperformance by the customer, we have rights to the underlying collateral,
which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable
securities. The credit risk to us in issuing letters of credit is essentially the same as that involved in extending loan facilities
to our customers.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Because many of the commitments are expected to expire without being fully drawn upon, the
total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each
customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by us,
upon extension of credit, is based on management’s credit evaluation of the customer.
Interest Rate Sensitivity and Market Risk
As a financial institution, our primary component of market risk is sensitivity to movement in interest rates. Our
asset and liability management policy provides management with the guidelines for effective interest rate risk management,
and we have established a measurement system for monitoring our interest rate sensitivity position. We manage our
sensitivity position within our established guidelines.
Fluctuations in interest rates will ultimately impact the level of income and expense recorded on many of our assets
and liabilities and the market value of all interest-earning assets and interest-bearing liabilities. Interest rate risk is the
potential of economic losses due to interest rate changes. These economic losses can be reflected as a loss of future net
interest income and/or a loss of the current fair market value of our equity. The objective of interest rate risk management
is to measure the effect on net interest income and economic value of equity and to position the balance sheet to minimize
the risk of losses and maximize the amount of income without taking on unnecessary earning volatility.
We seek to manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business
however we may enter into derivatives contracts to hedge interest rate risk if it is appropriate given our risk profile and
policy guidelines. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk.
We do not own any trading assets.
Our exposure to interest rate risk is managed by the asset-liability committee (“ALCO”) of b1BANK, in accordance
with policies approved by our board of directors. In determining the appropriate level of interest rate risk, the committee
considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates,
regional economies, liquidity, business strategies and other factors. The committee meets regularly to review, among other
things, the sensitivity of assets and liabilities to interest rate changes, the book and market 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. Management employs methodologies to manage interest rate risk which include an
analysis of relationships between interest-earning assets and interest-bearing liabilities, and an interest rate shock
simulation model.
We use interest rate risk simulation models and shock analysis to test the interest rate sensitivity of net interest
income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual
maturities and re-pricing opportunities of loans are incorporated into the model as are prepayment assumptions, maturity
data and optionality. Deposit assumptions such as repricing betas and non-maturity balance decay rates are also
incorporated into the model. Model assumptions are revised and updated on a regular basis as directed by policy, and more
frequently if conditions merit. The assumptions used 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, customer behavior, and the application and timing of various
management strategies.
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78
On at least a quarterly basis, we run simulation models to calculate potential impacts to net interest income and the
economic value of equity. Specific details of the simulations are reflected in policy as directed by ALCO.
The following table summarizes the simulated change in net interest income and fair value of equity over a 12-month
horizon as of the dates indicated:
As of December 31,
2024
2023
Change in Interest Rates (Basis Points)
Percent
Change in
Net Interest
Income
Percent
Change in
Fair Value of
Equity
Percent
Change in
Net Interest
Income
Percent
Change in
Fair Value of
Equity
+300
8.10%
(0.70%)
(5.50%)
(5.59%)
+200
5.60%
(0.30%)
(3.20%)
(3.47%)
+100
2.90%
-%
(1.10%)
(1.39%)
Base
-%
-%
-%
-%
-100
(2.30%)
0.30%
0.30%
1.40%
-200
(5.20%)
(1.30%)
0.50%
2.67%
The results of the simulations are primarily driven by the contractual characteristics of all balance sheet instruments
and customer behavior.
Impact of Inflation
Our consolidated financial statements and related notes included elsewhere in this statement have been prepared in
accordance with GAAP. These require 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.
Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates
may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However,
other operating expenses do reflect general levels of inflation.
Non-GAAP Financial Measures
Our accounting and reporting policies conform to GAAP, and the prevailing practices in the banking industry.
However, we also evaluate our performance based on certain additional non-GAAP financial measures. 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 United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial
measures do not include operating and other statistical measures or ratios or statistical measures calculated using
exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are
not non-GAAP financial measures or both.
This discussion and analysis section includes certain non-GAAP financial measures (e.g., referenced as “core” or
“tangible”) intended to supplement, not substitute for, comparable GAAP measures. These measures typically adjust
income available to common shareholders for certain significant activities or transactions that in management’s opinion can
distort period-to-period comparisons of Business First’s performance. Transactions that are typically excluded from non-
GAAP measures include realized and unrealized gains/losses on former bank premises and equipment, gain/losses on sales
of securities, and acquisition-related expenses (including, but not limited to, legal costs, system conversion costs, severance
and retention payments, etc.). The measures also typically adjust goodwill and certain intangible assets from book value
and shareholders’ equity.
Management believes presentations of these non-GAAP financial measures provide useful supplemental information
that is essential to a proper understanding of the operating results of the Company’s core business. These non-GAAP
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79
disclosures are not necessarily comparable to non-GAAP measures that may be presented by other companies. You should
understand how such other banking organizations calculate their financial metrics or with names similar to the non-GAAP
financial measures we have discussed in this statement when comparing such non-GAAP financial measures.
Core Net Income. Core net income available to common shareholders for the year ended December 31, 2024 was
$65.8 million, or $2.49 per diluted common share, compared to core net income available to common shareholders of $66.3
million, or $2.62 per diluted common share, for the year ended December 31, 2023. Core net income available to common
shareholders for the year ended December 31, 2024 included a CECL impact on the Oakwood acquisition of $4.8 million,
acquisition related expenses of $1.6 million and core conversion expenses of $974,000, compared to an adjustment for $2.6
million in losses on sales of securities, $945,000 in a gain on the sale of our Leesville, Louisiana banking center, $1.5
million in a gain on the extinguishment of debt associated with the TCBI acquisition in 2022, which was attributed to the
$8.9 million subordinated debt redemption, $236,000 in acquisition-related expenses, and a $432,000 write-down on
former bank premises for the year ended December 31, 2023.
For the Years Ended December 31,
2023
2022
2022
(Dollars in thousands, except per share data) (Unaudited)
Interest Income:
Interest income
$
414,764
$
353,327
$
236,114
Core interest income
414,764
353,327
236,114
Interest Expense:
Interest expense
187,381
138,198
36,537
Core interest expense
187,381
138,198
36,537
Provision for Credit Losses:
Provision for credit losses
10,873
4,483
10,886
CECL Oakwood impact (3)
(4,824)
-
-
Core provision expense
6,049
4,483
10,886
Other Income:
Other income
44,193
36,642
29,310
(Gains) losses on former bank premises and equipment
(50)
-
717
(Gains) losses on sale of securities
(7)
2,565
48
Insurance reimbursement of storm expenditures
-
-
(687)
Gain on sale of branch
-
(945)
-
Gain on extinguishment of debt
-
(1,458)
-
Core other income
44,136
36,804
29,388
Other Expense:
Other expense
177,652
156,702
149,409
Acquisition-related expenses (2)
(1,621)
(236)
(5,178)
Write-down of former bank premises
-
(432)
-
Occupancy and bank premises - storm repair
-
-
(501)
Core conversion expense
(974)
-
-
Core other expense
175,057
156,034
143,730
Pre-Tax Income:
Pre-tax income
83,051
90,586
68,592
CECL Oakwood impact (3)
4,824
-
-
(Gains) losses on former bank premises and equipment
(50)
-
717
(Gains) losses on sale of securities
(7)
2,565
48
Insurance reimbursement of storm expenditures
-
-
(687)
Gain on sale of branch
-
(945)
-
Gain on extinguishment of debt
-
(1,458)
-
Acquisition-related expenses (2)
1,621
236
5,178
Write-down of former bank premises
-
432
-
Occupancy and bank premises - storm repair
-
-
501
Core conversion expense
974
-
-
Core pre-tax income
90,413
91,416
74,349
Provision for Income Taxes: (1)
Provision for income taxes
17,944
19,543
14,337
Tax on CECL Oakwood impact (3)
1,019
-
-
Tax on (gains) losses on former bank premises and equipment
(11)
-
151
Tax on (gains) losses on sale of securities
(1)
542
10
Tax on insurance reimbursement of storm expenditures
-
-
(144)
Tax on gain on sale of branch
-
(200)
-
Tax on gain on extinguishment of debt
-
(308)
-
Tax on acquisition-related expenses (2)
97
21
942
Tax on write-down of former bank premises
-
91
-
Tax on occupancy and bank premises - storm repair
-
-
106
Tax on core conversion expense
205
-
-
Core provision for income taxes
19,253
19,689
15,402
Preferred Dividends
Preferred dividends
5,401
5,401
1,350
Core preferred dividends
5,401
5,401
1,350
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80
Net Income Available to Common Shareholders:
Net income available to common shareholders
59,706
65,642
52,905
CECL Oakwood impact (3), net of tax
3,805
-
-
(Gains) losses on former bank premises and equipment , net of tax
(39)
-
566
(Gains) losses on sale of securities, net of tax
(6)
2,023
38
Insurance reimbursement of storm expenditures, net of tax
-
-
(543)
Gain on sale of branch, net of tax
-
(745)
-
Gain on extinguishment of debt, net of tax
-
(1,150)
-
Acquisition-related expenses (2), net of tax
1,524
215
4,236
Write-down of former bank premises, net of tax
-
341
-
Occupancy and bank premises - storm repair, net of tax
-
-
395
Core conversion expense, net of tax
769
-
-
Core net income available to common shareholders
$
65,759
$
66,326
$
57,597
Diluted Earnings Per Common Share:
Diluted earnings per common share
$
2.26
$
2.59
$
2.32
CECL Oakwood impact (3), net of tax
0.14
-
-
(Gains) losses on former bank premises and equipment , net of tax
-
-
0.02
(Gains) losses on sale of securities, net of tax
-
0.08
-
Insurance reimbursement of storm expenditures, net of tax
-
-
(0.02)
Gain on sale of branch, net of tax
-
(0.03)
-
Gain on extinguishment of debt, net of tax
-
(0.04)
-
Acquisition-related expenses (2), net of tax
0.06
0.01
0.18
Write-down of former bank premises, net of tax
-
0.01
-
Occupancy and bank premises - storm repair, net of tax
-
-
0.02
Core conversion expense, net of tax
0.03
-
-
Core diluted earnings per common share
$
2.49
$
2.62
$
2.52
_______________________________
(1)
Tax rates, exclusive of certain nondeductible acquisition-related expenses and goodwill, utilized were 21.129% for both 2024 and 2023. These
rates approximate the marginal tax rates for the applicable periods.
(2)
Includes merger and conversion-related expenses and salary and employee benefits.
(3)
CECL non-PCD provision/unfunded commitment expense attributable to Oakwood.
Tangible Book Value Per Common Share. Tangible book value per common share is a non-GAAP measure generally
used by financial analysts and investment bankers to evaluate financial institutions. We calculate (1) tangible common
equity as shareholders’ equity less preferred stock, goodwill, and core deposit and customer intangible assets, net of
accumulated amortization, and (2) tangible book value per common share as tangible common equity divided by shares of
common stock outstanding. The most directly comparable GAAP financial measure for tangible book value per common
share is book value per common share.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity
and presents tangible book value per common share compared to book value per common share:
As of December 31,
2024
2023
(Dollars in thousands, except
per share data) (Unaudited)
Tangible Common Equity
Total shareholders' equity
$
799,466 $
644,259
Preferred stock
(71,930)
(71,930)
Total common shareholders' equity
727,536
572,329
Adjustments:
Goodwill
(121,572)
(88,391)
Core deposit and customer intangibles
(17,252)
(11,895)
Total tangible common equity
$
588,712 $
472,043
Common shares outstanding (1)
29,552,358
25,351,809
Book value per common shares (1)
$
24.62 $
22.58
Tangible book value per common shares (1)
19.92
18.62
_______________________________
(1)
Excludes the dilutive effect, if any, of 198,238 and 217,094 shares of common stock issuable upon exercise of outstanding stock
options and restricted stock awards as of December 31, 2024 and 2023, respectively.
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81
Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure
generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate tangible
common equity, as described above, and tangible assets as total assets less goodwill, core deposit and customer intangible
assets, net of accumulated amortization. The most directly comparable GAAP financial measure for tangible common
equity to tangible assets is total common shareholders’ equity to total assets.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity
and total assets to tangible assets:
As of December 31,
2023
2022
(Dollars in thousands, except
per share data) (Unaudited)
Tangible Common Equity
Total shareholders' equity
$
799,466
$
644,259
Preferred stock
(71,930)
(71,930)
Total common shareholders' equity
727,536
572,329
Adjustments:
Goodwill
(121,572)
(88,391)
Core deposit and customer intangibles
(17,252)
(11,895)
Total tangible common equity
$
588,712
$
472,043
Tangible Assets
Total Assets
$ 7,857,090
$ 6,584,550
Adjustments:
Goodwill
(121,572)
(88,391)
Core deposit and customer intangibles
(17,252)
(11,895)
Total tangible assets
$ 7,718,266
$ 6,484,264
Common Equity to Total Assets
9.3%
8.7%
Tangible Common Equity to Tangible Assets
7.6
7.3
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in
the United States and with general practices within the financial services industry. Application of these principles requires
management to make estimates and assumptions that affect the amounts reported in the 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. These assumptions form the basis for our judgments about the carrying values
of assets and liabilities that are not readily available from independent, objective sources. 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.
We have identified the following critical accounting policies and estimates that, due to the difficult, subjective or
complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of our financial
statements to those judgments and assumptions, are critical to an understanding of our financial condition and results of
operations. We believe that the judgments, estimates and assumptions used in the preparation of our financial statements
are appropriate.
Acquired Loans
Loans acquired in business combinations are initially recorded at fair value which includes an estimate of credit
losses expected to be realized over the remaining lives of the loans. Acquired loans are accounted for based upon a
determination of whether they were purchased with more-than insignificant amount of credit deterioration (“PCD” loans)
or an insignificant amount of credit deterioration (“non-PCD” loans), in either case as compared to origination. The
difference between the estimated fair value of the acquired loan related to non-credit deterioration is treated as an
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82
adjustment to the contractual yield and accreted into interest income over the remaining life of the loan. Acquired loans are
generally valued using a discount cash flow model. The assumptions in the model included prepayment rates, default/loss
given default rates, collateral values, recovery rates, and discount rates.
Allowance for Credit Losses on Loans and Unfunded Commitments
The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio,
including unfunded credit commitments. The allowance for credit losses is recorded against outstanding loan balances and
unfunded credit commitments and represents an estimate of the expected losses within the portfolio at the end of the
relevant reporting period.
As further discussed in the consolidated financial statements in Note 1 – Summary of Significant Accounting
Policies, our policies for the allowance for credit losses were modified on January 1, 2023, to reflect the adoption of
Accounting Standards Codification (“ASC”) Topic 326 (“ASC 326”) Financial Instruments – Credit Losses.
Management estimates the allowance for credit losses by considering forecast macroeconomic conditions, trends in
the portfolio, credit management and underwriting practices and economic conditions affecting our operating footprint.
After the forecast period, the Company reverts to long-term historical loss experience on a straight-line basis over a one-
year period, adjusted for the composition of the current loan portfolio, to estimate losses over the remaining lives of the
portfolio. Development of the estimate is dependent on reported peer losses.
Individual loan loss estimates are generally dependent on the fair value of collateral, as well as estimates of the cost
to market and sell collateral associated with an individual loan. These estimates are sensitive specific individual collateral
markets and can change significantly based on the specific collateral. To a lesser extent, individual reserve estimates reflect
specific loan cash flow amounts, which are dependent on borrower specific repayment expectations.
The results of our estimated allowance for credit losses also incorporate the reserve for unfunded lending
commitments. This reserve methodology is similar to the methodology for loans, however, an added estimate of the
expected use of unfunded credit commitments is included in the estimate.
Overall, the allowance for credit losses is based upon management’s best estimate using available information at the
time. The estimate can be significantly impacted by unexpected changes in the macroeconomic environment, borrower
behavior, credit management practices or other relevant credit information.
Purchase Accounting Adjustments (other than loans)
The Company accounts for acquisitions using the acquisition method of accounting. Under this method, the
Company records the assets acquired, including identified intangible assets, and liabilities assumed, at their respective fair
values, which generally involves estimates based on third party valuations, such as appraisals, discounted cash flow
analyses or other valuation techniques, as well as internal valuations for certain instruments. Core deposit intangibles,
deposit premiums, securities, properties, and borrowings are some of the more subjective instruments which are generally
fair valued during acquisitions. Further, the determination of the useful lives as well as the appropriate amortization method
of other intangible assets is also subjective.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Reference is made to the subheading entitled “Interest Rate Sensitivity and Market Risk” of the Management’s
Discussion and Analysis of Financial Condition and Results of Operations section of this report.
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83
ITEM 8. Financial Statements and Supplementary Data.
CONTENTS
Annual Audited Financial Statements:
Report of Independent Registered Public Accounting Firm
85
Consolidated Balance Sheets
89
Consolidated Statements of Income
91
Consolidated Statements of Comprehensive Income
92
Consolidated Statements of Changes in Shareholders' Equity
93
Consolidated Statements of Cash Flows
94 - 95
Notes to Consolidated Financial Statements
96 - 140
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84
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee
Business First Bancshares, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Business First Bancshares, Inc. (the “Company”) as of
December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of
its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March 7, 2025, expressed an opinion that the Company had not maintained
effective internal control over financial reporting as of December 31, 2024.
Change in Accounting Principle
As discussed in Notes 1 and 7 to the financial statements, effective January 1, 2023, the Company changed its method of
accounting for credit losses due to the adoption of Accounting Standards Codification Topic 326, Financial Instruments –
Credit Losses.
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 audits.
We are a public accounting firm registered with the 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 financial statements are free of material misstatement,
whether due to error or fraud.
Our audits 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 include examining, on a test
basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex
judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the
critical audit matter or on the accounts or disclosures to which it relates.
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85
Allowance for Credit Losses
As described in Note 1 and Note 7 to the consolidated financial statements, the Company’s allowance for loan losses is a
component of the allowance for credit losses and was $54.8 million as of December 31, 2024. The allowance for loan
losses is estimated utilizing forward-looking expected loss models which consider a variety of factors affecting lifetime
credit losses. Loans sharing risk characteristics are grouped into pools to estimate expected credit losses. The Company
incorporates forecasted economic scenarios over a reasonable and supportable forecast period which incorporates Company
and peer historical losses. Loss estimates also consider qualitative factors affecting credit losses not reflected in the model.
We identified the allowance for loan losses as a critical audit matter. The principal considerations for that determination
included the high degree of judgment and subjectivity relating to assumptions used in the model, such as management’s use
of qualitative factor adjustments related to economic conditions. Auditing these assumptions required a high degree of
auditor effort, specialized skills and knowledge, and significant auditor judgment.
The primary procedures we performed to address this critical audit matter included:
◦
We obtained an understanding of the Company’s model and process for determining the allowance for loan losses
and evaluated the design and tested the operating effectiveness of controls relating to the allowance for loan
losses, including controls over management’s review and approval of qualitative factor adjustments related to
economic conditions applied within the qualitative framework to address risks not already incorporated within the
model.
◦
We evaluated the reasonableness and adequacy of management’s qualitative factor adjustments related to
economic conditions and the completeness and accuracy of data utilized in development of such qualitative factor
adjustments.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 2019.
Fort Worth, Texas
March 7, 2025
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86
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee
Business First Bancshares, Inc.
Opinion on the Internal Control over Financial Reporting
We have audited Business First Bancshares Inc’s (the “Company”) internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will
not be prevented or detected on a timely basis. The following material weakness has been identified and included in
management’s assessment. The Company did not have effective information technology general controls (ITGCs)
supporting the Company’s internal control over financial reporting related to change management segregation of duties as
described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. This material
weakness was considered in determining the nature, timing, and extent of auditing procedures applied in our audit of the
Company’s consolidated financial statements, and this report does not affect our report dated March 7, 2025, on those
consolidated financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the
control criteria, Business First Bancshares, Inc. has not maintained effective internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2024 and 2023, and for each
of the three years in the period ended December 31, 2024, and our report dated March 7, 2025, expressed an unqualified
opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
We are a public accounting firm registered with the 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 effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
As described in Management’s Report on Internal Control over Financial Reporting, the scope of management’s
assessment of internal control over financial reporting as of December 31, 2024, has excluded Oakwood Bancshares, Inc.
(“Oakwood’) acquired on October 1, 2024. We have also excluded Oakwood from the scope of our audit of internal control
over financial reporting. Oakwood represented 11.0% percent of consolidated total assets as of December 31, 2024.
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87
Definitions and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Forvis Mazars, LLP
Fort Worth, Texas
March 7, 2025
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88
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
2024
2023
ASSETS
Cash and Due from Banks
$
319,098 $
226,110
Federal Funds Sold
197,669
151,134
Securities Purchased Under Agreements to Resell
50,835
-
Securities Available for Sale, at Fair Values (Amortized Cost of $973,423 at
December 31, 2024 and $963,978 at December 31, 2023)
893,549
879,571
Mortgage Loans Held for Sale
717
835
Loans and Lease Receivable, Net of Allowance for Loan Losses of $54,840 and $40,414
at December 31, 2024 and 2023, respectively
5,926,559
4,952,371
Premises and Equipment, Net
81,953
69,480
Accrued Interest Receivable
35,872
29,916
Other Equity Securities
41,100
33,942
Other Real Estate Owned
5,529
1,685
Cash Value of Life Insurance
117,645
96,478
Deferred Taxes
29,591
27,323
Goodwill
121,572
88,391
Core Deposit and Customer Intangible
17,252
11,895
Other Assets
18,149
15,419
Total Assets
$
7,857,090 $
6,584,550
LIABILITIES
Deposits:
Noninterest Bearing
$
1,357,045 $
1,299,090
Interest Bearing
5,154,286
3,949,700
Total Deposits
6,511,331
5,248,790
Securities Sold Under Agreements to Repurchase
22,621
18,885
Bank Term Funding Program
-
300,000
Federal Home Loan Bank Borrowings
355,875
211,198
Subordinated Debt
99,760
99,990
Subordinated Debt - Trust Preferred Securities
5,000
5,000
Accrued Interest Payable
5,969
14,841
Other Liabilities
57,068
41,587
Total Liabilities
7,057,624
5,940,291
Commitments and Contingencies (See Notes 19 and 22)
SHAREHOLDERS' EQUITY
Preferred Stock, No Par Value; 5,000,000 Shares Authorized; 72,010 Shares ($1,000
Liquidation Preference) Issued and Outstanding at both December 31, 2024 and 2023
71,930
71,930
Common Stock, $1 Par Value; 50,000,000 Shares Authorized; 29,552,358 and
25,351,809 Shares Issued and Outstanding at December 31, 2024 and 2023,
respectively
29,552
25,352
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89
Additional Paid-in Capital
500,024
397,447
Retained Earnings
260,958
216,115
Accumulated Other Comprehensive Loss
(62,998)
(66,585)
Total Shareholders' Equity
799,466
644,259
Total Liabilities and Shareholders' Equity
$
7,857,090 $
6,584,550
The accompanying notes are an integral part of these financial statements.
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90
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Years Ended December 31,
2024
2023
2022
Interest Income:
Interest and Fees on Loans
$
374,555 $
323,327 $
218,032
Interest and Dividends on Non-taxable Securities
4,265
4,340
4,131
Interest and Dividends on Taxable Securities
20,994
15,785
12,372
Interest on Federal Funds Sold and Due From Banks
14,950
9,875
1,579
Total Interest Income
414,764
353,327
236,114
Interest Expense:
Interest on Deposits
165,094
106,908
24,413
Interest on Borrowings
22,287
31,290
12,124
Total Interest Expense
187,381
138,198
36,537
Net Interest Income
227,383
215,129
199,577
Provision for Credit Losses
10,873
4,483
10,886
Net Interest Income after Provision for Credit Losses
216,510
210,646
188,691
Other Income:
Service Charges on Deposit Accounts
10,577
9,704
8,272
Gain (Loss) on Sales of Securities
7
(2,565)
(48)
Gain on Sales of Loans
2,973
1,972
574
Other Income
30,636
27,531
20,512
Total Other Income
44,193
36,642
29,310
Other Expenses:
Salaries and Employee Benefits
103,917
90,611
85,222
Occupancy and Equipment Expense
23,989
20,859
19,367
Other Expenses
49,746
45,232
44,820
Total Other Expenses
177,652
156,702
149,409
Income Before Income Taxes
83,051
90,586
68,592
Provision for Income Taxes
17,944
19,543
14,337
Net Income
65,107
71,043
54,255
Preferred Stock Dividends
5,401
5,401
1,350
Net Income Available to Common Shareholders
$
59,706 $
65,642 $
52,905
Earnings Per Common Share:
Basic
$
2.27 $
2.62 $
2.34
Diluted
$
2.26 $
2.59 $
2.32
The accompanying notes are an integral part of these financial statements.
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91
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Years Ended December 31,
2024
2023
2022
Consolidated Net Income
$
65,107 $
71,043 $
54,255
Other Comprehensive Income (Loss):
Unrealized Gain (Loss) on AFS Investment Securities
4,527
13,006
(93,418)
Unrealized Gain (Loss) on Share of Other Equity Investments
14
(782)
874
Reclassification Adjustment for Gains (Losses) on Sales of AFS
Investment Securities Included in Net Income
7
(2,565)
(48)
Income Tax Effect
(961)
(2,040)
19,565
Other Comprehensive Income (Loss)
3,587
7,619
(73,027)
Consolidated Comprehensive Income (Loss)
$
68,694 $
78,662 $
(18,772)
The accompanying notes are an integral part of these financial statements.
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92
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in thousands, except per share data)
Preferred
Stock
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders'
Equity
Balances at December 31, 2021
$
- $
20,400 $
292,271 $ 121,874 $
(1,177) $
433,368
Comprehensive Income:
Net Income
-
-
-
54,255
-
54,255
Other Comprehensive Loss
-
-
-
-
(73,027)
(73,027)
Cash Dividends Declared on
Preferred Stock, $18.75 Per Share
-
-
-
(1,350)
-
(1,350)
Cash Dividends Declared on
Common Stock, $0.48 Per Share
-
-
-
(10,824)
-
(10,824)
Preferred Stock Issuance, Net of
Issuance Costs
71,930
-
-
-
-
71,930
Stock Issuance, Net of Issuance
Costs
-
4,636
98,899
-
-
103,535
Stock Based Compensation Cost
-
119
3,577
-
-
3,696
Surrendered Shares of Options
Exercised
-
(45)
(1,057)
-
-
(1,102)
Balances at December 31, 2022
71,930
25,110
393,690
163,955
(74,204)
580,481
Cumulative Effect of Change in
Accounting Principle for Credit
Losses
-
-
-
(827)
-
(827)
Comprehensive Income:
Net Income
-
-
-
71,043
-
71,043
Other Comprehensive Income
-
-
-
-
7,619
7,619
Cash Dividends Declared on
Preferred Stock, $75.00 Per Share
-
-
-
(5,401)
-
(5,401)
Cash Dividends Declared on
Common Stock, $0.50 Per Share
-
-
-
(12,655)
-
(12,655)
Stock Based Compensation Cost
-
242
3,757
-
-
3,999
Balances at December 31, 2023
71,930
25,352
397,447
216,115
(66,585)
644,259
Comprehensive Income:
Net Income
-
-
-
65,107
-
65,107
Other Comprehensive Income
-
-
-
-
3,587
3,587
Cash Dividends Declared on
Preferred Stock, $75.00 Per Share
-
-
-
(5,401)
-
(5,401)
Cash Dividends Declared on
Common Stock, $0.56 Per Share
-
-
-
(14,863)
-
(14,863)
Stock Issuance, Net of Issuance
Costs
-
3,973
99,805
-
-
103,778
Stock Based Compensation Cost
-
227
2,772
-
-
2,999
Balances at December 31, 2024
$
71,930 $
29,552 $
500,024 $ 260,958 $
(62,998) $
799,466
The accompanying notes are an integral part of these financial statements.
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93
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31,
2024
2023
2022
Cash Flows From Operating Activities:
Consolidated Net Income
$
65,107 $
71,043 $
54,255
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Provision for Credit Losses
10,873
4,483
10,886
Depreciation and Amortization
5,257
4,670
4,818
Net Accretion of Purchase Accounting Adjustments
(2,505)
(7,615)
(7,949)
Stock Based Compensation Cost
2,999
3,999
3,696
Net Amortization of Securities
2,140
4,197
6,005
(Gain) Loss on Sales of Securities
(7)
2,565
48
Gain on Sale Loans
(2,376)
(671)
(398)
Income on Other Equity Securities
(2,201)
(3,045)
(1,554)
(Gain) Loss on Sale of Other Real Estate Owned, Net of
Writedowns
(89)
(214)
92
Increase in Cash Value of Life Insurance
(2,875)
(2,247)
(1,931)
Deferred Income Tax Benefit
(962)
(2,052)
(1,368)
Gain on Sale of Branch
-
(945)
-
Changes in Assets and Liabilities:
Increase in Accrued Interest Receivable
(3,079)
(4,250)
(3,466)
(Increase) Decrease in Other Assets
9
(1,683)
6,075
Increase (Decrease) in Accrued Interest Payable
(10,498)
12,749
519
Increase (Decrease) in Other Liabilities
(391)
11,443
(151)
Net Cash Provided by Operating Activities
61,402
92,427
69,577
Cash Flows From Investing Activities:
Purchases of Securities Available for Sale
(104,165)
(131,038)
(102,809)
Proceeds from Maturities / Sales of Securities Available for Sale
40,720
91,981
38,951
Proceeds from Paydowns of Securities Available for Sale
67,864
53,916
95,019
Net Cash Received in Acquisition
96,824
-
163,460
Net Cash Paid in Sale of Branch
-
(14,506)
-
Purchases of Other Equity Securities
(5,015)
(15,573)
(22,670)
Redemption of Other Equity Securities
1,713
21,361
10,327
Purchase of Life Insurance
(3,000)
(2,273)
(18,000)
Proceeds from Death Benefit of Cash Value of Life Insurance
813
-
499
Net Increase in Loans
(294,941)
(379,073)
(1,070,354)
Net Purchases of Premises and Equipment
(1,562)
(11,648)
(7,781)
Loss on Disposal of Premises and Equipment
7
-
717
Proceeds from Sales of Other Real Estate
621
1,240
682
Net Increase in Securities Purchased Under Agreements to Resell
(50,835)
-
-
Net (Increase) Decrease in Federal Funds Sold
(43,957)
(135,528)
211,438
Net Cash Used in Investing Activities
(294,913)
(521,141)
(700,521)
(CONTINUED)
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94
Years Ended December 31,
2024
2023
2022
Cash Flows From Financing Activities:
Net Increase in Deposits
520,570
444,780
265,827
Net Increase (Decrease) in Securities Sold Under Agreements to
Repurchase
3,736
(1,323)
1,087
Net Increase (Decrease) in Federal Funds Purchased
-
(14,057)
14,057
Net Advances (Repayments) on Federal Home Loan Bank
Borrowings
122,488
(198,902)
327,203
Net Proceeds (Repayments) on Bank Term Funding Program
(300,000)
300,000
-
Net Proceeds (Repayments) from Short Term Borrowings
-
-
(11)
Repayment of Subordinated Debt
-
(8,900)
-
Gain on Extinguishment of Debt
-
(1,458)
-
Proceeds from Issuance of Preferred Stock, Net of Issuance Costs
-
-
71,930
Net Proceeds (Costs) from Issuance of Common Stock
(31)
-
48,492
Surrendered Shares of Options Exercised
-
-
(1,102)
Payment of Dividends on Preferred Stock
(5,401)
(5,401)
(1,350)
Payment of Dividends on Common Stock
(14,863)
(12,655)
(10,824)
Net Cash Provided by Financing Activities
326,499
502,084
715,309
Net Increase in Cash and Cash Equivalents
92,988
73,370
84,365
Cash and Cash Equivalents at Beginning of Period
226,110
152,740
68,375
Cash and Cash Equivalents at End of Period
$
319,098 $
226,110 $
152,740
Supplemental Disclosures for Cash Flow Information:
Cash Payments for:
Interest on Deposits
$
164,197 $
104,811 $
23,846
Interest on Borrowings
$
32,056 $
20,638 $
11,953
Income Tax Payments
$
17,352 $
16,095 $
13,550
Supplemental Schedule for Noncash Investing and Financing
Activities:
Change in the Unrealized Gain (Loss) on Securities Available for Sale $
4,534 $
10,441 $
(93,466)
Change in the Unrealized Gain (Loss) on Equity Securities
$
14 $
(782) $
874
Change in Deferred Tax Effect on the Unrealized (Gain) Loss on
Securities Available for Sale and Equity Securities
$
(961) $
(2,040) $
19,565
Transfer of Loans to Other Real Estate
$
4,376 $
1,339 $
719
Acquisitions:
Fair Value of Tangible Assets Acquired
$
847,743 $
- $
531,510
Other Intangible Assets Acquired
7,640
-
3,875
Liabilities Assumed
781,609
-
508,991
Net Identifiable Assets Acquired Over Liabilities Assumed
$
73,774 $
- $
26,394
The accompanying notes are an integral part of these financial statements.
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95
Note 1– Nature of Operations – Summary of Significant Accounting Policies –
The accounting principles followed by Business First Bancshares, Inc. and its two wholly-owned subsidiaries,
b1BANK (the “Bank”), and Coastal Commerce Statutory Trust, I; and the Bank’s wholly-owned subsidiaries, Business
First Insurance, LLC, Smith Shellnut Wilson, LLC (“SSW”), Waterstone LSP, LLC ("Waterstone"), and b1 Securities,
LLC ("b1Securities") are those which are generally practiced within the banking industry. The methods of applying
those principles conform with generally accepted accounting principles (“GAAP”) and have been applied on a
consistent basis. The principles which significantly affect the determination of financial position, results of operations,
changes in shareholders’ equity and cash flows are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of Business First Bancshares, Inc. and its wholly-owned
subsidiary, b1BANK, and the Bank’s wholly-owned subsidiaries, Business First Insurance, LLC, SSW, Waterstone and
b1Securities (collectively, the “Company”). All significant intercompany balances and transactions have been
eliminated.
The Company has a single reportable operating segment called Community Banking. Our chief executive officer is our
chief operating decision maker. Our chief executive officer reviews net income on a routine basis to make decisions
about allocating capital and personnel throughout the Company, as well as the composition of the balance sheet. See the
Consolidated Statements of Income, Consolidated Statements of Financial Condition, and Note 18 for information
utilized to assess performance of the reportable operating segment.
Nature of Operations
The Bank operates out of full-service banking centers and loan production offices in markets across Louisiana, the
Dallas/Fort Worth, Texas metroplex, and Houston, Texas. As a state bank, it is subject to regulation by the Office of
Financial Institutions (“OFI”), State of Louisiana, and the Federal Deposit Insurance Corporation (“FDIC”), and
undergoes periodic examinations by these agencies. The Company is also regulated by the Federal Reserve and is
subject to periodic examinations.
On March 1, 2022, the Company completed the acquisition of Texas Citizens Bancorp, Inc. (“TCBI”), and its wholly-
owned subsidiary, Texas Citizens Bank, National Association, located in Pasadena, Texas. The company issued
2,069,532 shares of its common stock to the former shareholders of TCBI. At February 28, 2022, TCBI reported $534.2
million in total assets, $349.5 million in loans and $477.2 million in deposits.
On January 31, 2024, the Company completed the acquisition, through b1BANK, of Waterstone, headquartered in
Katy, Texas. Waterstone offers community banks and small businesses a range of SBA lending services including
planning, pre-qualification, packaging, closing and disbursements, servicing and liquidations. Upon consummation of
the acquisition, we paid $3.3 million in cash to the former owners of Waterstone.
On October 1, 2024, the Company completed the acquisition of Oakwood Bancshares, Inc. (“Oakwood”), the parent
bank holding company for Oakwood Bank, located in the Dallas, Texas region. The company issued 3,973,134 shares
of its common stock to the former shareholders of Oakwood. At September 30, 2024, Oakwood reported $863.6 million
in total assets, $700.2 million in loans and $741.3 million in deposits.
Estimates
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures.
These estimates are based on management’s best knowledge of current events and actions the Company may undertake
in the future. Critical accounting estimates that are particularly susceptible to significant change for the Company
include the determination of the acquired loans and allowance for credit losses and purchase accounting adjustments
(other than loans). Other estimates include goodwill, fair value of financial instruments, investment securities and the
assessment of income taxes. Management does not anticipate any material changes to estimates in the near term.
Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors
such as market interest rates and employment rates, changes to operating policies and procedures, economic conditions
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in the Company’s markets, and changes in applicable banking regulations. Actual results may ultimately differ from
estimates.
The Bank’s loans are generally secured by specific items of collateral including real property, business assets, and
consumer assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor
their contracts is dependent on local economic conditions in the Bank’s market area.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts
of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require
the Bank to recognize additional losses based on their judgments about information available to them at the time of
their examination.
Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near
term. However, the amount of the change that is reasonably possible cannot be estimated.
Acquisition Accounting
Acquisitions are accounted for under the purchase method of accounting. Purchased assets and assumed liabilities are
recorded at their respective acquisition date fair values, and identifiable intangible assets are recorded at fair value. If
the consideration given exceeds the fair value of the net assets received, goodwill is recognized. The Company
generally records provisional amounts of fair value at the time of acquisition based on the information available. The
provisional 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.
Securities
Management determines the appropriate classification of debt securities (held to maturity, available for sale or trading)
at the time of purchase and re-evaluates this classification quarterly. Securities classified as available for sale are those
debt securities the Bank intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to
sell a security classified as available for sale would be based on various factors, including significant movements in
interest rates, changes in the maturity mix of the Bank’s assets and liabilities, liquidity needs, regulatory capital
considerations, and other similar factors. Securities available for sale are recorded at fair value. Unrealized gains or
losses are reported as a component of comprehensive income. Realized gains or losses, determined on the basis of the
cost of specific securities sold, are included in earnings.
Securities classified as held to maturity are those debt securities the Bank has both the intent and ability to hold to
maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These
securities are recorded at cost adjusted for amortization of premium and accretion of discount, computed by various
methods approximating the interest method over their contractual lives. The Bank has no securities classified as held to
maturity at December 31, 2024 and 2023.
Securities classified as trading are those securities held for resale in anticipation of short-term market movements.
These securities are recorded at market value with any market adjustments included in earnings. The Bank has no
securities classified as trading at December 31, 2024 and 2023.
Other Equity Securities
The Bank has invested in Federal Home Loan Bank (“FHLB”) stock, and other similar correspondent banks, which is
reflected at cost in these financial statements. As a member of the FHLB System, the Bank is required to purchase and
maintain stock in an amount determined by the FHLB. The FHLB stock is redeemable at par value at the discretion of
the FHLB. The Bank has invested in certain equity investments which are accounted for under the equity method of
accounting, which are considered to be variable interest entities (“VIE”).
Loans, including acquired loans
Loans
Loans are stated at principal amounts outstanding, adjusted for deferred fees, costs and fair value adjustments, in the
case of acquired loans, less the allowance for loan losses. Interest on loans is accrued daily based on the principal
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outstanding. Deferred fees, costs and fair value adjustments for acquired loans are recognized as an adjustment to yield
over the life of the loan.
Generally, the Bank discontinues the accrual of interest income when a loan becomes 90 days past due as to principal or
interest. When a loan is placed on nonaccrual status, previously recognized but uncollected interest is reversed from
interest income. Subsequent cash receipts on nonaccrual loans are generally accounted for on the cost recovery method
until the loans qualify for return to accrual status. Loans are returned to accrual status when all the principal and interest
amounts contractually due are brought current and future payments are reasonably assured.
Prior to January 1, 2023, the Bank classified loans as impaired when it was probable the Bank would be unable to
collect the scheduled payments of principal and interest when due according to the contractual terms of the loan
agreement.
Acquired Loans
Purchased loans acquired in a business combination are initially recorded at their estimated fair value as of the
acquisition date.
Subsequent to acquisition, acquired loans are accounted for based upon a determination of whether they were purchased
with more-than insignificant amount of credit deterioration (“PCD”) or an insignificant (“non-PCD”) amount of credit
deterioration compared to origination. In either case, the difference between the estimated fair value of the acquired
loan related to non-credit deterioration is treated as an adjustment to the contractual yield and accreted into interest
income over the remaining life of the loan.
Effective January 1, 2023, the Company adopted ASU 2016-13, Financial Instrument – Credit Losses (Topic 326).
Measurement of Credit Losses on Financial Instruments related to the impairment of financial instruments (ASU
2016-13). Prior to the adoption of Financial Instrument – Credit Losses (Topic 324), Measurement of Credit Losses on
Financial Instruments, commonly referred to as the Current Expected Credit Loss (“CECL”), ASU 2016-13, acquired
performing loans were accounted for under ASC 310-20, Nonrefundable Fees and Other Costs, with the related
discount or premium being recognized as an adjustment to yield over the life of the loan and acquired impaired loans
were accounted for according to ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit
Quality (“ASC 310-30”). Under this method, adjustments to cash flows from the original acquisition date estimates
were accounted for as adjustments to accretion for these loans.
Allowance for Credit Losses
Allowance for Loan Losses
Effective January 1, 2023, the allowance for credit losses is established for current expected credit losses on the
Company’s loan portfolio, including unfunded credit commitments. Upon adoption of the guidance on January 1, 2023,
we recognized an $827,000 reduction to retained earnings, after recording the relating deferred tax asset adjustment at
our adjusted tax rate.
The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs,
inclusive of recoveries. Management evaluates the appropriateness of the allowance for credit losses on a quarterly
basis. The allowance considers expected losses for the remaining lives of the applicable assets. The Company
subscribes to a third-party service to provide economic forecasts at both the national and state levels, including GDP
and unemployment, and other relevant forecasts. National forecasted economic scenarios are considered over a
reasonable and supportable forecast period, currently one year, which incorporates Company and peer historical losses.
After the forecast period, the Company reverts to long-term historical loss experience on a straight-line basis over a
one-year period, adjusted for the composition of the current loan portfolio, to estimate losses over the remaining lives of
the portfolio. The economic scenarios are updated at least quarterly and are designed to provide estimates that take into
consideration the customer base of our loan portfolio. Loss estimates also consider qualitative factors affecting credit
losses not reflected in the model, including trends in the portfolio, credit management and underwriting practices and
forecasted economic conditions affecting our operating footprint.
The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors
affecting lifetime credit losses. These factors include loan and borrower characteristics, such as internal risk ratings,
delinquency status, collateral type and available valuation information, and the remaining term of the loan, adjusted for
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expected prepayments, with loans sharing risk characteristics grouped into pools to estimate expected losses. Where
loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses.
For each loan portfolio, model estimates are adjusted as necessary to consider any relevant qualitative factors that
would affect the accuracy of the model. The results of the analysis are evaluated quarterly to confirm the estimates are
appropriate for each loan portfolio. Expected credit loss estimates also include consideration of expected cash
recoveries on loans previously charged-off, or, expected recoveries on collateral dependent loans where recovery is
expected through sale of the collateral.
The allowance recorded for individually evaluated loans is based on an analysis utilizing expected cash flows
discounted using the original effective interest rate, the observable market price of the loan, or, when repayment is
expected through the sale of collateral, the fair value of the collateral, less selling costs, for collateral-dependent loans.
Prior to the adoption of ASU 2016-13, the allowance for credit losses on loans was a contra-asset valuation account
established through a provision for loan losses charged to expense, which represented management’s best estimate of
inherent losses that had been incurred within the existing portfolio of loans. The allowance for credit losses on loans
included allowance allocations calculated in accordance with ASC Topic 310, “Receivables” and allowance allocations
calculated in accordance with ASC Topic 450, “Contingencies.”
Allowance for loans acquired with credit deterioration
Beginning January 1, 2023, when a loan portfolio is purchased, an allowance is established for those loans considered
purchased with more-than-insignificant credit deterioration (PCD) loans, and those not considered purchased with
more-than-insignificant credit deterioration (non-PCD). The allowance established utilizes the same risk factors
discussed above for our non-acquired allowance. The allowance established for non-PCD loans is recognized through
provision expense upon acquisition, whereas the allowance established for loans considered PCD at acquisition is offset
by an increase in the basis of the acquired loans. Any subsequent increases and decreases in the allowance related to
acquired loans are recognized through provision expense, with future charge-offs recorded to the allowance.
Allowance for unfunded credit commitments
The Company also assesses the credit risk associated with off-balance sheet loan commitments and letters of credit. The
liability for off-balance sheet credit exposure related to loan commitments and other credit guarantees is included in
other liabilities. Therefore business processes and credit risks associated with unfunded credit commitments are
essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit
commitments, adjusted for an expectation of the actual utilization of the committed credit facility.
Allowance on investment securities
The allowance for credit losses encompasses potential expected credit losses related to the securities portfolio for credit
losses. The assessment includes reviewing historical loss data for both our portfolio and similar types of investment
securities to develop an estimate for the current securities portfolio. Additionally, our review of the securities portfolio
for expected credit losses includes an evaluation of factors including the security issuer bond ratings, delinquency
status, insurance or other available credit support, as well as our expectations of the forecasted economic outlook
relevant to these securities, and our ability and intent to hold the security over a period of time sufficient to recover its
value up to the amortized cost basis. The results of the analysis are evaluated quarterly to confirm that credit loss
estimates are appropriate for the securities portfolio.
Based on our assessments, expected credit losses on the investment securities portfolio as of December 31, 2024 and
2023, was negligible and therefore, no allowance for credit loss was recorded related to our investment securities.
Prior to the adoption of ASU 2016-13, declines in the fair value of available-for-sale securities below their cost that
were deemed to be other than temporary were reflected in earnings as realized losses. In estimating other-than-
temporary impairment losses prior to January 1, 2023, management considered, among other things, (i) the length of
time and the extent to which the fair value had been less than cost, (ii) the financial condition and near-term prospects
of the issuer and (iii) the intent and our ability to retain our investment in the issuer for a period of time sufficient to
allow for any anticipated recovery in fair value.
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Accrued Interest
The Company has elected to exclude accrued interest receivable from the amortized cost basis on its loan and debt
securities portfolio. The Company has also elected to not measure an allowance for credit losses on accrued interest for
loans held-for-investment or debt securities based on its policy to write off uncollectible interest in a timely manner.
For loans, this occurs when a loan is placed on nonaccrual status. Generally, for loans, such elections are made no later
than 90 days after a loan has become past due, although certain loans accrue interest after 90 days based on
management’s evaluation of the borrower’s ability to continue making contractual payments. For debt securities, the
elections are made based solely on management’s evaluation of the ability of the security issuer, and any relevant
entities, to continue making contractual payments. Such write-offs are recognized as a reduction of interest income.
Accrued interest receivable for the loan and securities portfolio is included within Accrued Interest Receivable in the
Consolidated Balance Sheets.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation. Depreciation is provided at rates based upon
estimated useful service lives using the straight-line method for financial reporting purposes.
The costs of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the
accounts in the year of disposal and the resulting gains or losses are included in current operations. Expenditures for
maintenance and repairs are charged to operations as incurred. Costs of major additions and improvements are
capitalized and expensed over their estimated depreciable lives.
Other Real Estate Owned
Real estate properties acquired through or in lieu of loan foreclosure or negotiated settlement are initially recorded at
the fair value less estimated selling cost at the date of acquisition. Any write-downs based on the asset’s fair value at the
date of acquisition are charged to the allowance for loan losses. After foreclosure, valuations are periodically performed
by management and property held for sale is carried at the lower of the new cost basis or fair value less cost to sell.
Impairment losses on property to be held and used are measured as the amount by which the carrying amount of a
property exceeds its fair value. Costs of significant property improvements are capitalized, whereas costs relating to
holding property are expensed. Valuations are periodically performed by management, and any subsequent write-downs
are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or
fair value less cost to sell.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a
business combination. Goodwill and other intangible assets deemed to have an indefinite useful life are not amortized
but instead are subject to review for impairment annually, or more frequently if deemed necessary.
Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and reviewed for
impairment. If impaired, the asset is written down to its estimated fair value. Our other intangibles include core deposit
intangibles (“CDI”) representing the value of the acquired core deposit base are generally recorded in connection with
business combinations involving banks and branch locations; and customer-related intangibles representing the value of
a customer list consisting of customer contact information acquired through business combination. The Company’s
policy is to amortize these intangibles on a straight-line basis over their estimated useful life. Core deposit and customer
intangibles are tested for impairment whenever events or changes in circumstances indicate the carrying amount of the
assets may not be recoverable from future undiscounted cash flows.
The Company recognizes the rights to service mortgage and other loans as separate assets, which are recorded in other
assets in the consolidated balance sheets, when purchased or when servicing is contractually separated from the
underlying loans by sale with servicing rights retained. For loan sales with servicing retained, a servicing right,
generally an asset, is recorded at fair value at the time of sale for the right to service the loans sold. All servicing rights
are identified by class and amortized over the remaining service life of the loan.
Income Taxes
The provision for income taxes is based on amounts reported in the statement of income after exclusion of nontaxable
income such as interest on state and municipal securities. Also, certain items of income and expense are recognized in
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different time periods for financial statement purposes than for income tax purposes. Thus, provisions for deferred taxes
are recorded in recognition of such temporary differences.
Deferred taxes are provided utilizing a liability method whereby deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the reported amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
The Company files a consolidated federal income tax return. Consolidated income tax expense is allocated on the basis
of each entity’s income adjusted for permanent differences.
The Company evaluates all significant tax positions as required by accounting principles generally accepted in the
United States of America. As of December 31, 2024 and 2023, the Company does not believe it has taken any positions
that would require the recording of any additional tax liability, nor does it believe there are any unrealized tax benefits
that would either increase or decrease within the next year.
The Company files income tax returns in the U.S. federal jurisdiction and applicable states. With few exceptions, the
Company is no longer subject to federal and state income tax examinations by tax authorities for years before 2021.
Any interest and penalties assessed by income taxing authorities are not significant, and are included in other expenses
in these financial statements, as applicable.
Stock Based Compensation
As described in Note 16, the Company has issued stock options, stock grants, phantom stock awards (settled only in
cash), and restricted stock awards which incorporate stock-based compensation. The Company has adopted a fair value-
based method of accounting for these awards. The compensation cost is measured at the grant date based on the value
of the award and is recognized over the requisite service period, which is usually the vesting period. Forfeitures are
recognized as they occur.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash on hand and due from banks.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.
Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities or
other equity investments, are reported as a separate component of the equity section of the balance sheet, such items,
along with net income, are components of comprehensive income. The components of comprehensive income are
disclosed on the Consolidated Statements of Comprehensive Income for all periods presented.
Advertising
The Company expenses all costs of advertising and promotion the first time the advertising or promotion takes place.
For the years ended December 31, 2024, 2023 and 2022, the Company expensed costs of $4.9 million, $4.6 million and
$3.9 million, respectively.
Recognition of Revenue from Contracts with Customers
Service charges on deposit accounts, fee and broker commissions, ATM/debit card fee income (including interchange),
and transactional income from traditional banking services, are the significant noninterest income sources of revenue
from contracts with customers. The Company generally acts in a principal capacity in the performance of these
services. The Company’s performance obligations are generally satisfied as the services are rendered and typically do
not extend beyond a reporting period. Fees, which are typically billed and collected after services are rendered, are
readily determinable and allocated individually to each service. In the normal course of business, the Company does not
generally grant refunds for services provided. As such, the Company does not establish provisions for estimated returns.
Accounting Standards Adopted in 2024
ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." ASU No.
2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." ASU 2023-07 requires
public business entities, including those with one reportable segment, to disclose additional disaggregated information
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about a reportable segment’s income and expenses in both interim and annual periods. The standard requires disclosure
of the title and position of the chief operating decision maker and an explanation of how the reported measure(s) of
segment profit or loss are utilized in assessing segment performance allocating resources.
The update permits disclosure of additional measures of a segment’s profit and losses, if multiple measures are utilized
by the chief operating decision maker to allocate resources and evaluate profitability. Such measures, to the extent they
are relevant but not in accordance with GAAP, shall be accompanied by appropriate disclosures and reconciliations to
the appropriate reported GAAP amounts. The adoption of this standard did not have a material impact on the
consolidated financial statements and disclosures.
Accounting Standards Not Yet Adopted
ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires
public business entities to disclose additional information in specified categories with respect to the rate reconciliation
for federal, state and foreign income taxes. In addition, the updates also require more details about reconciling items in
the rate reconciliation in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities
to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to
disaggregate the information by jurisdiction based on a quantitative threshold. ASU 2023-09 is effective for the
Company starting January 1, 2025, though early adoption is permitted. ASU 2023-09 is not expected to have a
significant impact on our financial statements.
Note 2– Reclassifications –
Certain reclassifications may have been made to the prior years’ financial statements in order to conform to the
classifications adopted for reporting in 2024.
These reclassifications have no material effect on previously reported shareholders’ equity or net income.
Note 3– Mergers and Acquisitions –
Texas Citizens Bancorp, Inc.
On March 1, 2022, the Company consummated the merger of Texas Citizens Bancorp, Inc. (“TCBI”), headquartered in
Pasadena, Texas, with and into the Company, pursuant to the terms of that certain Agreement and Plan of
Reorganization (the “Reorganization Agreement”), dated as of October 20, 2021, by and between the Company and
TCBI (the “Merger”). Also on March 1, 2022, TCBI’s wholly owned banking subsidiary, Texas Citizens Bank,
National Association, was merged with and into b1BANK. Pursuant to the terms of the Reorganization Agreement,
upon consummation of the Merger, the Company issued 2,069,532 shares of its common stock to the former
shareholders of TCBI. At February 28, 2022, TCBI reported $534.2 million in total assets, $349.5 million in loans and
$477.2 million in deposits.
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The following table reflects the consideration paid for TCBI’s net assets and the identifiable assets purchased and
liabilities assumed at their fair values as of March 1, 2022.
Cost and Allocation of Purchase Price for Texas Citizens Bancorp, Inc. (TCBI):
(Dollars in thousands, except per share data)
Purchase Price:
Shares Issued to TCBI's Shareholders on March 1, 2022
2,069,532
Closing Stock Price on February 28, 2022
$
26.19
Total Stock Issued
$
54,201
Other Consideration, Including Equity Awards
842
Total Purchase Price
$
55,043
Net Assets Acquired:
Cash and Cash Equivalents
$
163,460
Securities Available for Sale
370
Loans and Leases Receivable
338,027
Premises and Equipment, Net
2,776
Cash Value of Life Insurance
12,146
Core Deposit Intangible
3,875
Other Assets
14,731
Total Assets
535,385
Deposits
477,277
Borrowings
30,708
Other Liabilities
1,006
Total Liabilities
508,991
Net Assets Acquired
26,394
Goodwill Resulting from Merger
$
28,649
Oakwood Bancshares, Inc.
On October 1, 2024, the Company consummated the merger of Oakwood Bancshares, Inc. (“Oakwood”), headquartered
in the Dallas, Texas region, with and into the Company, pursuant to the terms of that certain Agreement and Plan of
Reorganization (the “Oakwood Reorganization Agreement”), dated as of April 25, 2024, by and between the Company
and Oakwood. Also on October 1, 2024, Oakwood's wholly owned banking subsidiary, Oakwood Bank, was merged
with and into b1BANK. Pursuant to the terms of the Oakwood Reorganization Agreement, upon consummation of the
Oakwood acquisition, the Company issued 3,973,134 shares of its common stock to the former shareholders of
Oakwood. At September 30, 2024, Oakwood reported $863.6 million in total assets, $700.2 million in loans and $741.3
million in deposits.
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The following table reflects the consideration paid for Oakwood's net assets and the identifiable assets purchased and
liabilities assumed at their fair values as of October 1, 2024.
Cost and Allocation of Purchase Price for Oakwood Bancshares, Inc. (Oakwood):
(Dollars in thousands, except per share data)
Purchase Price:
Shares Issued to Oakwood's Shareholders on October 1, 2024
3,973,134
Closing Stock Price on September 30, 2024
$
25.67
Total Stock Issued
$
101,990
Partial Shares Paid in Cash
10
Other Consideration, Including Equity Awards
1,819
Total Purchase Price
$
103,819
Net Assets Acquired:
Cash and Cash Equivalents
$
102,691
Securities Available for Sale
15,996
Loans and Leases Receivable, Net of Allowance
687,456
Premises and Equipment, Net
16,175
Cash Value of Life Insurance
16,105
Core Deposit Intangible
7,640
Other Assets
9,320
Total Assets
855,383
Deposits
742,347
Borrowings
22,189
Other Liabilities
17,073
Total Liabilities
781,609
Net Assets Acquired
73,774
Goodwill Resulting from Merger
$
30,045
The Company has recorded approximately $1.6 million and $236,000 of acquisition-related costs within merger and
conversion-related expenses and salaries and benefits for the years ended December 31, 2024 and 2023, respectively.
The following is a description of the methods used to determine the fair values of significant assets acquired and
liabilities assumed presented above.
Cash and Cash Equivalents: The carrying amount of these assets was a reasonable estimate of fair value based on the
short-term nature of these assets.
Securities Available for Sale: Fair values for securities were based on quoted market prices, where available. If quoted
market prices were not available, fair value estimates were based on observable inputs including quoted market prices
for similar instruments, quoted market prices that were not in an active market or other inputs that were observable in
the market. In the absence of observable inputs, fair value was estimated based on pricing models/estimations.
Loans and Leases Receivable: Fair values for loans were based on a discounted cash flow methodology that considered
factors including, but not limited to, loan type, classification status, remaining term, prepayment speed, and current
discount rates. The discount rates used for loans were based on current market rates for new originations of comparable
loans and included adjustments for any liquidity concerns. The discount rate did not include an explicit factor for credit
losses, as that was included within the estimated cash flows.
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As discussed in Note 1, acquired loans are evaluated as either PCD or non-PCD at acquisition, based upon
management's assessment of whether or not a loan has experienced more than insignificant credit deterioration since
origination. This evaluation is completed by management using a variety of factors, including individual loan
characteristics as well as industry type and collateral evaluation, among other factors. At acquisition, management
designated loans with a fair value of $146.9 million as PCD. The fair value was inclusive of an $8.4 million PCD
allowance and $2.3 million non-credit fair value discount from the acquired contractual value.
The remainder of the Oakwood loan portfolio, with a fair value of $540.6 million at acquisition included a non-credit
fair value discount of $2.0 million from the acquired contractual value.
Core Deposit Intangible (“CDI”): The fair value for core deposit intangible assets was estimated based on a discounted
cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of
the deposit base, including interest cost, and alternative cost of funds. The CDI is being amortized over 10 years based
upon the period over which estimated economic benefits are estimated to be received.
Deposits: The fair values used for the demand and savings deposits, by definition, equal the amount payable on demand
at the acquisition date. Fair values for time deposits were estimated using a discounted cash flow analysis, that applied
interest rates currently being offered to the contractual interest rates on such time deposits.
Borrowings: Fair values for borrowings were based on estimated market rates over the remaining terms of the
subordinated debt issuances.
Pro forma tables for TCBI and Oakwood were impractical to include due to the cost versus benefit of including such
disclosures.
Waterstone LSP, LLC
On January 31, 2024, the Company consummated the acquisition, through b1BANK, of Waterstone, headquartered in
Katy, Texas. Waterstone offers community banks and small businesses a range of SBA lending services including
planning, pre-qualification, packaging, closing and disbursements, servicing and liquidation. Upon consummation of
the acquisition, the Company paid $3.3 million in cash to the former owners of Waterstone.
Note 4– Earnings per Common Share –
Basic earnings per common share (“EPS”) represents income available to common shareholders divided by the
weighted average number of common shares outstanding; no dilution for any potentially convertible shares is included
in the calculation. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of common stock that then
shared in the earnings of the Company. The potential common shares that may be issued by the Company relate to
outstanding stock options, unvested restricted stock awards (“RSAs”), unvested restricted stock units ("RSUs") and
performance shares, excluding any that were antidilutive. In addition, nonvested share-based payment awards that
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
105
contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities and are
included in the computation of EPS pursuant to the two-class method.
Years Ended December 31,
2024
2023
2022
(Dollars in thousands, except per share data)
Numerator:
Net Income
$
65,107 $
71,043 $
54,255
Less: Preferred Stock Dividends
5,401
5,401
1,350
Net Income Available to Common Shares
$
59,706 $
65,642 $
52,905
Denominator:
Weighted Average Common Shares Outstanding
26,253,846
25,079,106
22,633,478
Dilutive Effect of Stock Options and Restricted Stock Awards
198,238
217,094
184,015
Weighted Average Dilutive Common Shares
26,452,084
25,296,200
22,817,493
Basic Earnings Per Common Share From Net Income Available
to Common Shares
$
2.27 $
2.62 $
2.34
Diluted Earnings Per Common Share From Net Income
Available to Common Shares
$
2.26 $
2.59 $
2.32
Note 5– Cash and Due From Banks –
The Bank is required to maintain funds in cash or on deposit with the Federal Reserve Bank. The Bank had no required
reserves as of December 31, 2024 and 2023.
Note 6– Securities –
The amortized cost and fair values of securities available for sale as of December 31, 2024 and 2023 are summarized as
follows:
December 31, 2024
(Dollars in thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. Treasury Securities
$
17,631 $
- $
956 $
16,675
U.S. Government Agencies
10,164
-
576
9,588
Corporate Securities
47,855
348
3,038
45,165
Mortgage-Backed Securities
584,321
542
47,125
537,738
Municipal Securities
313,452
23
29,092
284,383
Total Securities Available for Sale
$
973,423 $
913 $
80,787 $
893,549
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106
December 31, 2023
(Dollars in thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. Treasury Securities
$
17,690 $
- $
1,451 $
16,239
U.S. Government Agencies
10,258
-
848
9,410
Corporate Securities
49,609
-
5,770
43,839
Mortgage-Backed Securities
555,148
976
49,814
506,310
Municipal Securities
331,273
298
27,798
303,773
Total Securities Available for Sale
$
963,978 $
1,274 $
85,681 $
879,571
The following tables present a summary of securities with gross unrealized losses and fair values at December 31, 2024
and 2023, aggregated by investment category and length of time in a continued unrealized loss position. Due to the
nature of these investments and current prevailing market prices, these unrealized losses are considered non-credit
related.
December 31, 2024
Less Than 12 Months
12 Months or Greater
Total
(Dollars in thousands)
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. Treasury Securities
$
- $
- $
16,675 $
956 $
16,675 $
956
U.S. Government Agencies
-
-
9,588
576
9,588
576
Corporate Securities
4,262
132
28,894
2,906
33,156
3,038
Mortgage-Backed Securities
151,443
3,618
341,347
43,507
492,790
47,125
Municipal Securities
33,240
686
240,768
28,406
274,008
29,092
Total Securities Available for
Sale
$
188,945 $
4,436 $
637,272 $
76,351 $
826,217 $
80,787
December 31, 2023
Less Than 12 Months
12 Months or Greater
Total
(Dollars in thousands)
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. Treasury Securities
$
- $
- $
16,239 $
1,451 $
16,239 $
1,451
U.S. Government Agencies
-
-
9,410
848
9,410
848
Corporate Securities
7,529
362
36,106
5,408
43,635
5,770
Mortgage-Backed Securities
21,436
895
375,891
48,919
397,327
49,814
Municipal Securities
8,013
63
270,467
27,735
278,480
27,798
Total Securities Available for
Sale
$
36,978 $
1,320 $
708,113 $
84,361 $
745,091 $
85,681
As of December 31, 2024 and 2023, no allowance for credit losses was recognized on available for sale securities in an
unrealized loss position as management does not believe any of the securities are impaired due to credit quality. This
determination is based on the Company’s analysis of the underlying risk characteristics including credit ratings,
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
107
historical loss experience, and other qualitative factors. Further, the securities continue to make principal and interest
payments under their contractual terms and management does not have the intent to sell any of the securities and
believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of
amortized cost basis. Therefore, the Company has determined the unrealized losses are due to changes in market
interest rates compared to rates when the securities were acquired.
The amortized cost and fair values of securities available for sale as of December 31, 2024 by contractual maturity are
shown below. Actual maturities may differ from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or repaid without any penalties.
Amortized
Cost
Fair
Value
(Dollars in thousands)
Less Than One Year
$
28,943 $
28,658
One to Five Years
184,587
173,167
Over Five to Ten Years
358,681
328,897
Over Ten Years
401,212
362,827
Total Securities Available for Sale
$
973,423 $
893,549
Securities available for sale with a fair value of $385.4 million and $629.7 million, respectively, were pledged as
collateral on public deposits and for other purposes as required or permitted by law as of December 31, 2024 and 2023.
At December 31, 2024 and 2023, accrued interest receivable on securities was $4.9 million and $4.7 million,
respectively, and is included within accrued interest receivable on the consolidated balance sheets.
There were $21,000 and $9,000 realized gross gains from sales or redemptions of securities for the years ended
December 31, 2024 and 2022, respectively, and none for the year ended December 31, 2023. There were $14,000,
$2.6 million and $57,000 realized gross losses from sales or redemptions of securities for the years ended December 31,
2024, 2023 and 2022, respectively.
Other Equity Securities and VIEs
The Company has invested in the Federal Home Loan Bank of Dallas which is included in other equity securities and
reflected at cost in these financial statements. The cost of these securities was $20.6 million and $14.8 million,
respectively, at December 31, 2024 and 2023. The Federal Home Loan Bank stock is pledged to secure advances from
the Federal Home Loan Bank of Dallas at both December 31, 2024 and 2023. The Company also has investments of
$302,000 in TIB National Association, $562,000 in Bankers Insurance, LLC, and $2.2 million in First National
Banker’s Bank at both December 31, 2024 and 2023. These investments are carried at cost, less any impairment, due to
the lack of a quoted market price and a ready market for these types of investments.
VIEs are legal entities that either do not have sufficient equity to finance their activities without the support from other
parties or whose equity investors lack a controlling financial interest. The Company has investments in certain
partnerships and limited liability entities that have been evaluated and determined to be VIEs. Consolidation of a VIE is
appropriate if a reporting entity holds a controlling financial interest in the VIE and is the primary beneficiary. The
Company is not the primary beneficiary and does not hold a controlling interest in the VIEs as it does not have the
power to direct the activities that most significantly impact the VIEs’ economic performance.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
108
Small Business Investment Companies (“SBIC”) and financial technology (“Fintech”) funds at December 31, 2024 and
2023 are summarized below.
December 31,
2024
2023
(Dollars in thousands)
McLarty Capital Partners SBIC, L.P.
$
408 $
457
McLarty Capital Partners SBIC II, L.P.
2,562
2,520
Firmament Capital Partners SBIC III, L.P.
1,736
1,870
Firmament Capital Partners SBIC IV, L.P.
843
493
Bluehenge Capital Secured Debt SBIC, L.P.
2,485
3,220
Bluehenge Capital Secured Debt SBIC II, L.P.
1,784
1,146
New Louisiana Angel Fund 2, LLC
49
49
Pharos Capital Partners IV-A, L.P.
657
457
Valesco Fund II, LP
976
1,227
Valesco Fund III, LP
318
37
GP Capital Partners, LP
741
624
BankTech Ventures, LP
311
284
JAM FINTOP Banktech, LP
699
531
Ledyard Capital Managers, LLC
1,150
769
Mendon Ventures Banktech Fund I, LP
1,514
1,308
Castle Creek Launchpad Fund I, LP
781
607
Work America Capital Fund I, LP
395
425
$
17,409 $
16,024
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
109
Note 7– Loans and the Allowance for Loan Losses –
Loans receivable at December 31, 2024 and 2023 are summarized as follows:
December 31,
2024
2023
(Dollars in thousands)
Real estate loans:
Commercial
$
2,483,223 $
2,217,928
Construction
670,502
669,798
Residential
884,533
682,394
Total real estate loans
4,038,258
3,570,120
Commercial
1,868,675
1,358,838
Consumer and other
74,466
63,827
Total loans held for investment
5,981,399
4,992,785
Less:
Allowance for loan losses
(54,840)
(40,414)
Net loans
$
5,926,559 $
4,952,371
The performing 1-4 family residential, multi-family residential, commercial real estate, and commercial loans, are
pledged, under a blanket lien, as collateral securing advances from the FHLB at December 31, 2024 and 2023.
Commercial and agricultural loans are pledged against the Federal Reserve Banks’ discount window as of
December 31, 2024 and 2023.
Net deferred loan origination fees were $12.6 million at both December 31, 2024 and 2023, and are netted in their
respective loan categories above. In addition to loans issued in the normal course of business, the Company considers
overdrafts on customer deposit accounts to be loans, and reclassifies overdrafts as loans in its consolidated balance
sheets. At December 31, 2024 and 2023, overdrafts of $3.0 million and $2.2 million, respectively, have been
reclassified to loans.
The Bank is the lead lender on participations sold, without recourse, to other financial institutions which amounts are
not included in the consolidated balance sheets. The unpaid principal balances of mortgages and other loans serviced
for others were approximately $747.0 million and $723.5 million at December 31, 2024 and 2023, respectively. The
Company has servicing rights of $832,000 and $1.1 million recorded at December 31, 2024 and 2023, respectively,
which are recorded within other assets.
The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located in its
general market areas throughout Louisiana and Texas. Management segregates the loan portfolio into portfolio
segments which is defined as the level at which the Bank develops and documents a systematic method for determining
its allowance for credit losses. The portfolio segments are segregated based on loan types and the underlying risk
factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed
appropriate.
Portfolio Segments and Risk Factors
The loan portfolio is disaggregated into portfolio segments and then further disaggregated into classes for certain
disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic
method for determining its allowance for credit losses. A class is generally a disaggregation of a portfolio segment. The
Company's loan portfolio segments are Real Estate, Commercial, and Consumer and Other. The classes and risk
characteristics of each segment are discussed in more detail below. The segmentation and disaggregation of the
portfolio is part of the ongoing credit monitoring process.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
110
Real Estate Portfolio Segment
Real Estate: Commercial loans are extensions of credit secured by owner-occupied and non-owner-occupied collateral.
Repayment is generally dependent on the successful operations of the property. General economic conditions may
impact the performance of these types of loans, including fluctuations in the value of real estate, vacancy rates, and
unemployment trends. Real estate commercial loans also include farmland loans that can be, or are, used for
agricultural purposes. These loans are usually repaid through refinancing, cash flow from the borrower’s ongoing
operations, development of the property, or sale of the property.
Real Estate: Construction loans include loans to small-to-midsized businesses to construct owner-occupied properties,
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 in the Company’s market areas. Risks associated
with these loans include fluctuations in the value of real estate, project completion risk and changes in market trends.
The Company is also exposed to risk based on the ability of the construction loan borrower to finance the loan or sell
the property upon completion of the project, which may be affected by changes in secondary market terms and criteria
for permanent financing since the time that the Company funded the loan.
Real Estate: Residential loans include first and second lien 1-4 family mortgage loans, as well as home equity lines of
credit, in each case primarily on owner-occupied primary residences. The Company is exposed to risk based on
fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial
condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship.
Real estate residential loans also include multi-family residential loans originated to provide permanent financing for
multi-family residential income producing properties. Repayment of these loans primarily relies on successful rental
and management of the property.
Commercial Portfolio Segment
Commercial loans include general commercial and industrial, or C&I, loans, including commercial lines of credit,
working capital loans, term loans, equipment financing, asset acquisition, expansion, and development loans, borrowing
base loans, letters of credit and other loan products, primarily in the Company’s target markets that are underwritten
based on the borrower’s ability to service the debt from income. Commercial loan risk is derived from the expectation
that such loans generally are serviced principally from the operations of the business, and those operations may not be
successful. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by
events not under the control of the borrower such as economic events and changes in governmental regulations, could
materially affect the ability of the borrower to repay the loan.
Consumer and Other Portfolio Segment
Consumer and other loans include a variety of loans to individuals for personal, family and household purposes,
including secured and unsecured installment and term loans. The risk is based on changes in the borrower’s financial
condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship,
and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
The following tables set forth, as of December 31, 2024 and 2023, the balance of the allowance for credit losses by loan
portfolio segment. The allowance for credit losses allocated to each portfolio segment is not necessarily indicative of
future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other
portfolio segments.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
Allowance for Credit Losses and Recorded Investment in Loans Receivable
December 31, 2024
(Dollars in thousands)
Real Estate:
Commercial
Real Estate:
Construction
Real Estate:
Residential
Commercial
Consumer
and Other
Total
Allowance for Loan Losses:
Beginning Balance
$
17,676 $
6,596 $
5,485 $
10,424 $
233 $
40,414
Adjustment for Oakwood
on PCD Loans
4,013
1,420
374
2,603
-
8,410
Charge-offs
263
(2,261)
(297)
(986)
(2,392)
(5,673)
Recoveries
86
515
14
236
329
1,180
Provision
1,422
892
2,460
3,390
2,345
10,509
Ending Balance
$
23,460 $
7,162 $
8,036 $
15,667 $
515 $
54,840
Reserve for Unfunded Credit
Commitments:
Beginning Balance
$
206 $
1,546 $
177 $
1,372 $
23 $
3,324
Provision (Recovery)
22
(235)
181
393
3
364
Ending Balance
$
228 $
1,311 $
358 $
1,765 $
26 $
3,688
Total Allowance for Credit
Losses
$
23,688 $
8,473 $
8,394 $
17,432 $
541 $
58,528
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112
December 31, 2023
(Dollars in thousands)
Real Estate:
Commercial
Real Estate:
Construction
Real Estate:
Residential
Commercial
Consumer
and Other
Total
Allowance for Loan Losses:
Beginning Balance
$
14,702 $
5,768 $
5,354 $
11,721 $
633 $
38,178
Adoption of ASU
2016-13
4,823
933
(365)
(2,483)
(248)
2,660
Beginning Balance After
Adoption
19,525
6,701
4,989
9,238
385
40,838
Charge-offs
(2,049)
(36)
(42)
(2,813)
(1,489)
(6,429)
Recoveries
26
1
18
672
327
1,044
Provision (Recovery)
174
(70)
520
3,327
1,010
4,961
Ending Balance
$
17,676 $
6,596 $
5,485 $
10,424 $
233 $
40,414
Reserve for Unfunded Credit
Commitments:
Beginning Balance
$
220 $
137 $
13 $
229 $
6 $
605
Adoption of ASU
2016-13
116
2,113
190
657
121
3,197
Beginning Balance After
Adoption
336
2,250
203
886
127
3,802
Provision (Recovery)
(130)
(704)
(26)
486
(104)
(478)
Ending Balance
$
206 $
1,546 $
177 $
1,372 $
23 $
3,324
Total Allowance for Credit
Losses
$
17,882 $
8,142 $
5,662 $
11,796 $
256 $
43,738
Included within the above allowance are loans which management has individually evaluated to determine an
allowance for credit losses. The following table summarizes, by segment, the loan balance and specific allowance
allocation for those loans which have been individually evaluated.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
113
December 31, 2024
January 1, 2023
Loan Balance
Specific
Allocations
Loan Balance
Specific
Allocations
(Dollars in thousands)
Real estate loans:
Commercial
$
42,407 $
3,529 $
883 $
-
Construction
11,777
975
2,334
513
Residential
11,012
519
1,533
-
Total real estate loans
65,196
5,023
4,750
513
Commercial
99,234
2,505
-
-
Consumer and other
-
-
-
-
Total
$
164,430 $
7,528 $
4,750 $
513
Credit Quality Indicators
We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of
10 to 80. Individual loan officers review updated financial information for all pass grade loans to reassess the risk
grade, generally on at least an annual basis. When a loan has a risk grade of 60, it is still considered a pass grade loan;
however, it is considered to be on management’s “watch list,” and subject to additional and more frequent monitoring
by both the loan officer and senior credit and risk personnel. When a loan has a risk grade of 70 or higher, a special
assets officer monitors the loan on an on-going basis.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
114
The following tables set forth the credit quality indicators, disaggregated by loan segment, as of December 31, 2024
and 2023:
December 31, 2024
Criticized
Pass
(Risk Grade
10-45)
Special Mention
(Risk Grade 50)
Substandard
(Risk Grade 60)
Doubtful
(Risk Grade 70)
Loss
(Risk Grade 80)
Total
Current Period
Charge- offs
(Dollars in thousands)
Real Estate: Commercial
Originated in 2024
$
300,564
$
-
$
15,271
$
-
$
-
$
315,835
$
-
Originated in 2023
223,301
22,051
135
-
-
245,487
-
Originated in 2022
752,449
40,646
-
-
-
793,095
2
Originated in 2021
400,133
5,861
470
-
-
406,464
-
Originated in 2020
147,800
1,853
635
-
-
150,288
5
Originated Prior to 2020
508,370
4,779
6,557
851
-
520,557
(270)
Revolving
50,813
195
480
-
-
51,488
-
Revolving Loans Converted to Term
9
-
-
-
-
9
-
Total Real Estate: Commercial
$
2,383,439
$
75,385
$
23,548
$
851
$
-
$
2,483,223
$
(263)
Real Estate: Construction
Originated in 2024
$
203,537
$
-
$
402
$
-
$
-
$
203,939
$
-
Originated in 2023
86,505
-
586
-
-
87,091
46
Originated in 2022
176,301
2,886
2,188
-
-
181,375
278
Originated in 2021
86,514
-
3,522
-
-
90,036
1,937
Originated in 2020
26,646
-
14
-
-
26,660
-
Originated Prior to 2020
23,696
154
1,990
-
-
25,840
-
Revolving
54,990
396
-
-
-
55,386
-
Revolving Loans Converted to Term
175
-
-
-
-
175
-
Total Real Estate: Construction
$
658,364
$
3,436
$
8,702
$
-
$
-
$
670,502
$
2,261
Real Estate: Residential
Originated in 2024
$
80,126
$
-
$
225
$
-
$
-
$
80,351
$
2
Originated in 2023
102,618
175
244
-
-
103,037
3
Originated in 2022
228,784
1,179
1,200
8
-
231,171
12
Originated in 2021
145,072
205
-
-
-
145,277
1
Originated in 2020
69,222
315
555
9
-
70,101
2
Originated Prior to 2020
133,993
1,122
6,170
234
-
141,519
73
Revolving
111,452
167
1,091
-
-
112,710
204
Revolving Loans Converted to Term
367
-
-
-
-
367
-
Total Real Estate: Residential
$
871,634
$
3,163
$
9,485
$
251
$
-
$
884,533
$
297
Commercial
Originated in 2024
$
399,093
$
223
$
4,308
$
-
$
-
$
403,624
$
1
Originated in 2023
286,436
1,385
2,301
-
-
290,122
76
Originated in 2022
235,534
8,471
1,611
-
-
245,616
459
Originated in 2021
178,248
2,562
1,684
-
-
182,494
276
Originated in 2020
81,809
41
707
-
-
82,557
97
Originated Prior to 2020
100,096
2,526
629
300
-
103,551
77
Revolving
546,947
10,771
2,671
-
-
560,389
-
Revolving Loans Converted to Term
322
-
-
-
-
322
-
Total Commercial
$
1,828,485
$
25,979
$
13,911
$
300
$
-
$
1,868,675
$
986
Consumer and Other
Originated in 2024
$
12,084
$
-
$
8
$
-
$
-
$
12,092
$
32
Originated in 2023
7,118
-
33
-
-
7,151
84
Originated in 2022
4,646
-
18
-
-
4,664
427
Originated in 2021
2,195
-
49
-
-
2,244
4
Originated in 2020
1,183
-
60
-
-
1,243
31
Originated Prior to 2020
22,352
-
64
-
-
22,416
40
Revolving
24,474
-
137
-
-
24,611
1,774
Revolving Loans Converted to Term
45
-
-
-
-
45
-
Total Consumer and Other
$
74,097
$
-
$
369
$
-
$
-
$
74,466
$
2,392
Total Loans
$
5,816,019
$
107,963
$
56,015
$
1,402
$
-
$
5,981,399
$
5,673
Table of Contents
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
115
December 31, 2023
Criticized
Pass
(Risk Grade
10-45)
Special Mention
(Risk Grade 50)
Substandard
(Risk Grade 60)
Doubtful
(Risk Grade 70)
Loss
(Risk Grade 80)
Total
Current Period
Charge- offs
(Dollars in thousands)
Real Estate: Commercial
Originated in 2023
$
228,902
$
-
$
84
$
-
$
-
$
228,986
$
-
Originated in 2022
751,649
1,909
-
-
-
753,558
-
Originated in 2021
427,269
6,103
492
-
-
433,864
357
Originated in 2020
151,848
3,551
8
-
-
155,407
-
Originated in 2019
149,946
5,556
372
932
-
156,806
1,447
Originated Prior to 2019
379,503
1,313
7,970
335
-
389,121
245
Revolving
99,723
226
237
-
-
100,186
-
Revolving Loans Converted to Term
-
-
-
-
-
-
-
Total Real Estate: Commercial
$
2,188,840
$
18,658
$
9,163
$
1,267
$
-
$
2,217,928
$
2,049
Real Estate: Construction
Originated in 2023
$
131,617
$
-
$
-
$
-
$
-
$
131,617
$
-
Originated in 2022
322,032
647
62
-
-
322,741
-
Originated in 2021
85,438
2,601
1,229
-
-
89,268
-
Originated in 2020
22,515
31
16
-
-
22,562
-
Originated in 2019
19,402
-
1,675
-
-
21,077
1
Originated Prior to 2019
20,180
413
588
345
-
21,526
35
Revolving
60,612
395
-
-
-
61,007
-
Revolving Loans Converted to Term
-
-
-
-
-
-
-
Total Real Estate: Construction
$
661,796
$
4,087
$
3,570
$
345
$
-
$
669,798
$
36
Real Estate: Residential
Originated in 2023
$
76,662
$
-
$
-
$
-
$
-
$
76,662
$
-
Originated in 2022
170,229
433
410
14
-
171,086
-
Originated in 2021
98,329
-
708
-
-
99,037
11
Originated in 2020
68,281
386
520
57
-
69,244
1
Originated in 2019
54,902
1,112
1,061
119
-
57,194
22
Originated Prior to 2019
97,716
1,230
6,000
299
-
105,245
7
Revolving
103,252
-
654
-
-
103,906
1
Revolving Loans Converted to Term
20
-
-
-
-
20
-
Total Real Estate: Residential
$
669,391
$
3,161
$
9,353
$
489
$
-
$
682,394
$
42
Commercial
Originated in 2023
$
303,160
$
1,439
$
709
$
-
$
-
$
305,308
$
-
Originated in 2022
267,678
698
1,196
-
-
269,572
247
Originated in 2021
136,291
5,483
928
16
-
142,718
25
Originated in 2020
48,990
448
921
42
-
50,401
49
Originated in 2019
21,137
584
640
231
-
22,592
1,632
Originated Prior to 2019
61,166
3,843
341
251
-
65,601
658
Revolving
499,642
2,128
573
28
-
502,371
202
Revolving Loans Converted to Term
275
-
-
-
-
275
-
Total Commercial
$
1,338,339
$
14,623
$
5,308
$
568
$
-
$
1,358,838
$
2,813
Consumer and Other
Originated in 2023
$
11,245
$
-
$
-
$
-
$
-
$
11,245
$
8
Originated in 2022
7,219
-
27
-
-
7,246
78
Originated in 2021
3,372
-
55
-
-
3,427
29
Originated in 2020
1,850
-
88
-
-
1,938
11
Originated in 2019
2,359
-
40
-
-
2,399
18
Originated Prior to 2019
18,280
-
92
-
-
18,372
61
Revolving
18,814
100
160
-
-
19,074
1,284
Revolving Loans Converted to Term
126
-
-
-
-
126
-
Total Consumer and Other
$
63,265
$
100
$
462
$
-
$
-
$
63,827
$
1,489
Total Loans
$
4,921,631
$
40,629
$
27,856
$
2,669
$
-
$
4,992,785
$
6,429
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
116
The above classifications follow regulatory guidelines and can generally be described as follows:
•
Pass loans are of satisfactory quality.
•
Special mention loans have an existing weakness that could cause future impairment, including the
deterioration of financial ratios, past due status, questionable management capabilities and possible reduction
in the collateral values.
•
Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and
deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing
overdrafts. Immediate corrective action is necessary.
•
Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly
questionable and improbable.
As of December 31, 2024 and 2023, loan balances outstanding more than 90 days past due and still accruing interest
amounted to $860,000 and $127,000, respectively. As of December 31, 2024 and 2023, loan balances outstanding on
nonaccrual status amounted to $24.1 million and $16.9 million, respectively. The Bank considers all loans more than 90
days past due as nonperforming loans.
The following tables provide an analysis of the aging of loans and leases as of December 31, 2024 and 2023. All loans
greater than 90 days past due are generally placed on nonaccrual status.
Aged Analysis of Past Due Loans Receivable
December 31, 2024
(Dollars in thousands)
30-59
Days
Past Due
60-89
Days
Past Due
Greater
Than 90
Days
Past Due
Total
Past Due
Current
Total Loans
Receivable
Recorded
Investment
Over
90 Days Past
Due
and Still
Accruing
Real Estate Loans:
Commercial
$
6,688 $
303 $
3,035 $ 10,026 $ 2,473,197 $ 2,483,223 $
-
Construction
1,700
594
4,600
6,894
663,608
670,502
-
Residential
2,631
786
5,174
8,591
875,942
884,533
482
Total Real Estate
Loans
11,019
1,683
12,809
25,511 4,012,747 4,038,258
482
Commercial
8,741
1,075
7,674
17,490 1,851,185 1,868,675
240
Consumer and Other
177
48
262
487
73,979
74,466
138
Total
$ 19,937 $
2,806 $
20,745 $ 43,488 $ 5,937,911 $ 5,981,399 $
860
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
117
December 31, 2023
(Dollars in thousands)
30-59
Days
Past Due
60-89
Days
Past Due
Greater
Than 90
Days
Past Due
Total
Past Due
Current
Total Loans
Receivable
Recorded
Investment
Over
90 Days Past
Due and Still
Accruing
Real Estate Loans:
Commercial
$
240 $
536 $
2,954 $
3,730 $ 2,214,198 $ 2,217,928 $
44
Construction
279
1,320
3,198
4,797
665,001
669,798
-
Residential
1,792
1,207
4,058
7,057
675,337
682,394
20
Total Real Estate
Loans
2,311
3,063
10,210
15,584 3,554,536 3,570,120
64
Commercial
1,101
71
1,622
2,794 1,356,044 1,358,838
52
Consumer and Other
280
252
188
720
63,107
63,827
11
Total
$
3,692 $
3,386 $
12,020 $ 19,098 $ 4,973,687 $ 4,992,785 $
127
The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending
regulations and guidelines. The Bank makes loan modifications, primarily utilizing internal renegotiation programs via
direct customer contact, that manage customers’ debt exposures held only by the Bank. Additionally, the Bank makes
loan modifications with customers who have elected to work with external renegotiation agencies and these
modifications provide solutions to customers’ entire unsecured debt structures. During the periods ended December 31,
2024 and 2023, the concessions granted to certain borrowers included extending the payment due dates and offering
below market contractual interest rates, and were not significant to the consolidated financial statements.
The following table presents non-accrual loans by segment as of December 31, 2024 and 2023, respectively.
December 31,
2024
December 31,
2023
(Dollars in thousands)
Real Estate Loans:
Commercial
$
3,621 $
3,280
Construction
5,251
3,543
Residential
7,078
7,352
Total Real Estate Loans
15,950
14,175
Commercial
8,039
2,395
Consumer and Other
158
373
Total
$
24,147 $
16,943
Accrued interest receivable of $3.4 million and $4.2 million was outstanding as of December 31, 2024 and 2023,
respectively, for all loan deferrals, primarily attributable to the COVID-19 pandemic and, to a much lesser extent,
hurricanes which occurred in 2020 and 2021. These loans are no longer within their deferral periods. The accrued
interest on the loans is due at their maturity.
At December 31, 2024 and 2023, accrued interest receivable on loans was $30.9 million and $25.2 million,
respectively, and included within accrued interest receivable on the consolidated balance sheets.
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
118
Note 8– Premises and Equipment –
Bank premises and equipment at December 31, 2024 and 2023 consist of the following:
2024
2023
(Dollars in thousands)
Land
$
7,619 $
7,545
Buildings and Leasehold Improvements
65,388
56,513
Furniture and Equipment
40,537
35,252
Right of Use Asset
27,955
20,836
Total Bank Premises and Equipment
141,499
120,146
Less: Accumulated Depreciation
(59,546)
(50,666)
Total Bank Premises and Equipment, net
$
81,953 $
69,480
The provision for depreciation and amortization attributable to bank premises and equipment charged to operating
expenses was $5.3 million, $4.7 million and $4.8 million for the years ended December 31, 2024, 2023 and 2022,
respectively.
Note 9 - Goodwill and Other Intangible Assets –
Goodwill was recorded as a result of acquisitions. The carrying amount of goodwill as of December 31, 2024 and 2023
was $121.6 million and $88.4 million, respectively. In 2024, the increase of $33.2 million in goodwill was due to the
acquisitions of Waterstone and Oakwood. In 2023, goodwill was reduced by $153,000 due to the sale of the Leesville
branch. The Company performed the required annual goodwill impairment test as of October 1, 2024. The Company’s
annual test did not indicate any impairment as of the testing date. Following the testing date, management determined
no triggering event had occurred though December 31, 2024.
Core deposit and customer intangible assets were acquired in conjunction with the business combinations. A summary
of the core deposit and customer intangible assets as of December 31, 2024 and 2023 is as follows:
2024
2023
(Dollars in thousands)
Gross Carrying Amount
$
21,050 $
21,100
Adjustment for Sale of Branch
-
(50)
Acquired in Oakwood Acquisition
7,640
-
Less: Accumulated Amortization
(11,438)
(9,155)
Net Carrying Amount
$
17,252 $
11,895
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
119
Amortization expense on the core deposit and customer intangible assets totaled approximately $2.3 million, $2.1
million and $2.0 million during the years ended December 31, 2024, 2023 and 2022, respectively. The following table
presents the estimated aggregate amortization expense for the periods indicated:
December 31,
(Dollars in
thousands)
2025
$
2,649
2026
2,580
2027
2,580
2028
2,303
2029
1,995
Thereafter
5,145
Total Core Deposit and Customer Intangible
$
17,252
Note 10– Deposits –
Deposit accounts at December 31, 2024 and 2023 are summarized as follows:
2024
2023
(Dollars in thousands)
Noninterest Bearing - DDA
$
1,357,045 $
1,299,090
Noninterest Bearing Deposits
1,357,045
1,299,090
Interest Bearing - DDA
766,086
502,077
NOW and Super NOW Accounts
411,077
496,845
Money Market Accounts
2,354,563
1,425,808
Savings Accounts
225,647
223,871
Certificates of Deposit Over $250,000
687,601
623,336
Other Certificates of Deposit
709,312
677,763
Interest Bearing Deposits
5,154,286
3,949,700
Total Deposits
$
6,511,331 $
5,248,790
Approximately 70.7% of certificates of deposit as of December 31, 2024 have stated maturity dates during 2025 and the
remaining 29.3% have stated maturity dates during 2026 and beyond.
At December 31, 2024 and 2023, total deposits for the top three customer relationships was approximately $211.3
million and $168.3 million, respectively, which represented 3.2% and 3.2% of total deposits, respectively. Brokered
and reciprocal deposits were approximately $1.2 billion and $1.0 billion at December 31, 2024 and 2023, respectively.
Included in these brokered and reciprocal deposits are public fund deposits of approximately $155.0 million and $145.9
million at December 31, 2024 and 2023, respectively. Other public fund deposits were approximately $603.2 million
and $511.6 million at December 31, 2024 and 2023, respectively.
Note 11– Borrowings –
The Bank had outstanding advances from the FHLB of $355.9 million and $211.2 million at December 31, 2024 and
2023, respectively, consisting of:
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
120
One fixed rate loan with an original principal balance of $60.0 million. The loan was made in 2021 and the balance
at December 31, 2024 and December 31, 2023 was $23.3 million and $35.3 million, respectively, with interest at
0.89%. Principal and interest payments are due monthly and the loan matures in November 2026.
One fixed rate loan of $875,000 at both December 31, 2024 and 2023, that was acquired during the TCBI
acquisition, with interest at 4.88% paid monthly. Principal is due at maturity in April 2025.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 4.89% paid monthly.
Principal is due at maturity in July 2025.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 4.65% paid monthly.
Principal is due at maturity in January 2026.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 4.56% paid monthly.
Principal is due at maturity in July 2026.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 4.13% paid monthly.
Principal is due at maturity in October 2028. This advance has put options beginning in October 2024.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 3.92% paid monthly.
Principal is due at maturity in October 2030. This advance has put options beginning in October 2024.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 3.72% paid monthly.
Principal is due at maturity in October 2033. This advance has put options beginning in October 2024.
One fixed rate loan of $25.0 million at both December 31, 2024 and 2023, with interest at 3.57% paid monthly.
Principal is due at maturity in October 2033. This advance has put options beginning in October 2024.
One fixed rate loan with an original principal balance of $10.0 million. The loan was made in 2020 and was
acquired during the Oakwood acquisition. The balance at December 31, 2024 was $1.7 million, with interest at
0.52%. Principal and interest payments are due monthly and the loan matures in October 2025.
One fixed rate loan of $25.0 million at December 31, 2024, with interest at 4.84% paid monthly. Principal is due at
maturity in December 2026.
One fixed rate loan of $25.0 million at December 31, 2024, with interest at 4.78% paid monthly. Principal is due at
maturity in September 2027.
One fixed rate loan of $25.0 million at December 31, 2024, with interest at 4.73% paid monthly. Principal is due at
maturity in March 2028.
One fixed rate loan of $25.0 million at December 31, 2024, with interest at 4.69% paid monthly. Principal is due at
maturity in September 2028.
One short term, fifteen-day, fixed rate loan of $55.0 million at December 31, 2024, with interest at 4.38%. Principal
and interest was due, paid and rolled into a $30.0 million renewal, at maturity in January 2025.
These advances are collateralized by the Company’s investment in FHLB stock and a blanket lien on qualifying loans
in the Bank’s loan portfolio. The blanket lien totaled approximately $2.0 billion at December 31, 2024 with unused
availability for advances and letters of credit of approximately $1.3 billion.
The Company has outstanding lines of credit with several of its correspondent banks available to assist in the
management of short-term liquidity. These agreements provide for interest based upon the federal funds rate on the
outstanding balance. Total available lines of credit as of December 31, 2024 and 2023 were $160.0 million and $145.0
million, respectively. The Company was not in a purchased position on these lines at December 31, 2024 and 2023.
Table of Contents
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
121
On March 12, 2023, the Federal Reserve launched the Bank Term Funding Program (“BTFP”), which offered loans to
banks with a term of up to one year. The loans were secured by pledging the banks’ U.S. treasuries, agency securities,
agency mortgage-backed securities, and any other qualifying assets. These pledged securities were valued at par for
collateral purposes. The Bank participated in the BTFP and had outstanding debt of $300.0 million at December 31,
2023. These loans bore a fixed interest rate of 4.38% and matured on March 22, 2024, at which time the Bank repaid
them in full.
In December 2018, the Company issued subordinated notes in the amount of $25.0 million. The subordinated notes
bear a fixed rate of interest at 6.75% until December 31, 2028 and a floating rate thereafter through maturity in 2033.
The balance outstanding at both December 31, 2024 and 2023 was $25.0 million. The subordinated notes were issued
for the purpose of paying off a long term advance and line of credit with First National Bankers Bank, for general
corporate purposes and to provide Tier 2 capital. The subordinated notes are redeemable by the Company at its option
beginning in 2028.
In the Pedestal acquisition, the Company assumed Pedestal’s junior subordinated debentures, which are associated with
$5.0 million in trust preferred securities acquired from Pedestal. Interest on the junior subordinated debentures is
accrued at an annual rate equal to the 3-month LIBOR, as determined in the indenture governing the debentures, plus
3.05%. Interest is payable quarterly. The indenture allows the Company to defer interest payments for up to 20
consecutive quarterly periods without resulting in a default. The trust preferred securities do not have a stated maturity
date, however, they are subject to mandatory redemption on September 17, 2033, or upon earlier redemption. The
Company has guaranteed, on a subordinated basis, distributions and other payments due on the trust preferred securities
subject to the guarantee agreement and the indenture. Principal and interest payments on the junior subordinated
debentures are in a superior position to the liquidation rights of holders of common stock.
On March 26, 2021, the Company issued $52.5 million in subordinated debt. This subordinated debt bears interest at a
fixed rate of 4.25% through March 31, 2026 and a floating rate, based on a benchmark rate plus 354 basis points,
thereafter through maturity in 2031. The subordinated notes were issued to provide additional capital support to the
Bank, to support growth, to better position the Company to take advantage of strategic opportunities that may arise
from time to time, repayment of existing Company borrowings, and for other general corporate purposes. The
subordinated notes are redeemable by the Company at its option beginning in 2026.
On April 1, 2021, the Company, through b1BANK, consummated the acquisition of SSW. Under the terms of the
acquisition, the Company issued $3.9 million in subordinated debt to the former owners of SSW. This subordinated
debt bears interest at a fixed rate of 4.75% through April 1, 2026 and a floating rate, based on a benchmark rate plus
442 basis points, thereafter through maturity in 2031. The subordinated notes are redeemable by the Company at its
option beginning in 2026.
On March 1, 2022, the Company assumed, in connection with the TCBI acquisition, three tranches of subordinated debt
with an aggregate principal balance outstanding of $26.4 million. One tranche in the amount of $10.0 million bears an
adjustable interest rate, based on a benchmark rate plus 350 basis points, until maturity on April 11, 2028, and was
callable beginning April 11, 2023. Another tranche in the amount of $7.5 million bears an adjustable interest rate, based
on a benchmark rate plus 350 basis points, until maturity on December 13, 2028, and was callable beginning December
13, 2023. The third tranche in the amount of $8.9 million had an adjustable interest rate plus 595 basis points, based on
a benchmark rate, until maturity on March 24, 2027. The $8.9 million tranche was called on May 1, 2023 by the
Company and has been fully extinguished. The Company recognized a $1.5 million gain on the extinguishment of this
debt during 2023. These notes carried an aggregate $833,000 and $1.1 million fair value adjustment, respectively, as of
December 31, 2024 and 2023.
Note 12– Securities Purchased and Sold Under Agreements to Resell and Repurchase –
During the year ended December 31, 2024, the Bank entered into an agreement to purchase investment securities with
the intention to resell those securities at various times throughout the year. At December 31, 2024, the Bank purchased
$50.8 million at a rate of 5.1% and maturing in 2025. At December 31, 2024 and 2023, the Bank had also sold various
investment securities with an agreement to repurchase these securities at various times within one year. These securities
generally remain under the Bank’s control and are included in securities available for sale. These pledged securities
Table of Contents
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
122
have coupon rates ranging from 0.9% to 8.0% and maturity dates ranging from 2025 to 2041. The related liability to
repurchase these securities was $22.6 million and $18.9 million at December 31, 2024 and 2023, respectively.
Note 13– Income Taxes –
The consolidated provision (credit) for income taxes consists of the following at December 31, 2024, 2023 and 2022:
2024
2023
2022
(Dollars in thousands)
Provision for Current Taxes - Federal
$
18,906 $
17,491 $
12,969
Provision (Credit) for Deferred Taxes
(962)
2,052
1,368
Total Provision for Income Taxes
$
17,944 $
19,543 $
14,337
The provision (credit) for federal income taxes differs from the amount computed by applying federal statutory rates to
income from operations as indicated in the following analysis at December 31, 2024, 2023 and 2022:
2024
2023
2022
(Dollars in thousands)
Federal Statutory Income Tax
$
17,441 $
19,023 $
14,404
Tax Exempt Income
(513)
(188)
(690)
Stock Based Compensation
(9)
197
16
Goodwill Write-off for Branch Sale
-
32
-
State Taxes
928
695
226
Other - Net
97
(216)
381
Total Provision for Income Taxes
$
17,944 $
19,543 $
14,337
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
123
The components of the deferred tax assets and liabilities are as follows:
2024
2023
(Dollars in thousands)
State NOL
$
2,634 $
2,885
State NOL Valuation Allowance
(2,634)
(2,885)
Net Operating Loss Carryforward
681
583
Unrealized Loss on Securities
16,876
17,835
Acquired Loans Fair Market Value Adjustment
2,561
2,596
Allowance for Loan Losses
11,587
8,539
Lease Liability
8,139
4,472
Deferred Compensation
3,227
2,231
Stock Awards
1,012
1,277
Reserve for Unfunded Commitments
779
702
Credit Card Rewards
509
93
Other
1,146
361
Deferred Tax Assets
46,517
38,689
Right of Use Asset
7,976
4,402
Core Deposit Intangible
3,645
2,513
Depreciation
3,727
2,409
Acquired Securities Difference in Basis
868
1,209
Other
710
833
Deferred Tax Liabilities
16,926
11,366
Net Deferred Tax Asset
$
29,591 $
27,323
The Company acquired certain deferred tax attributes and liabilities as a result of the TCBI acquisition in 2022 and
Oakwood acquisition in 2024, including a federal net operating loss (“NOL”) carryforward of $8.8 million and $4.2
million, respectively, and a federal charitable contribution carryforward of $229,000 and $99,000. The amount of the
NOL carryforward the Company is allowed to deduct against current taxable income each year is limited, and the
Company may not offset more than 80% of taxable income in any year. As of December 31, 2024, the NOL and
charitable contribution carryforward was $3.2 million to be carried forward indefinitely until utilized.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
124
Note 14– Accumulated Other Comprehensive Income (Loss) –
The following is a summary of the changes in the balances of each component of accumulated other comprehensive
income (loss) for the years ended December 31, 2024 and 2023:
2024
2023
(Dollars in thousands)
Unrealized Gains (Losses) on AFS Investment Securities and Equity
Method Investments:
Balance at Beginning of Year
$
(66,585) $
(74,204)
Other Comprehensive Income on AFS Investment Securities Before
Reclassifications - Net of Tax
3,570
10,258
Other Comprehensive Income (Loss) on Equity Method Investments - Net
of Tax
11
(616)
Reclassification Adjustment for Gains (Losses) on Sale of AFS
Investment Securities Realized - Net of Tax
6
(2,023)
Other Comprehensive Income
3,587
7,619
Balance at End of Year
$
(62,998) $
(66,585)
Note 15– Shareholders’ Equity and Regulatory Matters –
Shareholders’ Equity of the Company includes the undistributed earnings of the Bank. The Company pays dividends
from its assets, which are provided primarily by dividends from the Bank. Certain restrictions exist regarding the ability
of the Bank to pay cash distributions. Louisiana statutes require approval to pay distributions in excess of a bank’s
earnings in the current year plus retained net profits for the preceding year. The Company paid quarterly common stock
dividends totaling $0.56 per share and $0.50 per share for the years ended December 31, 2024 and 2023, respectively,
based upon quarterly financial performance. The Company paid full quarterly preferred stock dividends totaling $75.00
per share for both years ended December 31, 2024 and 2023.
Common Stock Repurchase Plan
On May 23, 2023, the Company’s board of directors approved a resolution authorizing management to repurchase
shares of its common stock with an aggregate purchase price of up to $30.0 million from time to time, subject to certain
limitations and conditions. The stock repurchase program expired on December 31, 2023. The stock repurchase
program did not obligate the Company to repurchase any shares of its common stock. The Company did not repurchase
any shares under this plan.
Preferred Stock
On September 1, 2022, the Company entered into a securities purchase agreement with certain investors pursuant to
which the Company offered and sold shares of its 7.50% fixed-to-floating rate non-cumulative perpetual preferred
stock, with no par value, for an aggregate purchase price of $72.0 million. Holders of the preferred stock are entitled to
receive, if, when, and as declared by the Company’s board of directors, non-cumulative cash dividends at a rate of
7.50% per share for the first five years following issuance and thereafter at a variable rate equal to the then current 3-
month secured overnight financing rate (“SOFR”), reset quarterly, plus 470 basis points. The preferred stock has a
perpetual term and may not be redeemed, except under certain circumstances, under the first five years of issuance.
The preferred stock is non-convertible and dividends equivalent to $75.00 per share were paid during both years ended
December 31, 2024 and 2023.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
125
Regulatory Matters
The Company and the Bank are subject to various regulatory capital requirements administered by federal and state
banking agencies. Failure to meet minimum regulatory capital requirements can initiate certain mandatory, and possible
additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s
and the Bank’s financial statements.
Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the
Company and the Bank must meet specific capital guidelines involving quantitative measures of assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and
classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank
holding companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to
maintain minimum amounts and ratios. As detailed below, as of December 31, 2024 and 2023, the Bank met all of the
capital adequacy requirements to which it is subject.
As of December 31, 2024 and 2023, each of the Company and the Bank was categorized as well capitalized under the
regulatory framework for prompt corrective action. For the years ended December 31, 2024 and 2023, each of the
Company and the Bank was required to maintain minimum total capital, Tier 1 capital, risk-based common equity Tier
1, and Tier 1 leverage ratios at the levels disclosed in the table below to be categorized as well capitalized. There are no
conditions or events since the most recent notification that management believes have changed the prompt corrective
action category.
The following is a summary of the Company’s (consolidated) and the Bank’s actual capital amounts and ratios at
December 31, 2024 and 2023.
Business First Bancshares, Inc.
(Consolidated)
Actual
For Capital
Adequacy Purposes
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
December 31, 2024:
Total Capital (to Risk-Weighted
Assets)
$
878,914
12.75% $
551,523
8.00% $
689,404
10.00%
Tier 1 Capital (to Risk-Weighted
Assets)
727,959
10.56%
413,643
6.00%
551,523
8.00%
Common Equity Tier 1 Capital (to
Risk-Weighted Assets)
651,029
9.44%
310,232
4.50%
448,113
6.50%
Tier 1 Leveraged Capital (to Average
Assets)
727,959
9.53%
305,647
4.00%
382,058
5.00%
December 31, 2023:
Total Capital (to Risk-Weighted
Assets)
$
754,990
12.85% $
470,215
8.00% $
587,769
10.00%
Tier 1 Capital (to Risk-Weighted
Assets)
614,975
10.46%
352,661
6.00%
470,215
8.00%
Common Equity Tier 1 Capital (to
Risk-Weighted Assets)
538,045
9.15%
264,496
4.50%
382,050
6.50%
Tier 1 Leveraged Capital (to Average
Assets)
614,975
9.52%
258,407
4.00%
323,008
5.00%
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
126
b1BANK
Actual
For Capital
Adequacy Purposes
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
December 31, 2024:
Total Capital (to Risk-Weighted
Assets)
$
857,627
12.45% $
551,140
8.00% $
688,925
10.00%
Tier 1 Capital (to Risk-Weighted
Assets)
799,099
11.60%
413,355
6.00%
551,140
8.00%
Common Equity Tier 1 Capital (to
Risk-Weighted Assets)
799,099
11.60%
310,016
4.50%
447,801
6.50%
Tier 1 Leveraged Capital (to Average
Assets)
799,099
10.47%
305,247
4.00%
381,559
5.00%
December 31, 2023:
Total Capital (to Risk-Weighted
Assets)
$
730,117
12.43% $
469,751
8.00% $
587,188
10.00%
Tier 1 Capital (to Risk-Weighted
Assets)
686,379
11.69%
352,313
6.00%
469,751
8.00%
Common Equity Tier 1 Capital (to
Risk-Weighted Assets)
686,379
11.69%
264,235
4.50%
381,672
6.50%
Tier 1 Leveraged Capital (to Average
Assets)
686,379
10.63%
258,203
4.00%
322,754
5.00%
Note 16– Stock Based Compensation –
Equity Incentive Plan
In 2006, the Company’s board of directors adopted the 2006 Stock Option Plan, pursuant to which the Company was
permitted to issue stock options to purchase up to 450,000 shares of the Company’s common stock, all of which could
be issued as either incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended, or
non-qualified stock options. In January 2007, the Company’s board of directors adopted an amendment to the 2006
Stock Option Plan, which increased the number of available shares under the plan from 450,000 to 1,500,000. The 2006
Stock Option Plan expired on December 22, 2016, however, there are still 12,400 fully vested and outstanding options
that remain unexercised as of December 31, 2024.
On June 29, 2017, the Company’s shareholders approved its 2017 Equity Incentive Plan (the “2017 Plan”). The 2017
Plan provided for the grant of various types of equity grants and awards, including incentive stock options, nonstatutory
stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares
and other stock-based awards to eligible participants, which includes the Company’s employees, directors and
consultants. On June 23, 2022, the Company's shareholders approved an additional 400,000 shares to be reserved for
future awards under the 2017 Plan. In addition, the number of shares issuable under the 2017 Plan was increased by
143,908 shares as a result of the assumption of options to purchase shares of TCBI common stock that were converted
into options to purchase shares of Company common stock upon the TCBI acquisition on March 1, 2022. As of May
23, 2024, there will be no future awards made under the 2017 Plan.
On May 22, 2024, the Company’s shareholders approved the Business First Bancshares, Inc. 2024 Equity Incentive
Plan (the “2024 Plan”). The authorized share pool under the 2024 Plan is comprised of 645,000 shares, plus any shares
that were available for issuance under the 2017 Plan and any underlying awards outstanding under the 2017 Plan as of
the effective date of the 2024 Plan that were terminated or cancelled without having been unexercised or forfeited,
cancelled, or repurchased by the Company. In addition, the number of shares issuable under the 2024 Plan was
increased by 207,293 shares as a result of the conversion of Oakwood stock options to Company stock options due to
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
127
the Oakwood acquisition on October 1, 2024. In total, the 2024 Plan has reserved 852,293 shares of common stock for
grant, award or issuance to eligible participants, all of which may be subject to incentive stock option treatment. The
Plan is administered by the Compensation Committee of the Company’s board of directors, which determines, within
the provisions of the 2024 Plan, those eligible participants to whom, and the times at which, grants and awards will be
made. As of December 31, 2024, there were 160,336 shares of common stock issued pursuant to awards and grants
under the 2024 Plan to the Company’s employees, directors or consultants, of which 152,084 shares are subject to
outstanding and unexercised awards and grants, and 484,664 shares of common stock remain available for grant.
Restricted Stock Awards
The Company issues restricted stock under various plans for certain officers and other key employees. The restricted
stock awards may not be sold or otherwise transferred until certain restrictions have lapsed. The holders of the restricted
stock receive dividends and have full voting rights with respect to those shares as of the date of grant. The
compensation expense for these awards is determined based upon the market value of the Company’s common stock at
the grant date applied to the total number of shares awarded and is recognized over the requisite service period.
During the years ended December 31, 2024, 2023 and 2022, the Company issued shares of restricted stock which vest
in three equal installments over the requisite service period. For the years ended December 31, 2024, 2023 and 2022,
respectively, the Company recognized $2.8 million, $4.7 million and $4.3 million in compensation costs related to
restricted stock awards. At December 31, 2024, 2023 and 2022, respectively, unrecognized share-based compensation
associated with these awards totaled $1.1 million, $3.4 million and $3.7 million. The $1.1 million of unrecognized
share-based compensation at December 31, 2024 is expected to be recognized over a weighted average period of 0.6
years.
The table below summarizes the restricted stock award activity for the period presented.
Year Ended December 31,
2024
Year Ended December 31,
2023
Year Ended December 31,
2022
Shares
Weighted
Average
Grant Date
Fair Value
Shares
Weighted
Average
Grant Date
Fair Value
Shares
Weighted
Average
Grant Date
Fair Value
Balance, at Beginning of Period
231,036
$
21.43
131,624
$
24.45
94,245
$
21.60
Granted
207,501
22.43
280,101
20.29
141,646
26.34
Forfeited
(6,903)
21.66
(2,738)
19.51
(6,709)
27.13
Earned and Issued
(205,703)
21.99
(177,951)
16.97
(97,558)
24.20
Balance, at End of Period
225,931
$
21.83
231,036
$
21.43
131,624
$
24.45
Restricted Stock Units
The Company issues restricted share units to certain key officers and executive officers. The Company issues a.)
restricted share units that vest after the end of a three-year performance period, based on satisfaction of performance
conditions set for in the restricted share unit agreements, or b.) shares which vest ratably over a three-year service
period. Recipients do not possess voting or investment power over the common stock underlying such units until
vesting. The grant date fair value of these restricted share units is the same as the value of the corresponding number of
shares of common stock.
For the year ended December 31, 2024, the Company recognized $115,000 in compensation costs related to restricted
stock units. At December 31, 2024, unrecognized share-based compensation associated with these units totaled $4.4
million. The $4.4 million of unrecognized share-based compensation at December 31, 2024 is expected to be
recognized over a weighted average period of 2.4 years.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
128
Year Ended December 31, 2024
(Dollars in thousands, except per share data)
Shares
Weighted Average
Purchase Price
Weighted Average
Remaining
Contractual Term
Aggregate Intrinsic
Value
Weighted Average
Grant Date Fair
Value
Balance, at Beginning of Period
-
$
-
-
$
-
$
-
Granted
158,547
-
2.36
4,075
28.53
Forfeited
-
-
-
-
-
Earned and Issued
-
-
-
-
-
Balance, at End of Period
158,547
$
-
2.36
4,075
$
28.53
End of Period Vested and
Expected to Vest
158,547 $
-
2.36
$
4,075 $
28.53
Ending Exercisable
-
-
-
-
Phantom Stock
The Company issues phantom stock awards to certain key officers and employees. The awards are subject to a vesting
period of three years and are paid out in cash upon vesting. The amount paid per vesting period is calculated as the
number of vested “share equivalents” multiplied by the closing market price of a share of the Company’s common
stock on the vesting date. Share equivalents are calculated on the date of grant as the total award’s dollar value is
divided by the closing market price of a share of the Company’s common stock on the grant date. The liability for
these awards is recorded within other liabilities.
During the year ended December 31, 2024, the Company issued share equivalents of phantom stock which vest in three
equal installments over the requisite service period. For the year ended December 31, 2024, the Company recognized
$9,000 in compensation costs related to phantom stock. At December 31, 2024, unrecognized share-based
compensation associated with these units totaled $275,000. The $275,000 of unrecognized share-based compensation at
December 31, 2024 is expected to be recognized over a weighted average period of 2.4 years.
Year Ended December 31, 2024
(Dollars in thousands, except per share data)
Shares
Weighted Average
Purchase Price
Weighted Average
Remaining
Contractual Term
Aggregate Intrinsic
Value
Weighted Average
Grant Date Fair
Value
Balance, at Beginning of Period
-
$
-
-
$
-
$
-
Granted
11,030
-
2.36
283
28.60
Forfeited
-
-
-
-
-
Earned and Issued
-
-
-
-
-
Balance, at End of Period
11,030
$
-
2.36
283
$
28.60
End of Period Vested and
Expected to Vest
11,030 $
-
2.36
$
283 $
28.60
Ending Exercisable
-
-
-
-
Stock Options
As of December 31, 2024, the Company had 179,969 outstanding and 174,055 vested and exercisable stock options, all
of which have been issued to our executive officers and key personnel and remain subject to the terms and conditions of
the 2006 Stock Option Plan, 2017 Plan and 2024 Plan until they are exercised or forfeited. As of December 31, 2024,
the weighted average exercise price of the stock options was $21.74.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
129
The following is an analysis of the activity related to the stock options:
Years Ended December 31,
2024
2023
2022
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Outstanding Options, at Beginning of
Period
120,608
$
18.59
130,924
$
18.59
113,547
$
17.06
Granted
207,293
22.91
0
-
143,908
22
Exercised
(137,375)
19.25
(7,500)
17.11
(67,060)
19.93
Forfeited or Expired
(10,557)
22.02
(2,816)
22.38
(59,471)
22.45
Outstanding Options, at End of Period
179,969
$
21.77
120,608
$
18.59
130,924
$
18.59
Exercisable, at End of Period
174,055
$
21.74
111,032
$
18.24
118,958
$
18.18
The aggregate intrinsic value of outstanding awards at December 31, 2024 and 2023 is $707,000 and $731,000 with a
weighted average remaining contractual life of 3.7 years and 1.9 years, respectively.
Note 17– Employee Benefit Plans –
Defined Contribution Plan
The Bank has a defined contribution plan qualified under Internal Revenue Code 401(K) for those employees who meet
the eligibility requirements. Contributions may be made by eligible employees subject to Internal Revenue Service
limits. The Bank contributes a matching contribution up to 4% of wages which totaled $2.8 million, $2.4 million and
$2.3 million and is included in salaries and employee benefits for the years ended December 31, 2024, 2023 and 2022,
respectively.
Deferred Compensation
The Company has established certain unfunded nonqualified deferred compensation agreements for the purpose of
providing deferred compensation as retirement benefits for a select group of management. At December 31, 2024 and
2023, the Company had recorded accrued liabilities of $4.1 million and $3.5 million, respectively. The expense related
to the deferred compensation agreements was $766,000, $586,000 and $507,000 for the years ended December 31,
2024, 2023 and 2022, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
130
Note 18– Other Income and Expenses –
An analysis of Other Income for the Company's single reportable operating segment is as follows for the years ended
December 31, 2024, 2023 and 2022:
2024
2023
2022
(Dollars in thousands)
Debit Card and ATM Fee Income
$
7,659 $
6,590 $
6,407
Cash Value of Life Insurance Income
2,875
2,247
1,931
Fees and Brokerage Commissions
7,844
7,247
6,964
Pass-Through Income from SBIC Partnerships
1,208
1,946
1,347
Gain on Extinguishment of Debt
-
1,458
-
Gain on Sale of Branch
-
945
-
Swap Fee Income
2,739
964
-
Other
8,311
6,134
3,863
Total Other Income
$
30,636 $
27,531 $
20,512
An analysis of Other Expenses for the Company's single reportable operating segment is as follows for the years ended
December 31, 2024, 2023 and 2022:
2024
2023
2022
(Dollars in thousands)
Advertising and Promotions
$
4,878 $
4,628 $
3,949
Communications
2,247
2,290
2,561
Ad Valorem Shares Tax
4,057
3,160
3,400
Data Processing Fees
11,957
9,034
8,358
Directors' Fees
1,085
1,079
972
Insurance
2,025
2,028
1,655
Legal and Professional Fees
3,756
3,173
2,359
Office Supplies and Printing
1,091
1,215
1,159
Regulatory Assessments
4,118
4,119
3,124
Taxes and Licenses
103
299
61
Merger and Conversion Costs
1,236
236
4,808
Other
13,193
13,971
12,414
Total Other Expenses
$
49,746 $
45,232 $
44,820
Note 19– Financial Instruments with Off-Balance-Sheet Risk –
In the normal course of business, the Bank is a party to financial instruments with off-balance-sheet risk to meet the
financing needs of its customers. These financial instruments include commitments to extend credit and standby and
commercial letters of credit which are not included in the accompanying financial statements. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby and commercial letters of credit is represented by the contractual amount of
those instruments. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same
as that involved in making commitments to extend credit. The Bank uses the same credit policies in making such
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
131
commitments and conditional obligations as it does for instruments that are included in the balance sheet. In the normal
course of business, the Bank has made commitments to extend credit of approximately $1.4 billion and standby and
commercial letters of credit of approximately $50.0 million at December 31, 2024. As discussed in Note 7, we had a
reserve for unfunded loan commitments of $3.7 million and $3.3 million at December 31, 2024 and 2023, respectively.
Note 20– Concentrations of Credit –
The majority of the Bank’s business activities are with customers in the Bank’s market area, which consists primarily of
Louisiana, the Dallas / Fort Worth, Texas metroplex, and Houston, Texas. The majority of such customers are
depositors of the Bank. The concentrations of credit by type of loan are shown in Note 7. The Bank, as a matter of
policy, does not extend credit to any single borrower or group of related borrowers in excess of the Bank’s legal lending
limits. Most of the Bank’s credits are to individuals and businesses secured by real estate. A substantial portion of their
ability to pay on their debt is dependent on the local economy and industries in the areas.
Within the loan portfolio, the Bank has a concentration of credits secured by real estate. The Bank had extended credit
secured by non-farm non-residential real estate totaling approximately $2.3 billion and $2.0 billion, which accounted
for 39.2% and 39.8% of total loans held for investment at December 31, 2024 and 2023, respectively. Additionally, the
Bank had extended credit secured by construction and land development totaling approximately $670.5 million and
$669.8 million, respectively; these loans represented 11.2% and 13.4% of total loans held for investment at
December 31, 2024 and 2023, respectively.
The Bank maintains amounts on deposit and federal funds sold with correspondent banks which may periodically
exceed the federally insured amount.
Note 21– Leases –
The Bank leases certain branch offices through non-cancelable operating leases with terms that range from one to ten
years and contain various renewal options for certain of the leases. Certain leases provide for increases in minimum
monthly rental payments as defined by the lease agreement. Rental expense under these agreements was $6.6 million,
$5.6 million and $4.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company had a
weighted average lease term of 6.3 years and 6.5 years and a weighted average discount rate of 3.69% and 3.24% as of
December 31, 2024 and 2023, respectively.
Future minimum lease payments under these leases are as follows:
December 31,
(Dollars in
thousands)
2025
$
5,888
2026
$
5,632
2027
$
5,232
2028
$
4,510
2029
$
3,692
2030 and Thereafter
$
6,844
Total Future Minimum Lease Payments
$
31,798
Less Imputed Interest
$
(3,476)
Present Value of Lease Liabilities
$
28,322
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
132
Note 22– Commitments –
SBIC Capital Commitment
The SBIC is a program initiated by the U.S. Small Business Administration ("SBA") in 1958 to assist in the funding of
small business loans. The program is a joint venture between investors with venture capital, the SBA, and small
business borrowers. Investors are responsible for funding the first portion of the capital requirements, with the
remaining requirement being funded by the SBA. The funds are then lent to small business borrowers.
The Bank has agreed to participate as an investor with McLarty Capital Partners SBIC, L.P. (“McLarty”), McLarty
Capital Partners SBIC II, L.P. (“McLarty II”), Firmament Capital Partners SBIC III, L.P. (“Firmament III”), Firmament
Capital Partners SBIC IV, L.P. (“Firmament IV”), Bluehenge Capital Secured Debt SBIC, L.P. (“Bluehenge”),
Bluehenge Capital Secured Debt SBIC II, L.P. (“Bluehenge II”), New Louisiana Angel Fund 2, LLC (“New
Louisiana”), Pharos Capital Partners IV-A, L.P. (“Pharos”) and Valesco Fund III, LP ("Valesco III"). As part of the
TCBI acquisition, the Bank acquired investments in and committed to invest further in Bluehenge Capital Secured Debt
SBIC, L.P. (included with prior Bluehenge investments), Valesco Fund II, LP (“Valesco II”) and GP Capital Partners,
LP (“GP Capital”). Details of these commitments at December 31, 2024 are below.
Total Capital
Commitment
Capital Called
Remaining
Unfunded
Capital
Commitment
McLarty
$
2,000 $
1,802 $
198
McLarty II
2,500
2,222
278
Firmament III
2,500
1,873
627
Firmament IV
2,500
891
1,609
Bluehenge
2,500
2,312
188
Bluehenge II
2,500
1,574
926
New Louisiana
50
50
-
Pharos
1,000
685
315
Valesco II
1,000
795
205
Valesco III
2,000
452
1,548
GP Capital
1,000
736
264
$
19,550 $
13,392 $
6,158
Fintech Fund Commitment
The Company has agreed to invest in certain Fintech funds. As part of the TCBI acquisition, the Company acquired an
investment in Work America Capital Fund I, LP and SBRE I, LLC. During the year ended December 31, 2023, SBRE
I, LLC was fully redeemed. Details of these commitments at December 31, 2024 are below.
Total Capital
Commitment
Capital Called
Remaining
Unfunded
Capital
Commitment
BankTech Ventures, LP
$
500 $
310 $
190
JAM FINTOP Banktech, LP
1,000
598
402
Ledyard Capital Managers, LLC
1,000
1,000
-
Mendon Ventures Banktech Fund I, LP
2,500
1,500
1,000
Castle Creek Launchpad Fund I, LP
1,500
880
620
Work America Capital Fund I, LP
700
700
-
$
7,200 $
4,988 $
2,212
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
133
Federal Home Loan Bank Letters of Credit
The Bank had outstanding letters of credit on behalf of others from the FHLB of $327.2 million and $301.7 million at
December 31, 2024 and 2023, respectively. The outstanding letters of credit as of December 31, 2024 are as follows:
Fifteen letters of credit totaling $119.9 million expire in January 2025.
Seven letters of credit totaling $175.8 million expire in February 2025.
Two letters of credit totaling $508,000 expire in March 2025.
One letter of credit of $216,000 expires in May 2025.
Three letters of credit totaling $26.3 million expire in August 2025.
Two letters of credit totaling $2.5 million expire in September 2025.
Two letters of credit totaling $464,000 expire in October 2025.
Three letters of credit totaling $1.2 million expire in November 2025.
One letter of credit of $329,000 expires in December 2025.
Note 23– Related Party Transactions –
In the ordinary course of business, the Bank has granted loans to directors, officers and their affiliates. Such loans were
made on substantially the same terms as those prevailing at the time for comparable transactions with other customers.
Such loans amounted to $15.2 million and $19.5 million at December 31, 2024 and 2023, respectively.
Related party deposits totaled $57.1 million and $51.2 million as of December 31, 2024 and 2023, respectively.
Note 24– Fair Value of Financial Instruments –
Fair Value Disclosures
The Company groups its financial assets and liabilities measured at fair value in three levels. Fair value should be based
on the assumptions market participants would use when pricing the asset or liability and establishes a fair value
hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires
companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of
inputs used to measure fair value are as follows:
•
Level 1 – Includes the most reliable sources and includes quoted prices in active markets for identical assets or
liabilities.
•
Level 2 – Includes observable inputs. Observable inputs include inputs other than quoted prices that are
observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals,
volatilities, prepayment speeds, loss severities, credit risks, and default rates) as well as inputs that are derived
principally from or corroborated by observable market data by correlation or other means (market-corroborated
inputs).
•
Level 3 – Includes unobservable inputs and should be used only when observable inputs are unavailable.
Recurring Basis
Fair values of investment securities available for sale were primarily measured using information from a third-party
pricing service. This pricing service provides information by utilizing evaluated pricing models supported with market
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
134
data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads,
benchmark securities, bids, offers, and reference data from market research publications.
The fair values of mortgage loans held for sale are based on commitments on hand from investors within the secondary
market for loans with similar characteristics.
The following tables present the balance of assets and liabilities measured on a recurring basis as of December 31, 2024
and 2023. The Company did not record any liabilities at fair value for which measurement of the fair value was made
on a recurring basis.
Fair Value
Level 1
Level 2
Level 3
(Dollars in thousands)
December 31, 2024
Available for Sale:
U.S. Treasury Securities
$
16,675 $
- $
16,675 $
-
U.S. Government Agency Securities
9,588
-
9,588
-
Corporate Securities
45,165
-
32,665
12,500
Mortgage-Backed Securities
537,738
-
537,738
-
Municipal Securities
284,383
-
259,666
24,717
Loans Held for Sale
717
-
717
-
Total
$
894,266 $
- $
857,049 $
37,217
December 31, 2023
Available for Sale:
U.S. Treasury Securities
$
16,239 $
- $
16,239 $
-
U.S. Government Agency Securities
9,410
-
9,410
-
Corporate Securities
43,839
-
35,871
7,968
Mortgage-Backed Securities
506,310
-
506,310
-
Municipal Securities
303,773
-
282,926
20,847
Loans Held for Sale
835
-
835
-
Total
$
880,406 $
- $
851,591 $
28,815
The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Company’s ability to
observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy.
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
135
The tables below provide a reconciliation for assets measured at fair value on a recurring basis using significant
unobservable inputs, or Level 3 inputs, for the years ended December 31, 2024 and 2023.
Municipal
Securities
Corporate
Bonds
(Dollars in thousands)
Balance at December 31, 2022
$
34,768 $
19,000
Realized Gains (Losses) Included in Net Income
-
-
Unrealized Losses Included in Other Comprehensive Loss
(2,228)
(1,532)
Purchases
-
-
Sales
-
-
Maturities, Prepayments, and Calls
(1,798)
-
Transfers Into Level 3
-
-
Transfers Out of Level 3
(9,895)
(9,500)
Balance at December 31, 2023
$
20,847 $
7,968
Realized Gains (Losses) Included in Net Income
-
-
Unrealized Gains (Losses) Included in Other Comprehensive
Loss
(2,339)
782
Purchases
9,938
5,000
Sales
-
-
Maturities, Prepayments, and Calls
(3,729)
(1,250)
Transfers Into Level 3
-
-
Transfers Out of Level 3
-
-
Balance at December 31, 2024
$
24,717 $
12,500
The following table provides quantitative information about significant unobservable inputs used in fair value
measurements of Level 3 assets measured at fair value on a recurring basis at December 31, 2024.
Estimated
Fair Value
Valuation
Technique
Unobservable
Inputs
Range of
Discounts
(Dollars in
thousands)
December 31, 2024
Municipal Securities $
24,717
Present Value of Expected Future Cash
Flow Model
Liquidity Premium
1%
Corporate Securities
12,500
Present Value of Expected Future Cash
Flow Model
Liquidity Premium
2%
Nonrecurring Basis
The Company has segregated all financial assets and liabilities that are measured at fair value on a nonrecurring basis
into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the
measurement date in the table below. The Company did not record any liabilities at fair value for which measurement
of the fair value was made on a nonrecurring basis.
The fair value of the impaired/individually evaluated loans is measured at the fair value of the collateral for collateral-
dependent loans. Impaired loans are Level 3 assets measured using appraisals from external parties of the collateral less
any prior liens and adjusted for estimated selling costs. Adjustments may be made by management based on a
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
136
customized internally developed discounting matrix. Repossessed assets are initially recorded at fair value less
estimated cost to sell, which is generally 10%. The fair value of repossessed assets is based on property appraisals and
an analysis of similar properties available. As such, the Bank records repossessed assets as Level 3.
Fair Value
Level 1
Level 2
Level 3
(Dollars in thousands)
December 31, 2024
Assets:
Individually Evaluated Loans
$
62,138 $
- $
- $
62,138
Other Nonperforming Assets
5,529
-
-
5,529
Total
$
67,667 $
- $
- $
67,667
December 31, 2023
Assets:
Individually Evaluated Loans
$
4,750 $
- $
- $
4,750
Other Nonperforming Assets
1,685
-
-
1,685
Total
$
6,435 $
- $
- $
6,435
Fair Value Financial Instruments
The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other
than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many
instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future
cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. In
accordance with GAAP, certain financial instruments and all non-financial instruments are excluded from these
disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the
underlying fair value of the Company.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for
which it is practicable to estimate that value:
Cash and Short-Term Investments – For those short-term instruments, the carrying amount is a reasonable estimate of
fair value.
Securities Purchased Under Agreements to Resell - The carrying amount approximates its fair value.
Securities – Fair value of securities is based on quoted market prices. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
Loans – The fair value for loans is estimated using discounted cash flow analyses, with interest rates currently being
offered for similar loans to borrowers with similar credit rates. Loans with similar classifications are aggregated for
purposes of the calculations. The allowance for loan losses, which was used to measure the credit risk, is subtracted
from loans.
Cash Value of Bank-Owned Life Insurance (“BOLI") – The carrying amount approximates its fair value.
Other Equity Securities – The carrying amount approximates its fair value.
Deposits – The fair value of demand deposits and certain money market deposits is the amount payable at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses, with
interest rates currently offered for deposits of similar remaining maturities.
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
137
Borrowings – The fair value of FHLB advances and other long-term borrowings is estimated using the rates currently
offered for advances of similar maturities. The carrying amount of short-term borrowings maturing within ninety days
approximates the fair value.
Commitments to Extend Credit and Standby and Commercial Letters of Credit – The fair values of commitments to
extend credit and standby and commercial letters of credit do not differ significantly from the commitment amount and
are therefore omitted from this disclosure.
The estimated approximate fair values of the Bank’s financial instruments as of December 31, 2024 and 2023 are as
follows:
Carrying
Amount
Total
Fair Value
Level 1
Level 2
Level 3
(Dollars in thousands)
December 31, 2024
Financial Assets:
Cash and Short-Term
Investments
$
516,767 $
516,767 $
516,767 $
- $
-
Securities Purchased Under
Agreements to Resell
50,835
50,835
-
50,835
-
Securities
893,549
893,549
-
856,332
37,217
Loans Held for Sale
717
717
-
717
-
Loans - Net
5,926,559
5,832,326
-
-
5,832,326
Cash Value of BOLI
117,645
117,645
-
117,645
-
Other Equity Securities
41,100
41,100
-
-
41,100
Total
$ 7,547,172 $ 7,452,939 $
516,767 $ 1,025,529 $ 5,910,643
Financial Liabilities:
Deposits
$ 6,511,331 $ 6,513,709 $
- $
- $ 6,513,709
Borrowings
483,256
465,834
-
465,834
-
Total
$ 6,994,587 $ 6,979,543 $
- $
465,834 $ 6,513,709
December 31, 2023
Financial Assets:
Cash and Short-Term
Investments
$
377,244 $
377,244 $
377,244 $
- $
-
Securities
879,571
879,571
-
850,756
28,815
Loans Held for Sale
835
835
-
835
-
Loans - Net
4,952,371
4,849,503
-
-
4,849,503
Cash Value of BOLI
96,478
96,478
-
96,478
-
Other Equity Securities
33,942
33,942
-
-
33,942
Total
$ 6,340,441 $ 6,237,573 $
377,244 $
948,069 $ 4,912,260
Financial Liabilities:
Deposits
$ 5,248,790 $ 5,243,326 $
- $
- $ 5,243,326
Borrowings
635,073
613,464
-
613,464
-
Total
$ 5,883,863 $ 5,856,790 $
- $
613,464 $ 5,243,326
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
138
Note 25– Litigation and Contingencies –
In the normal course of business, the Bank is involved in various legal proceedings. In the opinion of management and
counsel, the disposition or ultimate resolution of such proceedings would not have a material adverse effect on the
Bank’s financial statements.
Note 26 – Financial Statements – Parent Company Only –
The balance sheets and statements of income for Business First Bancshares, Inc. (Parent Company) are as follows:
BALANCE SHEETS
AS OF DECEMBER 31, 2024 AND 2023
(Dollars in thousands)
2024
2023
Assets:
Cash
$
9,165 $
12,382
Investment in Subsidiaries
870,003
714,971
Fintech Funds
4,850
3,924
Goodwill
5,603
5,704
Income Taxes Receivable
13,482
10,840
Other Assets
1,313
1,610
Total Assets
$
904,416 $
749,431
Liabilities:
Subordinated Debt
$
99,760 $
99,990
Subordinated Debt - Trust Preferred Securities
5,155
5,155
Other Liabilities
35
27
Total Liabilities
104,950
105,172
Shareholders' Equity:
Preferred Stock
71,930
71,930
Common Stock
29,552
25,352
Additional Paid-in Capital
500,024
397,447
Retained Earnings
260,958
216,115
Accumulated Other Comprehensive Loss
(62,998)
(66,585)
Total Shareholders' Equity
799,466
644,259
Total Liabilities and Shareholders' Equity
$
904,416 $
749,431
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
139
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022
(Dollars in thousands)
2024
2023
2022
Income:
Dividend Income From Subsidiaries
$
26,000 $
13,000 $
10,000
Interest Income
13
19
13
Other Income
448
1,147
43
Expenses:
Interest Expense
5,841
5,753
5,477
Other Operating Expenses
5,186
6,102
6,097
Income (Loss) Before Income Taxes and Equity in
Undistributed
Net Income of Subsidiaries
15,434
2,311
(1,518)
Income Tax Benefit
(2,035)
(2,059)
(2,400)
Income Before Equity in Undistributed Net Income of
Subsidiaries
17,469
4,370
882
Equity in Undistributed Net Income of Subsidiaries
47,638
66,673
53,373
Net Income
65,107
71,043
54,255
Preferred Stock Dividends
5,401
5,401
1,350
Net Income Available to Common Shareholders
$
59,706 $
65,642 $
52,905
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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
140
ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
ITEM 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our management, including our principal executive officer and our principal financial officer, conducted an
evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of December 31, 2024. Our disclosure controls and procedures are designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our principal executive officer and our
principal financial officer, to allow timely decisions regarding required disclosure. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control objectives. Based on their evaluation, our
principal executive officer and our principal financial officer concluded that, as of the evaluation date, due to the material
weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not
effective as of December 31, 2024.
However, after giving full consideration to the material weakness described below, management has concluded
that the consolidated financial statements included in this Report present fairly, in all material respects, the Company’s
financial position, the results of its operations and its cash flows for each of the periods presented in conformity with
GAAP.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed under the supervision of our principal executive officer
and our principal financial officer to provide reasonable assurance regarding the reliability of the financial reporting and
preparation of our financial statements for external purposes in accordance with GAAP. Internal control over financial
reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of the Company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024,
based on the criteria for effective internal control established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013. As permitted by SEC guidance,
management excluded from its assessment the operations of Oakwood Bancshares, Inc. ("Oakwood"), which was acquired
by us on October 1, 2024, and is described in "Note 3 - Mergers and Acquisitions" of the Notes to Consolidated Financial
Statements included in Item 8 in this report. Oakwood represented 11.0% of our total assets as of December 31, 2024.
Based on the assessment, management determined that the Company’s internal control over financial reporting
was not effective as of December 31, 2024 because of the material weakness described below. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
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141
possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a
timely basis.
In January 2025, we identified control deficiencies involving the design and operation of information technology
general controls (“ITGCs”) around change management segregation of duties with respect to certain information
technology (“IT”) systems that support our financial reporting process, which we have outsourced to a third party service
provider. Specifically, user access controls at our third party service provider lacked sufficient segregation of duties as
multiple end users had the ability to both install changes into the production environment and develop application source
code via permissions inherited through group membership. As a result, unauthorized changes could have gone undetected
and could have had a direct or indirect impact on some of our financial reporting controls (both automated and manual) that
relied on certain system reports. Through our own testing procedures, we determined no unauthorized changes occurred in
the production database during the applicable periods. Nonetheless, we concluded that the deficiencies constituted a
material weakness.
Forvis Mazars, LLP, an independent registered public accounting firm, has issued an unqualified opinion on our
financial statements, which states that our consolidated financial statements present fairly, in all material respects, the
financial position of the Company, the results of its operations and its cash flows for each of the periods presented in
conformity with GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2024 has also
been audited by Forvis Mazars, LLP, an independent registered public accounting firm, as stated in their report which is
included herein.
Management’s Remediation Plan
As noted above, during management’s assessment of internal control over financial reporting, a material weakness
was identified related to the design and operation of ITGCs at our third party service provider. As management is
responsible for maintaining effective internal control over financial reporting, and for the assessment of the effectiveness of
internal control over financial reporting, we understand the importance of developing a remediation plan with our third
party service provider that is aligned with management and overseen by the Audit Committee of our Board of Directors.
Management, with the oversight of the Audit Committee of our Board of Directors, is committed to maintaining a
strong internal control environment, and has taken, and will continue to take, actions necessary to remediate the material
weakness. The identified material weakness in our internal control over financial reporting will not be considered
remediated until the remediated controls operate for a sufficient period of time and can be tested and concluded by
management to be designed and operating effectively. Our remediation efforts include working with our third party service
provider to ensure that it has taken steps to address its user access controls that led to the change management segregation
of duties deficiencies. Accordingly, we cannot provide any assurance that our remediation efforts will be successful or that
our internal control over financial reporting will be effective as a result of these efforts. As we continue to evaluate
operating effectiveness and monitor improvements to our internal control over financial reporting, we may take additional
measures to address control deficiencies or modify our remediation efforts. In addition, management will report the
progress and status of our remediation efforts to the Audit Committee of our Board of Directors on a periodic basis.
Although unrelated to our remediation efforts, it is important to note that prior to the identification of the control
deficiencies described above, we had notified our third party service provider of our intent to terminate our existing
relationship with them effective as of May 2025, at which time we will transition the applicable services to a new third
party service provider.
Changes in Internal Control over Financial Reporting
There were no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2024, that have materially
affected or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 9B. Other Information.
(a) Not applicable
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142
(b) During the three months ended December 31, 2024, no director or officer of the Company adopted or terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item
408(a) of Regulation S-K.
During the three months ended December 31, 2024, the Company did not adopt or terminate any “Rule 10b5-1
trading arrangement” as such term is defined in Item 408(a) of Regulation S-K.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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143
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance.
The information called for by this item is incorporated herein by reference from our Definitive Proxy Statement for
our Annual Meeting of Shareholders tentatively being held on May 22, 2025, or an Amended Annual Report on Form 10-
K/A containing such information, a copy of which will be filed with the SEC within 120 days of the end of the fiscal year
ended December 31, 2024.
ITEM 11. Executive Compensation.
The information called for by this item relating to security ownership of certain beneficial owners and management
is incorporated herein by reference from our Definitive Proxy Statement for our Annual Meeting of Shareholders
tentatively being held on May 22, 2025, or an Amended Annual Report on Form 10-K/A containing such information, a
copy of which will be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2024.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The information called for by this item is incorporated herein by reference from our Definitive Proxy Statement for
our Annual Meeting of Shareholders tentatively being held on May 22, 2025, or an Amended Annual Report on Form 10-
K/A containing such information, a copy of which will be filed with the SEC within 120 days of the end of the fiscal year
ended December 31, 2024.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
The information called for by this item is incorporated herein by reference from our Definitive Proxy Statement for
our Annual Meeting of Shareholders tentatively being held on May 22, 2025, or an Amended Annual Report on Form 10-
K/A containing such information, a copy of which will be filed with the SEC within 120 days of the end of the fiscal year
ended December 31, 2024.
ITEM 14. Principal Accountant Fees and Services.
The information called for by this item is incorporated herein by reference from our Definitive Proxy Statement for
our Annual Meeting of Shareholders tentatively being held on May 22, 2025, or an Amended Annual Report on Form 10-
K/A containing such information, a copy of which will be filed with the SEC within 120 days of the end of the fiscal year
ended December 31, 2024. The Independent Registered Accounting Firm is Forvis Mazars, LLP (PCAOB Firm ID No.
686) located in Fort Worth, TX.
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144
PART IV
ITEM 15. Exhibits and Financial Statement Schedules.
(a)
List of documents filed as part of this Report
(1)
Financial Statements
The following financial statements are included in Item 8 of this Report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules
Financial statement schedules are omitted either because they are not required or are not applicable, or
because the required information is shown in the financial statements or notes thereto.
(3)
Exhibits
Number Description
2.1
Agreement and Plan of Reorganization, dated October 20, 2021, by and between Business First Bancshares,
Inc., and Texas Citizens Bancorp, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form
8-K filed by Business First Bancshares, Inc. on October 21, 2021).
2.2
Agreement and Plan of Reorganization, by and between Business First Bancshares, Inc., and Oakwood
Bancshares, Inc., dated April 25, 2024 (incorporated by reference to Exhibit 2.1 to the Current Report on Form
8-K filed by Business First Bancshares, Inc. on April 25, 2024).
3.1
Restated Articles of Incorporation of Business First Bancshares, Inc., adopted October 27, 2022 (incorporated
by reference to Exhibit 3.1 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022,
filed by Business First Bancshares, Inc. on November 3, 2022).
3.2
Amended and Restated Bylaws of Business First Bancshares, Inc., adopted April 23, 2020 (incorporated by
reference to Exhibit 3.2 to the Current Report on Form 8-K filed by Business First Bancshares, Inc. on April
28, 2020).
4.1
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on
Form S-4 filed by Business First Bancshares, Inc. on November 12, 2014).
4.2
Form of Series A Preferred Stock (incorporated by reference to Exhibit A to Exhibit 10.1 to the Current Report
on Form 8-K filed by Business First Bancshares, Inc. on September 1, 2022).
4.3
Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to
Exhibit 4.3 included in the Annual Report on Form 10-K for the year ended December 31, 2023, filed by
Business First Bancshares, Inc. on March 2, 2023).
Instruments defining the rights of the long-term debt securities of Business First Bancshares, Inc. and its
subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. Business First
Bancshares, Inc. hereby agrees to furnish copies of these instruments to the SEC upon request.
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145
10.1+
Amended and Restated Executive Employment Agreement by and between Business First Bank and David R.
Melville, III, dated November 6, 2019 (incorporated by reference to Exhibit 10.1 of the Quarterly Report on
Form 10-Q for the quarter ended September 30, 2019, filed by Business First Bancshares, Inc. on November 7,
2019).
10.2+
Change in Control Agreement, dated November 6, 2019, between Business First Bank and Gregory Robertson
(incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019, filed by Business First Bancshares, Inc. on November 7, 2019).
10.3+
Change in Control Agreement, dated November 6, 2019, between Business First Bank and Philip Jordan
(incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019, filed by Business First Bancshares, Inc. on November 7, 2019).
10.4+
Business First Bancshares 2006 Stock Option Plan (“2006 Stock Option Plan”) (incorporated by reference to
Exhibit 10.5 to the Registration Statement on Form S-4 filed by Business First Bancshares, Inc. on November
12, 2014).
10.5+
Form of Incentive Stock Option Award Agreement under 2006 Stock Option Plan (incorporated by reference to
Exhibit 10.6 to the Registration Statement on Form S-4 filed by Business First Bancshares, Inc. on November
12, 2014).
10.6+
Form of Incentive Stock Option Award Agreement (As Amended), under 2006 Stock Option Plan
(incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-4 filed by Business First
Bancshares, Inc. on November 12, 2014).
10.7+
Amendment No. 1 to the 2006 Stock Option Plan, dated December 17, 2007 (incorporated by reference to
Exhibit 10.9 to Amendment No. 2 to Form S-4 Registration Statement filed by Business First Bancshares, Inc.
on February 5, 2015).
10.8+
Business First Bancshares, Inc., 2017 Equity Incentive Plan (as amended) (incorporated by reference to
Appendix A included in the Definitive Additional Materials to the Definitive Proxy Statement on Form DEF
14A filed by Business First Bancshares, Inc., dated as of April 28, 2022, and filed May 3, 2022).
10.9+
Business First Bancshares, Inc., 2024 Equity Incentive Plan (incorporated by reference to Appendix A included
in the Definitive Proxy Statement filed by Business First Bancshares, Inc. on April 10, 2024).
10.10+
Supplemental Executive Retirement Plan, adopted as of August 1, 2009, by Business First Bank (incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Business First Bancshares, Inc. on
January 13, 2021).
10.11+
Supplemental Executive Retirement Plan Participation Agreement, dated as of January 7, 2021, between
b1BANK and Gregory Robertson (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-
K filed by Business First Bancshares, Inc. on January 13, 2021).
10.12+
Supplemental Executive Retirement Plan Participation Agreement, dated as of October 20, 2009, between
b1BANK and David R. Melville, III (incorporated by reference to Exhibit 10.16 to the Annual Report on Form
10-K filed by Business First Bancshares, Inc. on March 5, 2021).
10.13+
Supplemental Executive Retirement Plan Participation Agreement, dated as of October 20, 2009, between
b1BANK and Philip Jordan (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K
filed by Business First Bancshares, Inc. on March 5, 2021).
10.14+
Change in Control Agreement, dated October 29, 2019, between Business First Bancshares, Inc. and Keith
Mansfield (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2022, filed by Business First Bancshares, Inc. on August 4, 2022).
Table of Contents
146
10.15+
Supplemental Executive Retirement Plan Participation Agreement, dated as of January 7, 2021, between
b1BANK and Keith Mansfield (incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-
Q for the quarter ended June 30, 2022, filed by Business First Bancshares, Inc. on August 4, 2022).
10.16+
Change in Control Agreement, dated June 23, 2022, between Business First Bancshares, Inc. and Saundra
Strong (incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2023, filed by Business First Bancshares, Inc. on May 4, 2023).
10.17+
Supplemental Executive Retirement Plan Participation Agreement, dated as of April 27, 2023, between
b1BANK and Saundra Strong (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2023, filed by Business First Bancshares, Inc. on May 4, 2023).
10.18+
Change in Control Agreement, dated November 16, 2022, by and among Business First Bancshares, Inc.,
b1BANK and N. Jerome Vascocu, Jr. (incorporated by reference to Exhibit 10.3 of the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2024, filed by Business First Bancshares, Inc. on July 31, 2024).
10.19+
Retention Bonus Agreement, dated November 21, 2022, by and among Business First Bancshares, Inc.,
b1BANK and N. Jerome Vascocu, Jr. (incorporated by reference to Exhibit 10.4 of the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2024, filed by Business First Bancshares, Inc. on July 31, 2024).
10.20+
Supplemental Executive Retirement Plan Participation Agreement, dated February 28, 2023, between b1BANK
and N. Jerome Vascocu, Jr. (incorporated by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q
for the quarter ended June 30, 2024, filed by Business First Bancshares, Inc. on July 31, 2024).
10.21+
b1BANK Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 of the Current Report on
Form 8-K, filed by Business First Bancshares, Inc. on December 12, 2024).
10.22+
Form of Securities Purchase Agreement by and among Business First Bancshares, Inc. and the several
purchasers of Series A Preferred Stock named therein (incorporated by reference to Exhibit A to Exhibit 10.1
to the Current Report on Form 8-K filed by Business First Bancshares, Inc., on September 1, 2022).
19.1
Insider Trading Policy*
21.1
List of subsidiaries of Business First Bancshares, Inc.*
23.1
Consent of Forvis Mazars, LLP*
24.1
Power of Attorney (contained on the signature page hereto).*
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
97.1
Clawback Policy (incorporated by reference to Exhibit 97.1 to the Annual Report on Form 10-K filed by
Business First Bancshares, Inc. on March 1, 2024).
101.INS Inline XBRL Instance Document*
101.SCH Inline XBRL Taxonomy Extension Schema Document*
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document*
Table of Contents
147
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_________________________
*
Filed herewith.
**
Furnished herewith, and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or
otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into
any filing under the Securities Act or the Exchange Act.
+
Represents a management contract or a compensatory plan or arrangement.
ITEM 16. Form 10-K Summary.
None.
Table of Contents
148
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BUSINESS FIRST BANCSHARES, INC.
March 7, 2025
By:
/s/ David R. Melville, III
David R. Melville, III
Chairman, President and Chief
Executive Officer
The undersigned directors and officers do hereby constitute and appoint David R. Melville, III and Gregory
Robertson and either of them, our true and lawful attorneys-in-fact and agents, with full power of substitution and re-
substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers, and to
execute any and all instruments for us and in our names in the capacities indicated below, that such person may deem
necessary or advisable to enable Business First Bancshares, Inc. to comply with the Securities Exchange Act of 1934 and
any rules, regulations and requirements of the Securities and Exchange Commission in connection with this Annual Report
on Form 10-K for the fiscal year ended December 31, 2024, including specifically, but not limited to, power and authority
to sign for us, or any of us, in the capacities indicated below, any and all amendments hereto; and we do hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on the 7th day of March, 2025.
Signature
Title
Date
By:
/s/ David R. Melville, III
Chairman, President, Chief Executive Officer and
Director
March 7, 2025
David R. Melville, III
(Principal Executive Officer)
By:
/s/ Gregory Robertson
Chief Financial Officer
March 7, 2025
Gregory Robertson
(Principal Financial Officer)
By
/s/ James J. Buquet, III
Director
March 7, 2025
James J. Buquet, III
By:
/s/ Carol M. Calkins
Director
March 7, 2025
Carol M. Calkins
By:
/s/ Ricky D. Day
Director
March 7, 2025
Ricky D. Day
By:
/s/ John Ducrest
Director
March 7, 2025
John Ducrest
By:
/s/ Mark P. Folse
Director
March 7, 2025
Mark P. Folse
By:
/s/ William Hall
Director
March 7, 2025
William Hall
By:
/s/ J. Vernon Johnson
Director
March 7, 2025
Table of Contents
149
J. Vernon Johnson
By:
/s/ Rolfe H. McCollister, Jr.
Director
March 7, 2025
Rolfe H. McCollister, Jr.
By:
/s/ Andrew D. McLindon
Director
March 7, 2025
Andrew D. McLindon
By:
/s/ Patrick E. Mockler
Director
March 7, 2025
Patrick E. Mockler
By:
/s/ David A. Montgomery, Jr.
Director
March 7, 2025
David A. Montgomery, Jr.
By:
/s/ Arthur J. Price
Director
March 7, 2025
Arthur J. Price
By:
/s/ Aimee Quirk
Director
March 7, 2025
Aimee Quirk
By:
/s/ Zeenat Sidi
Director
March 7, 2025
Zeenat Sidi
By:
/s/ Kenneth Smith
Director
March 7, 2025
Kenneth Smith
By:
/s/ Keith A. Tillage
Director
March 7, 2025
Keith A. Tillage
By:
/s/ Steven G. White
Director
March 7, 2025
Steven G. White
Table of Contents
150
BUSINESS FIRST BANCSHARES,
INC. INSIDER TRADING POLICY
As adopted by the Board of Directors
The Need for a Policy Statement
The purchase or sale of securities of Business First Bancshares, Inc. (“Business First”)
while aware of material nonpublic information, or the disclosure of material nonpublic
information to others who then trade in the securities of Business First, is prohibited by federal
and state securities laws. Insider trading violations are pursued vigorously by the Securities and
Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (“Exchange Act”)
and other state authorities, and are punished severely. While the SEC concentrates its efforts on
the individuals who trade, or who tip inside information to others who trade, the federal
securities laws also impose potential liability on companies and other “controlling persons” if
they fail to take reasonable steps to prevent insider trading by company personnel.
Accordingly, Business First has adopted this Insider Trading Policy (“Policy”) both to
satisfy its obligation to prevent insider trading and to help those persons subject to the Policy
avoid the severe consequences associated with violations of the insider trading laws. This Policy
is also intended to prevent even the appearance of improper conduct on the part of traditional
insiders, such as directors and officers, and employees, as well as certain other persons who may
be associated with Business First. Generally, for purposes of this Policy, the term “insider”
means all directors, executive officers, employees and such other persons. Business First is
proud of its reputation for integrity and ethical conduct and cannot afford to have that reputation
damaged.
Persons Subject to the Policy
You are subject to this Policy if you are a director1, officer or employee of Business First
or any of its subsidiaries, including b1BANK. Business First may also determine that other
persons are subject to this Policy, such as contractors or consultants who have access to material
nonpublic information. In addition, if you are subject to this Policy, this Policy applies to your
family members who reside with you (including a spouse, a child, a child away at college,
stepchildren, grandchildren, parents, stepparents, grandparents, siblings and in-laws), anyone else
who lives in your household, and any family members who do not live in your household but
whose transactions in Business First securities are directed by you or are subject to your
influence or control, such as parents or children who consult with you before they trade in
Business First securities (collectively referred to as “Family Members”). This Policy also applies
to any entities that you or your Family Members influence or control, including any corporations,
partnerships or trusts (collectively referred to as “Controlled Entities”). You are responsible for
the transactions of your Family Members and Controlled Entities and should treat all such
transactions for the purposes of this Policy and applicable securities laws as if the transactions
were for your own account. This Policy does not, however, apply to personal securities
transactions of Family Members where the purchase or sale decision is made by a third party not
controlled by, influenced by or related to you or your Family Members.
1
1
For purposes of this Policy, the term “director” includes any advisory director, board observer or any other person who
regularly attends board meetings or has access to materials provided to directors.
Although all persons described above are generally subject to this Policy, not all sections
of this Policy will apply to all such persons. Specifically, the sections titled “Pre-Clearance
Procedures”, and “Blackout Periods” apply only to directors and executive officers of Business
First and its subsidiaries, and any other persons specifically designated by the Legal Compliance
Officer, together with their respective Family Members and Controlled Entities.
Transactions Subject to the Policy
This Policy applies to transactions in Business First securities, including Business First’s
common stock, options to purchase common stock, or any other type of securities that Business
First may issue, including (but not limited to) preferred stock, convertible debentures and
warrants, as well as derivative securities that are not issued by Business First, such as exchange -
traded put or call options or swaps relating to Business First securities, except as expressly set
forth below.
Transactions Not Subject to this Policy
The following transactions are not subject to this Policy to the extent expressly set forth
below:
Stock Option Exercises. This Policy does not apply to the exercise of stock options
issued by Business First; provided that the exercise price is paid in cash or by means of a “net
exercise,” whereby an option holder has elected to have Business First withhold shares subject to
an option to cover the exercise price of the options. In addition, this Policy does not apply to the
exercise of a tax withholding right under which an option holder has elected to have Business
First withhold shares subject to an option to satisfy tax withholding requirements. This Policy
does apply, however, to the sale of Business First securities acquired upon the exercise of a stock
option, as well as to any sale of stock as part of a broker-assisted cashless exercise of an option
or any other market sale for the purpose of generating the cash needed to pay the exercise price
of an option or any tax withholding obligation.
Restricted Stock Awards. This Policy does not apply to the vesting of restricted stock, or
the exercise of a tax withholding right under which you elect to have Business First withhold
shares of stock to satisfy tax withholding requirements upon the vesting of any restricted stock.
The Policy does apply, however, to any sale of restricted stock in any public or private market
transaction.
401(k) Plan. To the extent that the Business First 401(k) plan may from time to time
permit the acquisition of Business First securities, this Policy does not apply to purchases of
Business First securities in Business First’s 401(k) plan resulting from your periodic contribution
of money to the plan under your payroll deduction election. This Policy does apply, however, to
certain elections you may make under the 401(k) plan, including: (a) an election to increase or
decrease the percentage of your periodic contributions that will be allocated to Business First
stock fund; (b) an election to make an intra-plan transfer of an existing account balance into or
out of Business First stock fund; (c) an election to borrow money against your 401(k) plan
2
account if the loan will result in a liquidation of some or all of your Business First stock fund
balance; and (d) an election to pre-pay a plan loan if the pre-payment will result in allocation of
loan proceeds to Business First stock fund.
Employee Stock Purchase Plan. This Policy does not apply to purchases of Business
First securities in an employee stock purchase plan, if any, resulting from your periodic
contribution of money to the plan under the election you made at the time of your enrollment in
the plan. This Policy also does not apply to purchases of Business First securities resulting from
lump sum contributions to the plan, provided that you elected to participate by lump sum
payment at the beginning of the applicable enrollment period. This Policy does apply, however,
to your election to participate in the plan for any enrollment period, and to your sales of Business
First securities purchased under the plan.
Business First Offerings or Repurchases. The purchase of Business First securities
from Business First, and the sale of Business First securities to Business First, are not subject to
this Policy.
Bona Fide Gifts. Bona fide gifts of Business First securities are not subject to this
Policy, unless the person making the gift has reason to believe that the recipient intends to sell
such Business First securities while the officer, employee or director is aware of material
nonpublic information, or the person making the gift is subject to the trading restrictions
specified below under the heading “Pre-Clearance Procedures” and has reason to believe that the
recipient intends to sell the Business First securities during a blackout period.
Mutual Fund Transactions. Transactions in mutual funds that are invested in Business
First securities are not subject to this Policy.
While these transactions are exceptions to this Policy’s prohibitions on trading in
Business First’s securities, a Section 16 Reporting Person, Designated Individual or member of
such person’s immediate family or household or any such person’s controlled entity
contemplating such a transaction should still pre-clear the proposed transaction with the
Compliance Officer.
Administration of the Policy
Heather Roemer and Saundra Strong shall each serve as Compliance Officer for the
purposes of this Policy. The Company will at all times have a designated Compliance Officer for
the purposes of this Policy, and in their absence, another employee designated by the
Compliance Officer will be responsible for administration of this Policy. All determinations and
interpretations by the Compliance Officer will be final and not subject to further review. Any
questions regarding this Policy should be directed to the Compliance Officer. The Compliance
Officer may consult with counsel to Business First in connection with the administration of this
Policy.
Individual Responsibility
Persons subject to this Policy have ethical and legal obligations to maintain the
confidentiality of information about Business First and its subsidiaries and not to engage in
3
transactions in Business First securities while in possession of material nonpublic information.
Each individual is responsible for ensuring that he or she complies with this Policy, and that any
Family Member or Controlled Entity also complies with this Policy. In all cases, the
responsibility for determining whether an individual is in possession of material nonpublic
information rests with that individual, and any action on the part of Business First, the
Compliance Officer or any other employee or director under this Policy or otherwise does not in
any way constitute legal advice or insulate an individual from liability under applicable securities
laws.
Statement of Policy
It is the policy of Business First that no director, officer or other employee of Business
First (or any other person designated by this Policy or by the Compliance Officer as subject to
this Policy, including Family Members and Controlled Entities) who is aware of material
nonpublic information relating to Business First may, directly, or indirectly through any other
person or entity:
1.
Engage in transactions in Business First securities, except as otherwise specified in
this Policy under the headings “Transactions Not Subject to this Policy” and “Rule
10b5-1 Plans;”
2.
Recommend the purchase or sale of any Business First securities;
3.
Disclose material nonpublic information to persons within Business First whose
jobs do not require them to have that information, or outside of Business First to
other persons, including, but not limited to, family, friends, business associates,
investors and expert consulting firms, unless any such disclosure is made in
accordance with Business First’s policies regarding the protection or authorized
external disclosure of information regarding Business First; or
4.
Assist anyone engaged in the above activities.
In addition, it is the policy of Business First that insiders of Business First who, in the
course of their relationship with Business First, learn of material nonpublic information about a
company with which Business First does business, including a customer or supplier of Business
First, may not trade in that company’s securities until the information becomes public or is no
longer material.
The prohibition on unauthorized disclosure of material nonpublic information apples to
all forms of communication, including communications made through social media or other
electronic means. The prohibitions described above also apply to trades by any investment
clubs, the membership of which includes any director, officer or employee of Business First (or
any other person designated by this Policy or the Compliance Officer as subject to this Policy,
including their Family Members and Controlled Entities).
4
There are no exceptions to this Policy, except as specifically noted herein. Transactions
that may be necessary or justifiable for independent reasons (such as the need to raise money for
an emergency expenditure), or small transactions, are not excepted from this Policy. The
securities laws do not recognize any mitigating circumstances, and, in any event, even the
appearance of an improper transaction must be avoided to preserve Business First’s reputation
for adhering to the highest standards of conduct.
5
Definition of Material Nonpublic Information
Material Information. Information is considered “material” if a reasonable investor
would consider that information important in making a decision to buy, hold or sell securities.
Any information that could be expected to affect Business First’s stock price, whether it is
positive or negative, should be considered material. There is no bright-line standard for assessing
materiality; rather, materiality is based on an assessment of all of the facts and circumstances.
You should remember that anyone scrutinizing your transactions will be doing so after the fact,
with the benefit of hindsight. If you are uncertain whether information is material, you should
assume that it is until you obtain guidance from the Compliance Officer. While it is not possible
to define all categories of material information, some examples of information that ordinarily
would be regarded as material are:
•
Projections of future earnings or losses, or other earnings guidance;
•
Changes to previously announced earnings guidance, or a decision to
suspend earnings guidance;
•
A pending or proposed merger, acquisition or tender offer;
•
A pending or proposed acquisition or disposition of a significant asset;
•
A pending or proposed change as to the national securities exchange on which
Business First is listed, or any pending or proposed decision to delist from
such exchange or deregister as a public company;
•
A change in dividend policy, the declaration of a stock split, or an offering
of additional securities;
•
Company borrowings or other financing transactions out of the ordinary course;
•
The establishment of a repurchase program for Business First securities;
•
Development of a significant new product or process;
•
New major contracts or customers, or the loss of a major customer
•
A change in management or the board of directors;
•
A change in auditors or notification that the auditor’s reports may no longer
be relied upon;
•
Any proposed or pending restatement of Business First’s financial statements or
b1BANK s Reports of Condition and Income;
•
Pending or threatened significant litigation, or the resolution of such litigation;
•
Impending bankruptcy or the existence of severe liquidity problems;
6
7
•
Information regarding a breach of customer privacy;
•
A pending or proposed regulatory investigation or administrative action against
Business First, its subsidiaries or its affiliates, or any person related to Business
First, its subsidiaries or its affiliates; and
•
The imposition of an administrative action against Business First, its subsidiaries
or its affiliates.
When Information is Considered Public. Information that has not been disclosed to the
public is generally considered to be nonpublic information. In order to establish that the
information has been disclosed to the public, it may be necessary to demonstrate that the
information has been widely disseminated. Information generally would be considered widely
disseminated if it has been disclosed through the newswire services, a broadcast on widely-
available radio or television programs, publication in a widely-available newspaper, magazine or
news website, or public disclosure documents filed with the SEC that are available on the SEC’s
website. By contrast, information would likely not be considered widely disseminated if it is
available only to Business First’s employees, or if it is only available to a select group of
analysts, brokers and institutional investors.
Once information is widely disseminated, it is still necessary to afford the investing
public with sufficient time to absorb the information before the information is considered public.
As a general rule, information should not be considered fully absorbed by the marketplace until
after the second business day after the day on which the information is released. If, for example,
Business First were to make an announcement on a Monday, you should not trade in Business
First securities until Thursday. If an announcement were made on a Friday, Wednesday generally
would be the first eligible trading day. Depending on the particular circumstances, Business First
may determine that a longer or shorter period should apply to the release of specific material
nonpublic information.
Pre-Clearance Procedures
To help prevent inadvertent violations of the securities laws and to avoid even the
appearance of trading on inside information, directors and executive officers of Business First
and its subsidiaries, and any other persons designated by the Compliance Officer under this
Policy as being subject to the pre-clearance procedures, together with their respective Family
Members and Controlled Entities, may not engage in any transaction in Business First securities
without first obtaining pre-clearance of the transaction from the Compliance Officer.
A request for pre-clearance should be submitted to the Compliance Officer at least two
business days in advance of the proposed transaction. The Compliance Officer is under no
obligation to approve a transaction submitted for pre-clearance and may determine not to permit
the transaction. If a person seeks pre-clearance to engage in the transaction and is denied, then
he or she should refrain from initiating any transaction in Business First securities and should not
inform any other person of the restriction. Pre-cleared trades must be executed within five
business days of receipt of pre-clearance, unless the Compliance Officer grants an exception.
8
When a request for pre-clearance is made, the requestor should carefully consider
whether he or she may be aware of any material nonpublic information about Business First and
should describe fully those circumstances to the Compliance Officer. The requestor should also
indicate whether he or she has effected any transactions in Business First securities within the
past six months. Pre-clearance of a trade does not constitute legal advice and does not relieve the
requestor of his or her legal obligation to refrain from trading while in possession of material
nonpublic information.
The requirement for pre-clearance does not apply to those transactions to which this
Policy does not apply, as described above under the heading “Transactions Not Subject to this
Policy,” or to transactions conducted under approved Rule 10b5-1 plans, as described under the
heading “Rule 10b5-1 Plans.”
Blackout Periods
Quarterly Blackout Periods. Business First’s announcement of its quarterly financial
results almost always has the potential to have a material effect on the market for Business First
securities. Therefore, to avoid even the appearance of trading while aware of material nonpublic
information, directors and executive officers of Business First and its subsidiaries, and any other
persons designated by the Compliance Officer, as well as their respective Family Members and
Controlled Entities, generally will not be pre-cleared to conduct any transactions involving
Business First securities during a “blackout period” beginning on the 15th day of the last month
of each fiscal quarter and ending after the second full business day following the date of the
public release of Business First’s financial results for that quarter. In other words, these persons
may only conduct transactions in Business First securities during the “window period” beginning
on the third business day following the public release of Business First’s quarterly financial
results and ending on the 14th day of the last month of the next fiscal quarter.
In addition, Business First’s financial results may be sufficiently material in a particular
fiscal quarter that, in the judgment of the Compliance Officer, designated persons should refrain
from trading in Business First securities even sooner than the typical quarterly blackout period
described above, in which case the Compliance Officer may impose an event-specific blackout
period.
Event-Specific Blackout Periods. From time to time, an event may occur that is material
to Business First and is known by only a few directors, officers and/or employees. So long as the
event remains material and nonpublic, the persons designated by the Compliance Officer may
not trade in Business First securities. The existence of an event-specific blackout period will not
be announced, other than to those who are aware of the event giving rise to the blackout. Any
person made aware of the existence of an event-specific blackout period should not disclose the
existence of the blackout to any other person. The failure of the Compliance Officer to designate
you as a person subject to an event-specific blackout will not relieve you of the obligation not to
trade while aware of material nonpublic information.
9
Pension Fund Blackout Periods. No director or officer may trade in Business First
securities during any “pension fund blackout period” if that person acquired such securities in
connection with his or her employment as a director or officer of Business First or its
1
subsidiaries. A “pension fund blackout period” means any period of more than three consecutive
business days during which the ability of not fewer than 50% of the participants or beneficiaries
under all individual account plans (as defined under the Employee Retirement Security Act of
1974, but excluding a one-participant retirement plan) maintained by Business First to purchase,
sell or otherwise acquire or transfer an interest in any equity security of Business First held in
such an individual account plan is temporarily suspended by Business First or a fiduciary of the
plan, but does not include any period which the SEC exempts from the definition of “blackout
period” under Section 306(a) of the Sarbanes-Oxley Act of 2002.
Exceptions. A person who is subject to a quarterly earnings blackout period and who has
an unexpected and urgent need to sell Business First securities in order to generate cash may, in
appropriate circumstances, be permitted to do so even during the blackout period. Hardship
exceptions may be granted only by the Compliance Officer and must be requested at least two
business days in advance of the proposed trade. A hardship exception may be granted only if the
Compliance Officer concludes that the person does not in fact possess material nonpublic
information. Under no circumstance will a hardship exception be granted during an event-
specific blackout period.
The quarterly trading restrictions and event-driven trading restrictions do not apply to
those transactions to which this Policy does not apply, as described above under the heading
“Transactions Not Subject to this Policy,” or to transactions conducted under approved Rule
10b5-1 plans, as described under the heading “Rule 10b5-1 Plans.”
Special and Prohibited Transactions
Business First has determined that there is a heightened legal risk and/or the appearance
of improper or inappropriate conduct if persons subject to this Policy engage in certain types of
transactions. Therefore, it is Business First’s policy that no person subject to this Policy
(including Family Members and Controlled Entities (each, a “Covered Person”)), should engage
in any of the following transactions except to the extent permitted below:
Short-Term Trading. Short-term trading of Business First securities may be distracting
to the person and may unduly focus the person on Business First’s short-term stock market
performance instead of Business First’s long-term business objectives. For these reasons, a
Covered Person who purchases Business First securities in the open market may not sell any
Business First securities of the same class during the six months following the purchase (or vice
versa), except with the consent of the Compliance Officer.
Short Sales. Short sales of Business First securities (i.e., the sale of a security that the
seller does not own) may evidence an expectation on the part of the seller that the securities will
decline in value, and therefore have the potential to signal to the market that the seller lacks
confidence in Business First’s prospects. In addition, short sales may reduce a seller’s incentive
to seek to improve Business First’s performance. For these reasons, short sales of Business First
securities by Covered Persons are prohibited. In addition, Section 16(c) of the Exchange Act
prohibits officers and directors from engaging in short sales. (Short sales arising from certain
1
types of hedging transactions are governed by the paragraph below captioned “Hedging
Transactions.”)
1
Publicly-Traded Options. A transaction in publicly-traded options is, generally speaking,
a bet on the short-term movement of Business First securities and therefore may create the
appearance that the insider is trading based on material nonpublic information. Transactions in
publicly-traded options may also focus an insider’s attention on short-term performance at the
expense of Business First’s long-term objectives. Accordingly, transactions by Covered Persons
in put options, call options or other derivative securities, on an exchange or in any other
organized market, are prohibited by this Policy. Option positions arising from certain types of
hedging transactions are governed by the next paragraph below.
Hedging Transactions. Certain forms of hedging or monetization transactions, such as
prepaid variable forwards, equity swaps, collars and exchange funds, allow an insider to lock in
much of the value of his or her stock holdings, often in exchange for all or part of the potential
for upside appreciation in the stock. These transactions allow the insider to continue to own the
covered securities, but without the full risks and rewards of ownership. When that occurs, the
insider may no longer have the same objectives as Business First’s other shareholders. Therefore,
Business First strongly discourages Covered Persons from engaging in such transactions. Any
Covered Person wishing to enter into such an arrangement must first pre-clear the proposed
transaction with the Compliance Officer. Any request for pre-clearance of a hedging or similar
arrangement must be submitted to the Compliance Officer at least two weeks prior to the
proposed execution of documents evidencing the proposed transaction and must set forth a
justification for the proposed transaction.
Margin Accounts and Pledged Securities. Securities held in a margin account as
collateral for a margin loan may be sold by the broker without the customer’s consent if the
customer fails to meet a margin call. Because a margin sale may occur at a time when the
pledgor is aware of material nonpublic information or otherwise is not permitted to trade in
Business First securities, Covered Persons are not permitted to hold Business First securities in a
margin account. Similarly, securities pledged (or hypothecated) as collateral for a loan may be
sold in foreclosure if the borrower defaults on a loan while the borrower is aware of material
nonpublic information. As such, Covered Persons are generally discouraged from pledging
Business First securities as collateral for loan. A Covered Person who wishes to pledge Business
First securities as collateral for a loan (not including margin debt) and clearly demonstrates the
financial capacity to repay the loan without resort to the pledged securities may engage in such a
transaction with the prior approval of the Compliance Officer. Any Covered Person who wishes
to pledge Business First securities as collateral for a loan must submit a request for approval to
the Compliance Officer at least two weeks prior to the proposed execution of documents
evidencing the proposed pledge. Pledges of Business First securities arising from certain types
of hedging transactions may also be governed by the paragraph above captioned “Hedging
Transactions.”
Standing and Limit Orders. Standing and limit orders (except standing and limit orders
under approved Rule 10b5-1 Plans, as described below) create heightened risks for insider
trading violations similar to the use of margin accounts. There is no control over the timing of
purchases or sales that result from standing instructions to a broker, and as a result the broker
could execute a transaction when an insider is in possession of material nonpublic information.
1
Business First therefore discourages placing standing or limit orders on Business First securities.
If a Covered Person subject to this Policy determines he or she must use a standing order or limit
1
order, the terms of the standing or limited order must be disclosed to the Compliance Officer
during the pre-clearance process.
Rule 10b5-1 Plans
Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability
under Rule 10b-5. To rely on this defense, a person subject to this Policy must enter into a Rule
10b5-1 plan for transactions in Business First securities that meet certain conditions specified in
the Rule (a “Rule 10b5-1 Plan”). To comply with the Policy, a Rule 10b5-1 Plan must meet the
requirements of Rule 10b5-1 and be approved by the Compliance Officer. Under a Rule 10b5-1
Plan, Business First securities may be purchased or sold without regard to certain insider trading
restrictions.
In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering
into the plan is not in possession of material nonpublic information. Anyone entering into a Rule
10b5-1 Plan is required to certify in writing to Business First that the person is not aware of
material nonpublic information and that the person is adopting the 10b5-1 Plan in good faith and
not as part of a plan to evade the prohibition against illegal insider trading. Once the plan is
adopted, the person must not exercise any influence over the amount of securities to be traded,
the price at which they are to be traded or the date of the trade. The plan must either specify the
amount, pricing and timing of transactions in advance or delegate discretion on these matters to
an independent third party. Any Rule 10b5-1 Plan must be submitted to the Compliance Officer
for approval not less than five business days prior to the entry into the Rule 10b5-1 Plan.
Transactions effected under a pre-cleared Rule 10b5-1 Plan will not require further pre-clearance
at the time of the transaction if the plan specifies the dates, prices and amounts of the
contemplated trades, or establishes a formula for determining the dates, prices and amounts. Rule
10b5-1 Plans are subject to a “cooling off” period following the adoption or modification of the
Rule 10b5-1 Plan before the plan can go into effect. For officers and directors, the cooling off
period begins on the date of the Rule 10b5-1 Plan adoption or modification and ends the later of
(1) 90 days thereafter and (2) two business days following filing of a Form 10-Q or 10-K (or 6-K
or 20-F) covering the financial reporting period in which the Rule 10b5-1 Plan was adopted or
modified, but in no event later than 120 days. For insider employees who are not officers or
directors, the cooling off period is 30 days and begins on the date of the Rule 10b5-1 Plan
adoption or modification.
Post-Termination Transactions
This Policy continues to apply to transactions in Business First securities even after
termination of service to Business First. If an individual is in possession of material nonpublic
information when his or her service terminates, neither that individual, nor his or her Family
Members or Controlled Entities, may trade in Business First securities until that information has
become public or is no longer material. The pre-clearance procedures described in this Policy,
however, will cease to apply to transactions in Business First securities at the time of the
termination of service.
Consequences of Violations
1
The purchase or sale of securities while aware of material nonpublic information, or the
disclosure of material nonpublic information to others who then trade in Business First’s
securities, is prohibited by the federal and state laws. Insider trading violations are pursued
vigorously by the SEC, U.S. Attorneys and state enforcement authorities, among others.
Punishment for insider trading violations is severe, and could include significant fines and
imprisonment. While the regulatory authorities concentrate their efforts on the individuals who
trade, or who tip inside information to others who trade, the federal securities laws also impose
potential liability on companies and other “controlling persons” if they fail to take reasonable
steps to prevent insider trading by company personnel. In addition, an individual’s failure to
comply with this Policy may subject the individual to Company imposed sanctions, including
dismissal for cause, whether or not the employee’s failure to comply results in a violation of law.
A violation of law, or even an SEC investigation that does not result in prosecution, can
tarnish a person’s reputation and irreparably damage a career. Accordingly, Business First
strongly urges all persons covered by this Policy to strictly comply with its terms.
Reporting of Completed Trades
Each director or executive officer (or other person, including, without limitation, key
employees, as determined by the Compliance Officer) who is responsible for complying with the
reporting requirements under Section 16 of the Exchange Act must timely complete and deliver
to the Compliance Officer the appropriate forms for filing with the SEC following the execution
of a reportable transaction. If such person has completed an acceptable power of attorney, the
Compliance Officer will complete the Section 16 filing, provided such person has supplied the
necessary transaction detail to the Compliance Officer in a timely manner. All Section 16 filings
must be available on the corporate website no later than the end of the business day following the
filing with the SEC. Any late or delinquent Section 16 filing must also be publicly reported, by
individual, under separate caption, in Business First’s proxy statement for its next annual
meeting.
Reporting of Violations
Any employee, officer or director who violates this Policy or any federal or state laws
governing insider trading or tipping, or knows of any such violation by any other employee,
officer or director of Business First, must report the violation immediately to the Compliance
Officer. Upon learning of any such violation, the Compliance Officer, in consultation with
Business First’s outside legal counsel, will determine whether Business First should release any
material nonpublic information, or whether Business First should report the violation to the SEC
or other appropriate governmental authority.
Inquiries
Please direct all inquiries regarding any of the provisions or procedures of this Policy to
the Compliance Officer.
1
Acknowledgement of Insider Trading Policy
I, the undersigned director/officer/employee of Business First Bancshares, Inc.
(“Business First”) do acknowledge and represent that (i) I have received and reviewed the
Insider Trading Policy of Business First, (ii) I am, and have been for the prior twelve-month
period, in compliance with such policy, and (iii) I agree to comply with such policy and to
promptly notify Business First of any event, circumstance, action or failure to act that does, or
could be expected to, violate such policy:
ACKNOWLEDGED AND AGREED, as of the date written below.
Print Name
Date
EXHIBIT 21.1
SUBSIDIARIES OF BUSINESS FIRST BANCSHARES, INC.
Name
Jurisdiction of Incorporation
Parent Entity
b1BANK
Coastal Commerce Statutory Trust I
Louisiana
Connecticut
Business First Bancshares, Inc.
Business First Bancshares, Inc.
Business First Insurance, LLC
Louisiana
b1BANK
Smith Shellnut Wilson, LLC
Waterstone LSP, LLC
b1Securities, LLC
Mississippi
Texas
Louisiana
b1BANK
b1BANK
b1BANK
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Forms S-3 (Nos. 333-256605
and 333-279754) and Forms S-8 (No. 333-234256, No. 333-225393, and No. 333-266983) of Business First
Bancshares, Inc. of our reports dated March 7, 2025, with respect to the consolidated financial statements (on
which our report is unqualified) of Business First Bancshares, Inc. and the effectiveness of internal control over
financial reporting (on which our report expresses an adverse opinion on the effectiveness of the Company’s
internal control over financial reporting because of a material weakness), included in this Annual Report on Form
10-K for the year ended December 31, 2024.
/s/ Forvis Mazars, LLP
Fort Worth, Texas
March 7, 2025
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, David R. Melville, III, certify that:
1.
I have reviewed this Annual Report on Form 10-K (this “Report”) of Business First Bancshares, Inc.;
2.
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Report;
3.
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for the periods presented in this Report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this Report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this Report based on such evaluation; and
(d)
Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 7, 2025
/s/ David R. Melville, III
David R. Melville, III
Chairman, President and Chief Executive
Officer
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Gregory Robertson, certify that:
1.
I have reviewed this Annual Report on Form 10-K (this “Report”) of Business First Bancshares, Inc.;
2.
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Report;
3.
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for the periods presented in this Report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this Report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this Report based on such evaluation; and
(d)
Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 7, 2025
/s/ Gregory Robertson
Gregory Robertson
Executive Vice President and Chief
Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO RULE 13a-14(b) 18 U.S.C. SECTION 1350,
As adopted pursuant to
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Financial Report on Form 10-K of Business First Bancshares, Inc.
(the “Company”) for the year ended December 31, 2024, as filed with the Securities and Exchange Commission (the
“Report”), we, David R. Melville, III, as Chairman, President and Chief Executive Officer of the Company, and Gregory
Robertson, as Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as added by
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company as of and for the period covered by the Report.
Date: March 7, 2025
/s/ David R. Melville, III
David R. Melville, III
Chairman, President and Chief Executive Officer
/s/ Gregory Robertson
Gregory Robertson
Chief Financial Officer