When we refer in this Annual Report to ~~“we,~~“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.

This Annual Report on Form 10-K, or the ~~“Report,~~“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 ~~recently completed acquisition of Minden Bancorp, Inc. and its subsidiary, MBL Bank.~~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.

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.

The above summary is subject in its entirety to the more complete discussion of risk factors set for forth in “ITEM 1A. Risk Factors”.

Business First Bancshares, Inc. is a ~~bank~~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, ~~including~~ in the ~~state’s six largest metropolitan markets,~~Dallas/Fort Worth metroplex and Houston, from a network of 18 banking centers aand loan production ~~office and a wealth solutions office. We also opened a loan production office in Dallas, Texas in June 2017, marking our first formal expansion outside of the state of Louisiana.~~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 ~~ten~~ largest Louisiana-based financial institutions. As of December 31, ~~2017,~~2023, on a consolidated basis, we had total assets of ~~$1.3~~$6.6 billion, total loans of ~~$975.5 million,~~$5.0 billion, total deposits of ~~$1.1~~$5.2 billion and shareholders’ equity of ~~$179.9~~$644.3 million.

Currently, there has been no established public market for our common stock. In connection with our acquisition of Minden Bancorp, Inc., in October 2017 we conducted a private placement of shares of ourOur common stock ~~pursuant to which we agreed with certain institutional investors that we would list our common stock for trading on a national exchange. We have applied to list our common stock~~is listed on the ~~NASDAQ~~Nasdaq Global Select Market under the symbol “BFST” ~~and expect that~~ ~~our listing will be effective late in the first quarter or early in the second quarter of 2018.~~.

We believe a bank should be measured by the value it adds to its ~~customers~~’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.

WeWe believe there is an area stretching from ~~Dallas, Texas~~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:

~~American Gateway Financial Corporation.~~Smith Shellnut Wilson, LLC (“SSW”). On March 22, 2021, we, through b1BANK, entered into a definitive agreement to acquire SSW, a registered investment advisor with approximately $3.5 billion in assets under management, specializing in managing investment portfolios for corporations, foundations and individuals. The acquisition of SSW was consummated on April 1, 2021. At March 31, ~~2015, we acquired American Gateway Financial Corporation, or AGFC, and its wholly-owned banking subsidiary, American Gateway Bank. Prior to the merger, AGFC operated ten full-service banking locations~~2021, SSW reported $3.6 million in ~~the Baton Rouge market. We acquired~~ total assets ~~of $371.5 million, total loans of $143.2 million,~~ and ~~total deposits of $283.3~~$2.3 million in ~~the transaction. The acquisition greatly expanded our branch network within the West Baton Rouge and East Baton Rouge markets and enhanced our core deposit portfolio.~~total liabilities.

~~Minden~~Texas Citizens Bancorp, Inc. On October ~~5, 2017,~~20, 2021, we entered into a definitive agreement to acquire ~~Minden~~Texas Citizens Bancorp, Inc. (“TCBI”), ~~or MBI, and its wholly-owned banking subsidiary, MBL Bank.~~the parent bank holding company for Texas Citizens Bank, National Association, headquartered in Pasadena, Texas. The acquisition was consummated on ~~January~~March 1, ~~2018.~~2022. As a result of the ~~transaction,~~TCBI acquisition, we ~~acquired MBL Bank’s two full-service~~added six banking locations in the ~~Shreveport-Bossier City metropolitan area,~~Houston, Texas market, and as of February 28, 2022, reported total assets of ~~$315.4~~$534.2 million, ~~net~~ loans of ~~$193.3~~$349.5 million and total deposits of ~~$264.0~~$477.2 million. ~~The acquisition expanded our presence in our Northwest Louisiana market and added what we believe to be a strong portfolio of core deposits to our business.~~

Because the acquisition of MBI was consummated after the year ended December 31, 2017, our financial information and statements contained in this Annual Report on Form 10-K will not include the effect of the ~~transaction. See “Note 24—Subsequent Events” in the Notes to Consolidated Financial Statement.~~

We believe the following competitive strengths differentiate us from our peers and position us for future growth:

Our banking operations are currently organized into ~~eight markets~~five regions in Louisiana, which include the ~~six~~ largest metropolitan areas in the state, the Dallas/Fort Worth metroplex, and ~~the Dallas, Texas market,~~Houston, which we service through 18our banking centers aand loan production ~~office in each of our New Orleans and Dallas markets and a wealth solutions office in our Houma market.~~offices. We formally expanded our operations outside of Louisiana for the first time in June of 2017 with the opening of a loan production office in Dallas, Texas, where we already have substantial lending relationships primarily originated from our Northwest Louisiana market. We intend to convert each of our loan production offices into full banking centers in the second quarter of 2018. While we do not have any further specific expansion plans at this time, we will continue to look for talented teams of bankers in markets and potential acquisitions that fit our model going forward.

~~Business First Bank~~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, ~~Business First Bank~~b1BANK offers our customers wealth management products, drive-through banking facilities, automated teller machines, night depository, personalized checks, credit cards, debit cards, internet banking, electronic funds transfers through ACH services, domestic and foreign wire transfers, traveler’s checks, cash management, vault services, loan and deposit sweep accounts, and lock box services.

As a business-focused community-based financial institution, wewe 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 ~~high net worth~~ 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 ~~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, 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 2025 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 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 ~~multifamily~~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 ~~one-to-four~~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. ~~We also originate for resale one-to-four family mortgage loans, and those loans are included as a part of our consumer real estate loan portfolio until sold to investors.~~ 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. ~~We offer consumer loans as an accommodation to our existing customers and do not market consumer loans to persons who do not have a pre-existing relationship with us.~~ 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.

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~~board of ~~Directors.~~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. ~~Our board has established an “in-house” lending limit to any single customer equal to 10% of risk-based capital measured at the most recent year end.~~ As of December 31, ~~2017,~~2023, the ~~Bank had a legal~~Board has set the “in-house” household lending limit was $60.0 million with an additional borrower “in-house” lending limit of ~~approximately $56.0 million for loans secured without readily marketable collateral, and its “in-house” lending limit was $17.6~~$20.0 million as of such date. Our credit ~~analyst teams~~underwriters are based ~~in Baton Rouge and Shreveport~~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. ~~Loans presenting aggregate lending exposure less than or equal~~We approve loans under four types of authority, Matrix (which includes Executive and Directors’ Loan Committees), Incremental, Small Business, and Consumer authority. With the exception of loans secured by cash deposited with us, 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 ~~$250,000 must~~$500,000, market presidents have authority up to $750,000, regional market presidents have authority up to $1.5 million, the chief banking officer and regional credit managers have authority up to $2.5 million, regional chairmen have authority up to $2.0 million and the Chief Executive Officer, 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 $5.0 million. All relationships exceeding $5.0 million are approved by the Executive Loan Committee. All relationships exceeding $10.0 million are required to be approved by the ~~loan officer and a senior banker or market president.~~Director’s Loan Committee, which is comprised of board members. Loans ~~presenting aggregate lending exposure between $250,000 and $1.0 million must~~may be approved byusing 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 ~~president~~leaders being able to approve up to $350,000, regional presidents and ~~Chief Commercial Officer. Loans presenting aggregate lending exposure between $1.0~~higher authorities up to $1.5 million, and $2.5 million must be approved by the Chief Commercial Officer and Chief Credit Executive, along with the market president. Loans presenting aggregate lending exposure in excess of $2.5 million or $6.5 million must be approved by the Bank~~’s Executive Loan Committee or Directors’ Loan Committee, respectively.~~cumulatively. Consumer loans which present an aggregate lending exposure under ~~$1.0~~$5.0 million ~~(residential) or $250 thousand (other)~~ 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. ~~Consumer loans~~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. ~~We conduct weekly meetings of the Executive Loan Committee, at which asset quality, credit approvals and delinquencies are reviewed.~~ Loan officers, credit administration personnel and senior management proactively support collection activities. Our evaluation and compensation program ~~for our loan officers~~ includes significant goals, such as the percentages of past due loans and charge-offs to total loans in the officer’s portfolio ~~that we~~and at the banking center level. We believe ~~motivate the~~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,~~, or~~ the ~~Watch~~“Watch List,” that receive additional attention if we believe there may be a potential credit risk. The ~~Watch List is presented to~~Risk Committee of the Board reviews a list of ~~Directors monthly.~~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.

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.

WeWe 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 ~~trust 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, with operations primarily conducted from our wealth solutions office in Thibodaux.~~centers.

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, ~~international trade finance, international trade~~receivables factoring, correspondent banking services ~~foreign exchange services,~~(offered by our Financial Institutions Group) and other treasury services.

~~We have t~~woBusiness First Bancshares, Inc. has two direct, wholly-owned ~~subsidiaries.~~subsidiaries: b1BANK, formerly known as Business First Bank, ~~is a~~and Coastal Commerce Statutory Trust I. In addition, b1BANK has two direct, wholly-owned ~~subsidiary~~subsidiaries, Business First Insurance, LLC and SSW, which are indirect subsidiaries of Business First Bancshares, Inc. ~~Business First Insurance, LLC is a wholly-owned subsidiary of Business First Bank, and is, therefore, an indirect wholly-owned subsidiary of the Company.~~ Business First Insurance, LLC is currently inactive and does not engage in any material business activities.

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.

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, ~~201~~7,2023, we proudly employ 751 full-time and 19 part-time employees (for a total of 770 employees). Our employees reside coast to coast, with personnel located in Alabama (remote), Arkansas (remote), Illinois (remote), Kentucky (remote), Louisiana, Mississippi, Nevada (remote), North Carolina (remote), South Dakota (remote), Tennessee (remote), Texas, and Virginia (remote). Full-time equivalents (FTEs) as of December 31, 2023, were 761.

All banking centers and loan production offices are in Louisiana and Texas, and our subsidiary registered investment advisor (RIA), Smith Shellnut Wilson, LLC, or SSW, is in Mississippi. Our Chief Human Resources Officer reports directly to the Chief Administrative Officer 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.

Productivity. We carefully manage the size of our workforce and reallocate resources as needed. For 2023, we managed an average of $6.6 million in loans held for investment and $6.9 million in deposits per FTE.

Diversity. We have an organization-wide focus to improve recruitment and retention of women and ethnic minorities. In 2023, we completed a second 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 2023, we continued the use of online exit surveys to provide feedback and help increase retention of women and ethnic minorities. As of December 31, 2023, our colleagues had ~~219 full-time equivalent employees. None~~the following attributes:

In addition to our continued Diversity Equity and Inclusion (“DEI”) efforts, we have emphasized merit-based promotions in an effort to promote from within, foster talent development of our best human capital resources, and increase the our organic growth.

Compensation and Benefits. We provide pay, benefits, and services that not only meet the varying needs of our employees but are represented by any collective bargaining unit or are parties to a collective bargaining unit. We are committed to hiring and retaining high quality employees to execute our strategic plan, and we believe our relationsin line with our ~~employees are good.~~equilibrium for competitive compensation. 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 of new colleagues and retention. Each of these metrics is tracked for all key business lines. Sourcing strategies and support structures are modified to ensure that performance targets are met consistently.

In 2023, 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.

This year also marked a notable 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 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 6.7 years of service. During 2023, we had 109 internal employee promotions, 138 external hires, and 14 rehired employees. Employee turnover for 2023 was 17.2%.

The Company files reports and other information with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, as amended. You may read and copy this information at the SEC’s Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC ~~also~~ 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: ~~Heather Roemer,~~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~~’sCompany’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.

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, ~~FDIC, CFPB,~~ Federal Deposit Insurance Corporation (“FDIC”), Consumer Financial Protection Bureau (“CFPB”), Louisiana ~~OFI, IRS~~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~~’sFDIC’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.

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 wethat 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 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, or 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~~’sReserve’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. ~~On July 21,~~ In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act was enacted. The Dodd-Frank Act broadly ~~affects~~affected the financial services industry by implementing changes to the financial regulatory landscape aimed at strengthening the sound operation of the financial services ~~sector, including provisions that, among other things:~~sector.

In addition, the Dodd-Frank Act ~~addresses~~addressed many investor protection, corporate governance and executive compensation matters ~~that will affect~~affecting publicly-traded companies. However, ~~under~~ the Jumpstart our Business Startups Act of 2012, or JOBS Act, ~~there are~~provided certain exceptions to these requirements for so long as a publicly-traded qualifies as an emerging growth company.

~~The requirements~~ In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) revised certain aspects of the Dodd-Frank ~~Act~~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 ~~still in the process of being implemented over time and most will be~~ subject to ~~regulations implemented over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented~~higher risk weightings. Further changes effected by the ~~various regulatory agencies and through regulations, the full extent~~passage of the impact such requirements will have on our operations is unclear. Further, the Trump administration issued an executive order on February 3, 2017, outlining a number of “Core Principles” of regulation of the industry and directing the Secretary of the Treasury to submit a report by June 3, 2017, identifying any laws, rules or regulations (including those promulgated under the auspices of the Dodd-Frank Act) thatEGRRCPA are determined to be inconsistent with those principles. Changes resulting from further implementation of, changes to, or repeal of the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. Failure to comply with the new requirements may negatively impact our results of operations and financial condition.

Revised Rules on Regulatory Capital.Regulatory capital rules pursuant to the Basel III requirements, released in July 2013 and effective January 1, 2015, ~~implement~~implemented higher minimum capital requirements for bank holding companies and banks. These rules include a new common equity Tier 1, or 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. These enhancements are designed to both improve the quality and increase the quantity of capital required to be held by banking organizations, better equipping the U.S. banking system to cope with adverse economic conditions. 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 ~~will help~~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. The capital conservation buffer began phasing in in January 2016 at 0.625% of risk-weighted assets and will increase by that amount each year until fully implemented in January 2019. Although these new capital ratios do not become fully phased in until 2019, the banking regulators will generally expect bank holding companies and banks to meet these requirements well ahead of that date. 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, ~~2017,~~2023, the Company’s capital meets or exceeds these capital requirements, ~~on a fully phased-in basis.~~including the buffer.

~~The new capital rules also attempt to improve~~On September 17, 2019, the ~~quality~~FDIC and other federal bank regulatory agencies approved the community bank leverage ratio (“CBLR”) framework as part of ~~capital by implementing changes~~the directive under Section 201 of the EGRRCPA. This framework became effective January 1, 2020, and is available to the ~~definition of capital. Among~~Bank and Company as an alternative to the ~~most important changes are stricter eligibility criteria~~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 ~~regulatory~~calculating and reporting risk-based capital ~~instruments~~ratios for qualifying community banking organizations that ~~would disallow~~opt into the ~~inclusion of certain instruments, such as trust preferred securities (other than grandfathered trust preferred securities), in Tier 1 capital going forward~~framework. For the year ended December 31, 2020, the Company and ~~new constraints on~~Bank elected to adopt the ~~inclusion of minority interests, mortgage-servicing assets, deferred tax assets~~CBLR framework. For the years ended December 31, 2023, 2022 and ~~certain investments in~~2021, the ~~capital of unconsolidated financial institutions. In addition,~~Company and Bank elected to revert to the ~~new rule requires that most regulatory capital deductions be made from CET1 capital.~~risk-weighted ratios.

The Federal Reserve may also set higher capital requirements for holding companies whose circumstances warrant it. For example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Bank regulatory agencies could also impose higher capital requirements to meet well-capitalized standards and future regulatory change could impose higher capital standards as a routine matter. As

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 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~~’sinstitution’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 ~~Bank Holding Company~~BHC Act, ~~or BHCA,~~ 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 ~~BHCA~~BHC Act and the Change in Bank Control Act, or 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 ~~BHCA~~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, ~~we are~~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, ~~our~~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, ~~we are~~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 ~~we make~~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 certain circumstances, wethe 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~~’scompany’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 ~~BHCA, we are~~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 wethe 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, or the GLB Act, amended the ~~BHCA~~BHC Act and eliminated the barriers to affiliations among banks, securities firms, insurance companies and other financial service providers. The GLB Act ~~permits~~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 ~~currently have no plans~~elected to ~~make~~become a financial holding company ~~election, although we may make a financial holding company election~~ in ~~the future if we engage in any lines of business that are impermissible for bank holding companies but permissible for financial holding companies.~~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 ~~be as high as~~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.

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, 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. When fully phased in, the~~ capital ~~conservation buffer requirement will~~and effectively ~~require~~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, 2023, 2022 and 2021.

Corrective Measures for Capital Deficiencies. The federal banking regulators are required by the Federal Deposit Insurance Act, or 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, ~~2017,~~2023, 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 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 ~~us,~~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 usthe 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 usthe 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 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 ~~near~~ future.

Audit Reports. For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with ~~GAAP,~~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 ~~semi-annually,~~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.

In addition, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation, or FICO, an agency of the federal government established to recapitalize the predecessor to the Deposit Insurance Fund. These assessments, which are included in Deposit Insurance Premiums on the Consolidated Statements of Income, will continue until the FICO bonds mature between 2017 and 2019.

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 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 ~~multifamily~~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, or 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.~~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 CFPB officially came into being on July~~ 21, 2011, and rulemaking authority for a range of consumer financial protection laws (such as the Truth in Lending Act, the Electronic Funds Transfer Act and the Real Estate Settlement Procedures Act, among others) transferred from the Federal Reserve and other federal regulators to the CFPB on that date. 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 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.” On January 10, 2013, the CFPB published final rules to, among other things, specify the types of income and assets that may be considered in the ability-to-repay determination, the permissible sources for income verification, and the required methods of calculating the loan’s monthly payments. Since then the CFPB made certain modifications to these rules. The rules extend the requirement that creditors verify and document a borrower’s income and assets to include all information that creditors rely on in determining repayment ability. The rules also provide further examples of third-party documents that may be relied on for such verification, such as government records and check-cashing or funds-transfer service receipts. The new rules became effective on January 10, 2014. The rules also 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. ~~Points and fees are subject to a relatively stringent cap, and the terms include a wide array of payments that may be made in the course of closing a loan.~~ 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, or 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, or 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, which must be complied with no later than May 2018.~~customers.

The Office of Foreign Assets Control, or 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~~’sinstitution’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.

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, or 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.

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~~’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.

The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus ~~have~~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.

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 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 March 15, 2023, the SEC issued proposed amendments that would require registered broker-dealers, investment companies, investment advisors, and transfer agents to adopt written policies and procedures for an incident response program to address unauthorized access to or use of customer information. Additionally, the proposed amendments would also require, with certain limited exceptions, covered institutions to provide notice to individuals whose sensitive customer information was or is reasonably likely to have been accessed or used without authorization. The proposal would require a covered institution to provide this notice as soon as practicable but not later than 30 days after the covered institution becomes aware that an incident involving unauthorized access to, or use of customer information has occurred or is reasonably likely to have occurred.

On July 26, 2023, the SEC adopted rules requiring registrants to disclose the occurrence of cybersecurity incidents once such incidents are determined to be material in nature. Additionally, the rule requires the annual disclosure of material information regarding cybersecurity risk management, strategy, and governance.

On October 30, 2023, the current Presidential Administration issued an Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, emphasizing the need for transparency, accountability and fairness in the secure development and use of artificial intelligence (“AI”). The order seeks to address AI risks by providing eight guiding principles and priorities, including the development of standards, tools, and tests to help ensure AI systems are safe, secure, and trustworthy and the development of an advanced cybersecurity program to develop tools to identify and address vulnerabilities in critical software.

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.

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.

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. Although the United States economy, as a whole, has improved moderately over the past several years, the business environment in which we operate continues to be impacted by the effects of the most recent recession. Uncertainty about ~~the~~ federal fiscal ~~policymaking process,~~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 ~~the euro currency,~~foreign currencies, could affect the stability of global financial markets, which could hinder domestic economic growth. ~~The current~~

Adverse economic ~~environment is characterized by interest rates at historically low levels, which impacts~~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 ~~ability~~control, and the government policy responses to ~~attract deposits~~such conditions, could have an adverse effect on our business, financial conditions, results of operations and ~~to generate attractive earnings through our investment portfolio.~~ prospects.

All of these factors ~~are~~could be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Our business is also significantly affected by monetary and related policies of the United States government and its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control. Adverse economic conditions and government policy responses to such conditions could have an adverse effect on our business, financial condition, results of operations and prospects.

The geographic concentration of our business in the s~~tate~~state of Louisiana, in the Dallas/Fort Worth metroplex and ~~in Dallas~~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 ~~Dallas, Texas.~~Houston. As of December 31, ~~2017,~~2023, 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.

WeWe 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:

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 tosuccessfully execute our business strategy could have an adverse effect on our business, financial condition and results of ~~operations~~operations..

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:

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~~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.

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~~’sborrower’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, ~~2017,~~2023, approximately ~~$512.4 million,~~$2.9 billion, or ~~52.5%~~57.8% 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 ~~loan~~credit losses, which would reduce our profitability, and could adversely affect our business, financial condition, results of operations and prospects.

Because a significant portion of our loan portfolio is comprised of real estate loans, ~~negative~~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.

~~Real estate values in many Louisiana markets have experienced periods of fluctuation over the last five years, and the~~The market value of real estate can fluctuate significantly in a short period of time. As of December 31, ~~2017,~~2023, approximately ~~$669.9 million,~~$3.6 billion, or ~~68.7%~~71.5%, of our total loans ~~was~~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 ~~operation.~~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 ~~loan~~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 thethe 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, ~~2017,~~2023, we held approximately ~~$227,000~~$1.7 million in ~~OREO.~~other real estate owned (“OREO”) of which $279,000 is related to former bank facilities. 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 ~~writedowns~~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 ~~adverse~~lyadversely affect our business, financial condition and results of operations.

As of December 31, ~~2017,~~2023, approximately ~~$254.4 million,~~$1.4 billion, or ~~26.1%~~27.2%, 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, ~~2017,~~2023, our average loan size (including unfunded commitments) was approximately $~~388,000.~~$415,000. Further, as of December 31, ~~2017,~~2023, our 2010 largest borrowing relationships ranged from approximately ~~$9.7~~$35.4 million to ~~$27.4~~$77.6 million (including unfunded commitments) and averaged approximately ~~$12.7~~$4.4 million in total commitments and ~~$8.5~~$3.0 million in principal balance, respectively. 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 obligations as a result of economic or market conditions or personal circumstances, our nonperforming loans and our provision for ~~loan~~credit losses could increase significantly, which could have an adverse effect on our business, financial condition and results of operations.

Our allowance for ~~loan~~credit losses may prove to be insufficient to absorb losses inherent inin our loan portfolio, which could have a material adverse effect on our business, financial condition and results of operations.

We maintain an allowance for ~~loan~~credit losses that represents ~~management~~’smanagement’s judgment of probable losses and risks inherent in our loan ~~portfolio.~~portfolio, including unfunded commitments. As of December 31, ~~2017,~~2023, our allowance for ~~loan~~credit losses totaled ~~$8.8~~$43.7 million, which represents approximately ~~0.90%~~0.88% 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 ~~loan~~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 ~~loan~~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 ~~loan~~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 ~~loan~~credit losses, we may need additional provisions for ~~loan~~credit losses to restore the adequacy of our allowance for ~~loan~~credit losses. Finally, the measure of our allowance for ~~loan~~credit losses is dependent on the adoption and interpretation of accounting standards. The Financial Accounting Standards Board (“FASB”) recently issued a new credit impairment model, the Current Expected Credit Loss ~~or CECL~~(“CECL”) model, which ~~will become~~became applicable to us on January 1, ~~2020, though we may choose to adopt~~2023. CECL ~~on January 1, 2019, or may be encouraged to by our regulators. CECL will require~~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. ~~Accordingly, the CECL model could require financial institutions like the Bank to increase their allowances for loan losses.~~ Moreover, the CECL model ~~likely would create more volatility~~is heavily dependent on macroeconomic forecasts, with changes in those forecasts potentially requiring material increases to our level of allowance for ~~loan losses. If we are required to materially increase our level of allowance for loan~~credit losses ~~for any reason, such increase~~which could adversely affect our business, financial condition, ~~and~~ results of ~~operations.~~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~~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. 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, e~~specially~~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, ~~2017,~~2023, we had ~~$256.9 million~~$1.2 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 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, ~~2017, 34.7%~~2023, 35.5% of our earning assets and ~~50.7%~~58.7% of our interest-bearing liabilities were variable rate. ~~Our interest sensitivity profile was asset sensitive as~~As of December 31, ~~2017, meaning that~~2023, our modeled interest sensitivity was close to neutral, but slightly 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 ~~increase more~~differ from ~~rising interest rates than from falling interest rates.~~those in the model, and there is no guarantee that actual results will match modeled results.

~~Additionally, an increase~~Interest rates increased rapidly during 2022 and 2023 to levels that we have not experienced in ~~interest~~recent history. Interest rates may ~~among other things, reduce the~~increase further, or they may remain at current levels for some time. This new interest rate environment could have a number of effects on our business, which may include reduced loan demand, ~~for loans~~increased delinquencies and ~~our ability to originate loans~~increased loan paydowns and ~~decrease loan repayment rates. A~~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 ~~market~~smarkets 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 ~~loan~~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 ~~loan~~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 Fannie Mae and Federal Home Loan Mortgage Corporation, or 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.

New l~~ines~~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 ~~or Federal Reserve Bank,~~ and the ~~Federal Home Loan Bank~~FHLB of ~~Dallas, or FHLB.~~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 ~~fluctuation~~sfluctuations 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, ~~2017, $170.8~~2023, $657.5 million, or approximately ~~16.2%~~12.5%, 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 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~~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 ~~Business First Bank,~~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~~.borrowings. As of December 31, ~~2017,~~2023, brokered and wholesale deposits, including reciprocal deposits, comprised ~~14.8%~~20.5% of our total deposits, and our borrowings comprised ~~43.7%~~98.6% of our total shareholders’ ~~equity .~~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 ~~becomes~~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 cancan fluctuate due to factors outside of our control.

As of December 31, ~~2017,~~2023, the fair value of our investment securities portfolio was approximately $~~179.1~~$879.6 million, which included a net unrealized loss of approximately ~~$2.1~~$84.4 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. ~~These~~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. 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 inwith respect ofto the securities, defaults by the issuer or with respect to the underlying securities, ~~and changes in market interest rates~~ 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.

If we fail to maintain an effective system of disclosure ~~controls~~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 S~~arbanes-Oxley~~Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley ~~Act, which require annual management assessments~~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 ~~effectiveness~~system are met, due to certain inherent limitations. Any failure or circumvention of our ~~internal~~ controls ~~over financial reporting~~ and when we cease to be an emerging growth company under the JOBS Act, will require a report by our independent auditors addressing these assessments. Our management may conclude that our internal controls over financial reporting are not effective due to ourprocedures; failure to ~~cure any identified~~comply with regulations related to controls and procedures could have a material ~~weakness or otherwise. Moreover, even if~~adverse effect on our ~~management concludes that our internal controls over~~reputation, business, financial reporting are effective, our independent registered public accounting firm may not conclude that our internal controls over financial reporting are effective. In the future, our independent registered public accounting firm may not be satisfied with our internal controls over financial reporting or the level at which our controls are documented, designed, operated or reviewed, or wecondition and ~~our accounting firm may have differences in opinion regarding the applicable requirements. In addition, during the course~~results of the evaluation, documentation and testing of our internal controls over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Securities and Exchange Commission, or the SEC, for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. Any such deficiencies may also subject us to adverse regulatory consequences. If we fail to achieve and maintain the adequacy of our internal controls over financial reporting, as these standards are modified, supplemented or amended from time to time, we may be unable to report our financial information on a timely basis, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act, and we may suffer adverse regulatory consequences. There could also be a decline in investor confidence as to the reliability our financial statements, which could result in a decline in the value of our capital stock.operations.

Our financial results depend on management’s’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 Accounting Principles Accepted~~generally accepted accounting principles in the United States, or 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 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 ~~the~~acquired loans and allowance for ~~loan~~credit losses and purchase accounting ~~for income taxes, the determination of fair value for financial instruments and accounting for stock-based compensation.~~adjustments (other than loans). Because of the uncertainty of estimates involved in these matters, we may be required to significantly increase our allowance for ~~loan~~credit losses or sustain ~~loan~~credit losses that are significantly higher than the reserve provided, ~~significantly increase our accrued tax liability~~ 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 ~~Financial Accounting Standards Board, or~~ 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 ~~the~~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, 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 ~~criminal~~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 p~~roperty.~~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 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 ~~involves a two-step process. Under~~is performed annually and was completed as of October 1, 2023. The annual test did not indicate any impairment as of the ~~first step,~~testing date. We estimate the ~~estimation of~~ fair value of the reporting unit is compared to its carrying value including goodwill. ~~If step one indicates a potential impairment, the second step is performed to measure the amount of impairment, if any.~~ If the carrying amount of the reporting unit goodwill exceeds the ~~implied~~ 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, 2023. As of December 31, ~~2017,~~2023, our goodwill totaled ~~$6.8~~$88.4 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.

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 ~~such as the Dodd-Frank Act,~~ 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 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, or the Federal Reserve, the Federal Deposit Insurance Corporation, or the FDIC, and the Louisiana Office of Financial Institutions, or 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, ~~requir~~erequire us to raise additional capital, limit growth opportunities or result in regulatory restrictions.

~~Beginning January 1, 2015, we became subject~~The Dodd-Frank Act required the federal banking agencies to ~~new rules designed to implement the recommendations with respect to regulatory capital standards, commonly known as Basel III, approved by the International Basel Committee on Banking Supervision.~~ ~~The new rules~~ establish ~~a new regulatory capital standard based on tier 1 common equity, increase the minimum tier 1 capital~~stricter risk-based capital ~~ratio,~~requirements and impose a capital conservation buffer of at least 2.5% of common equity tier 1 capital above the new minimum regulatory capital ratios, when fully phased in during 2019. The rules also change the manner in which a number of our regulatory capital components are calculated, including deferred tax assets,leverage limits to apply to banks and the risk weights applicable to certain asset categories. The Basel III rules generally require us to maintain greater amounts of regulatory capital than we were required to maintain prior to implementation of such rulesbank holding companies. See “PART I – ITEM 1. Business – Supervision and may also limit or restrict how we utilize our capital. Increased regulatory capital requirements (and the associated compliance costs) whether due to the adoption of new laws and regulations, changes in existing laws and regulations, or more expansive or aggressive interpretations of existing laws and regulations, may require us to raise additional capital, or impact our ability to repurchase shares of capital stock, pay dividends or pay compensation to our executives, which could have a material and adverse effectRegulation – Business First Bancshares, Inc. – Revised Rules on ~~our business, financial condition, results of operations and the value of our common stock.~~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 ~~“Supervision~~“PART I – ITEM 1. Business – Supervision and Regulation ~~- Regulatory~~– b1BANK – Capital Adequacy Requirements.”

New activities and expansion require regulatory approvals, and failure to obtain themthem 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 ~~Community Reinvestment Act, or~~ 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.

WeWe face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The Bank Secrecy Act, 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 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.

WeWe 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”~~“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~~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.~~“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 ~~operation.~~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 s~~ubject~~subject us to litigation.

~~Loa~~nLoan 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 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 ~~operation.~~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 ~~rulemakin~~grulemaking 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.~~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 andand 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.

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, ~~2017, our total loans~~2023, we were within the 300.0% regulatory guideline for ~~acquisition,~~commercial real estate, as well as the 100.0% regulatory guideline for construction, land development, and other land ~~equaled 127.5% of the Bank’s total risk-based capital and combined with our total~~ loans ~~secured by multifamily and non-farm non-residential equaled 288.3% of the Bank’s total risk-based capital. We were within the 300.0% regulatory guideline, but outside the 100.0% regulatory guideline~~ 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.

•
Total assets of $6.6 billion, a $594.1 million, or 9.9%, increase from December 31, 2022.
•
Total loans held for investment of $5.0 billion, a $386.6 million, or 8.4%, increase from December 31, 2022.
•
Total deposits of $5.2 billion, a $428.4 million, or 8.9%, increase from December 31, 2022.
•
Net income available to common shareholders of $65.6 million, a $12.8 million, or 24.1%, increase from the year ended December 31, 2022.
•
Net interest income of $215.1 million, a $15.6 million, or 7.8%, increase from the year ended December 31, 2022.
•
An allowance for credit losses of 0.88% of total loans held for investment, compared to 0.84% as of December 31, 2022, and a ratio of nonperforming loans to total loans held for investment of 0.34%, compared to 0.25% as of December 31, 2022.
•
Earnings per common share for the year ended December 31, 2023 of $2.62 per basic common share and $2.59 per diluted common share, compared to $2.34 per basic common share and $2.32 per diluted common share for the year ended December 31, 2022.
•
Return to common shareholders on average assets of 1.04% compared to 0.97% for the year ended December 31, 2022.
•
Return to common shareholders on average common equity of 12.36% compared to 11.59% for the year ended December 31, 2022.
•
Capital Ratios included 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%, respectively, compared to Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.49%, 8.68%, 10.07% and 12.75% for the year ended December 31, 2022.
46
Table of ~~$1.3 billion, a $215.4 million or 19.5% increase from December 31, 2016.~~
Contents

~~Total~~ ~~loans~~ ~~of $975.5 million, a $164.4 million or 20.3% increase from December 31, 2016.~~
~~Total~~ ~~deposits~~ ~~of $1.1 billion, a $122.7 million or 13.2% increase from December 31, 2016.~~
~~Net income for the year~~ ~~ended December 31, 2017 of $4.8 million, a $263,000 or 5.1% decrease from the year ended December 31, 2016.~~
~~Net interest~~ ~~income~~ ~~of $44.4 million for the year ended December 31, 2017, a $6.8 million or 18.0% increase from the year ended December 31, 2016.~~
~~An allowance for loan and lease~~ ~~losses~~ ~~of 0.90% of total loans held for investment and a ratio of non-performing loans to total loans held for investment of 1.30% as of December 31, 2017.~~
~~Return on average assets~~ ~~of 0.40% for the year ended December 31, 2017.~~
~~Return on average equity~~ ~~of 3.68% for the year ended December 31, 2017.~~
~~Capital ratios~~ ~~for Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 13.53%, 14.49%, 14.49% and 15.23%, respectively as of December 31, 2017.~~
~~Book value per~~ ~~share~~ ~~of $17.58 as of December 31, 2017, an increase of 7.1% from $16.42 at December 31, 2016.~~
•
Book value per common share of $22.58, an increase of 11.5% from $20.25 at December 31, 2022.

Results of Operations for the Years Ended December31, ~~201~~72023 and ~~201~~20226

Performance Summary

For the year ended December 31, ~~2017,~~2023, net income available to common shareholders was ~~$4.8~~$65.6 million, or ~~$0.63~~$2.62 per basic common share and ~~$0.61~~$2.59 per diluted common share, compared to net income available to common shareholders of ~~$5.1~~$52.9 million, or ~~$0.73~~$2.34 per basic common share and ~~$0.70~~$2.32 per diluted common share, for the year ended December 31, ~~2016. The decrease~~2022. Return to common shareholders on average assets increased to 1.04% for the year ended December 31, ~~2017, compared to the same time period in 2016, can primarily be attributed to (1) replenishing our loan loss provision during the 4~~^th quarter 2017 in the amount of $2.2 million after recognizing impairment on two loan relationships which were both a number of years old and related to the energy industry; (2) the short-term effect on earnings2023 from the timing of the receipt and deployment of the October 2017 private placement offering proceeds where we raised gross proceeds of $66.0 million that were used to fund our acquisition of Minden Bancorp, Inc and its subsidiary, MBL Bank, after the year ended December 31, 2017; and (3) the additional $1.7 million income tax expense recognized as a result of the December 22, 2017 enactment of the Tax Cuts and Jobs Act where we were required to write-down the value of our net deferred tax assets as a result of the new corporate tax rate structure. Return on average assets decreased to 0.40%0.97% for the year ended December 31, ~~2017 from 0.45%~~2022. Return to common shareholders on average common equity increased to 12.36% for the year ended December 31, ~~2016. Return on average equity decreased~~2023, as compared to ~~3.68%~~11.59% for the year ended December 31, ~~2017, as compared to 4.42% for the year ended December 31, 2016.~~2022.
51
~~Table of Contents~~

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 ~~capital~~equity using a monthly ~~average.~~average, and average yield/rate utilizing an actual 365 day count convention.

For the year ended December 31, ~~2017,~~2023, net interest income totaled ~~$44.4~~$215.1 million, and net interest margin and net interest spread were ~~4.01%~~3.62% and ~~3.77%~~2.72%, respectively. For the year ended December 31, ~~2016~~2022 net interest income totaled ~~$37.6~~$199.6 million and net interest margin and net interest spread were ~~3.64%~~3.92% and ~~3.46%~~3.57%, respectively. The ~~positive change in net interest margin and net interest spread~~average yield on the loan portfolio was primarily due to the sale of a 98% participation interest in two of our impaired credits acquired from AGFC, and to a lesser extent, to the change in the rate environment. Excluding the $2.8 million purchase discount included in interest income which was recognized upon the two sales of a 98% participation interest during6.65%, for the year ended December 31, ~~2017, net interest margin~~2023, compared to 5.42% for the year ended December 31, 2022, and ~~net interest spread were 3.76% and 3.52%, respectively, with an average yield on our loan portfolio of 5.03% and an~~the average yield on total interest-earning assets ~~of 4.42%, compared to an average yield on our loan portfolio of 4.96% and an average yield on total interest-earning assets of 4.20%~~was 5.95% for the year ended December 31, ~~2016. In addition, we experienced an~~2023, compared to 4.64% for the year ended December 31, 2022. For the year ended December 31, 2023, overall ~~increase in~~ cost of funds ~~of 16~~(which includes noninterest-bearing deposits) increased 169 basis points ~~for~~compared to the ~~same period. While we experienced significant growth in average loan balances, we anticipate continued pressure on our net interest margin~~year ended December 31, 2022, primarily due to the federal reserve continuing to increase rates during the first part of 2023 and ~~net interest spread.~~full impact of the 2022 increases.

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The following table ~~present~~s,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 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, ~~2017~~2023, 2022 and ~~2016,~~2021, 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 interest income over the remaining lives of the respective ~~loans.~~loans or expected cash flows. Averages presented in the table below, and throughout this report, are month-end averages.

For the Years Ended December 31,

For the Years Ended December 31,

2017

2016

2023

2022

2021

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

Average Outstanding Balance

Interest Earned/Interest Paid

Average Yield/Rate

Average Outstanding Balance

Interest Earned/Interest Paid

Average Yield/Rate

(Dollars in thousands)

(Dollars in thousands)

Assets

Interest-earning assets:

Total loans
$ 890,683 $ 47,516 5.33 % $ 795,625 $ 39,468 4.96 % $ 4,859,637 $ 323,327 6.65 % $ 4,020,436 $ 218,032 5.42 % $ 3,037,020 $ 156,791 5.16 %
Securities available for sale
195,211 3,829 1.96 % 211,351 3,781 1.79 %
Securities
898,771 20,125 2.24 956,232 16,503 1.73 870,282 13,520 1.55
Interest-bearing deposits in other banks
20,229 256 1.27 % 25,642 169 0.66 % 180,997 9,875 5.46 115,016 1,579 1.37 104,471 127 0.12
Total interest-earning assets
1,106,123 51,601 4.67 % 1,032,618 43,418 4.20 % 5,939,405 353,327 5.95 5,091,684 236,114 4.64 4,011,773 170,438 4.25
Allowance for loan losses
(8,773 ) (7,453 ) (41,665 ) (32,093 ) (26,132 )
Noninterest-earning assets
102,438 102,608 444,140 413,917 418,029
Total assets
$ 1,199,788 $ 51,601 $ 1,127,773 $ 43,418 $ 6,341,880 $ 353,327 $ 5,473,508 $ 236,114 $ 4,403,670 $ 170,438
Liabilities and Shareholders’ Equity

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing deposits
$ 733,264 $ 6,328 0.86 % $ 723,996 $ 5,152 0.71 % $ 3,566,216 $ 106,908 3.00 % $ 3,007,882 $ 24,413 0.81 % $ 2,604,825 $ 12,183 0.47 %
Subordinated debt
105,369 5,323 5.05 106,054 5,108 4.82 68,183 3,526 5.17
Subordinated debt - trust preferred securities
5,000 430 8.60 5,000 247 4.94 5,000 168 3.36
Bank Term Funding Program
253,706 11,313 4.46 - - - - - -
Advances from FHLB
65,513 737 1.12 % 53,516 561 1.05 % 329,726 13,702 4.16 271,025 6,479 2.39 47,325 554 1.17
First National Bankers Bank ("FNBB") Line of Credit
- - - 2,500 121 4.84 - - -
Other borrowings
6,609 164 2.48 % 6,436 113 1.76 % 21,825 522 2.39 23,197 169 0.73 27,182 123 0.45
Total interest-bearing liabilities
805,386 7,229 0.90 % 783,948 5,826 0.74 % 4,281,842 138,198 3.23 3,415,658 36,537 1.07 2,752,515 16,554 0.60
Noninterest-bearing liabilities:

Noninterest-bearing deposits
254,765 221,047 1,412,979 1,539,938 1,196,970
Other liabilities
7,891 7,141 44,173 37,533 28,493
Total noninterest-bearing liabilities
262,656 228,188 1,457,152 1,577,471 1,225,463
Shareholders’ equity
131,746 115,637
Total liabilities and shareholders’ equity
$ 1,199,788 $ 1,127,773
Shareholders' equity:

Common shareholders' equity
530,956 456,388 425,692
Preferred equity
71,930 23,991 -
Total shareholders' equity
602,886 480,379 425,692
Total liabilities and shareholders' equity
$ 6,341,880 $ 5,473,508 $ 4,403,670
Net interest rate spread⁽¹⁾
3.77 % 3.46 % 2.72 % 3.57 % 3.65 %
Net interest income
$ 44,372 $ 37,592 $ 215,129 $ 199,577 $ 153,884
Net interest margin⁽²⁾
4.01 % 3.64 % 3.62 % 3.92 % 3.84 %
Overall cost of funds
2.43 % 0.74 % 0.42 %
(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.

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The following table ~~present~~spresents 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. For purposes of ~~these tables,~~this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

For the Year Ended December 31, 2017
compared to the Year ended
December 31, 2016

For the Year Ended December 31, 2023 compared to the Year
Ended December 31, 2022

Increase (Decrease) due to change in

Increase (Decrease) due to change in

Volume

Rate

Total

Volume

Rate

Total

(Dollars in thousands)

(Dollars in thousands)

Interest-earning assets:

Total loans
$ 5,072 $ 2,976 $ 8,048 $ 55,835 $ 49,460 $ 105,295
Securities available for sale
(317 ) 365 48
Interest-earning deposits in other banks
(69 ) 156 87
Total increase (decrease) in interest income
$ 4,686 $ 3,497 $ 8,183
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
$ 80 $ 1,096 $ 1,176 $ 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
135 41 176 2,439 4,784 7,223
FNBB Line of Credit
- (121 ) (121 )
Other borrowings
4 47 51 (33 ) 386 353
Total increase (decrease) in interest expense
219 1,184 1,403
Total increase in interest expense
30,422 71,239 101,661
Increase (decrease) in net interest income
$ 4,467 $ 2,313 $ 6,780 $ 27,726 $ (12,174 ) $ 15,552

For the Year Ended December 31, 2022 compared to the Year
Ended December 31, 2021

Increase (Decrease) due to change in

Volume

Rate

Total

(Dollars in thousands)

Interest-earning assets:

Total loans
$ 60,236 $ 1,005 $ 61,241
Securities
1,483 1,500 2,983
Interest-bearing deposits in other banks
145 1,307 1,452
Total increase in interest income
$ 61,864 $ 3,812 $ 65,676
Interest-bearing liabilities:

Interest-bearing deposits
$ 3,271 $ 8,959 $ 12,230
Subordinated debt
1,824 (241 ) 1,583
Subordinated debt - trust preferred securities
- 80 80
Advances from FHLB
5,347 577 5,924
FNBB Line of Credit
120 - 120
Other borrowings
(29 ) 75 46
Total increase in interest expense
10,533 9,450 19,983
Increase (decrease) in net interest income
$ 51,331 $ (5,638 ) $ 45,693

Provision for ~~Loan~~Credit Losses

Our provision for ~~loan~~credit losses is a charge to income in order to bring our allowance for ~~loan~~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 ~~loan~~credit losses see “—Financial ~~Condition—~~Condition—Allowance for ~~Loan Losses.~~Credit Losses.” The provision for ~~loan~~credit losses was ~~$4.2~~$4.5 million and ~~$1.2~~$10.9 million for of the years ended December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. The ~~higher~~lower provision during the year ended December 31, ~~2017 was~~2023 compared to 2022 relates primarily to lower loan growth in 2023, as ~~a result~~well as improvements in the macroeconomic environment and continued resolution of ~~a $2.2 million addition to the reserve during the 4~~^th ~~quarter 2017 after recognizing impairment on two loan relationships related to the energy industry, and an overall increase~~acquired PCD loans in our ~~general reserves related to our exposures in the commercial and energy sectors.~~portfolio.

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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.~~commissions, and pass-through income from other investments (small business investment company (“SBIC”) partnerships and fintech technology (“Fintech”) funds). The following table presents, for the periods indicated, the major categories of noninterest income:

For the Years Ended
December 31,

Increase

For the Years Ended December 31,

2017

2016
(Decrease)
2023

2022

Increase (Decrease)

(Dollars in thousands)

(Dollars in thousands)

Noninterest income:

Service charges on deposit accounts
$ 2,109 $ 2,033 $ 76 $ 9,704 $ 8,272 $ 1,432
Debit card fee income
652 619 33
Automated Teller Machine (“ATM”) fees
193 183 10
Debit card and ATM fee income
6,590 6,407 183
Bank-owned life insurance income
632 789 (157 ) 2,247 1,931 316
Gain on sales of investment securities
31 232 (201 )
Brokerage commissions
957 657 300
Gain on sales of loans
1,972 574 1,398
Loss on sales of investment securities
(2,565 ) (48 ) (2,517 )
Fees and brokerage commissions
7,247 6,964 283
Mortgage origination income
204 160 44 285 532 (247 )
Correspondent bank income
331 204 127 456 113 343
Pass-through income (loss) from SBIC partnerships
190 (44 ) 234
Rental income
301 50 251
Gain (Loss) on sales of other real estate owned
(276 ) 168 (444 )
Gain on sales of other real estate owned
646 33 613
Loss on sales of other assets
(15 ) (717 ) 702
Gain on sale of banking center
945 - 945
Gain on extinguishment of debt
1,458 - 1,458
Swap Fee Income
964 - 964
Pass-through income from other investments
1,946 1,347 599
Other
294 370 (76 ) 4,762 3,902 860
Total noninterest income
$ 5,618 $ 5,421 $ 197 $ 36,642 $ 29,310 $ 7,332

Noninterest income for the year ended December 31, ~~201~~72023 increased ~~$197,000~~$7.3 million, or ~~3.6%~~25.0%, to ~~$5.6~~$36.6 million compared to noninterest income of ~~$5.4~~$29.3 million for the same period in ~~2016.~~2022. The components of noninterest income with significant fluctuations compared to the prior year period were as follows:
Service charges on deposit accounts
~~Bank-owned life insurance~~ ~~(“BOLI”)~~ ~~income.~~ .We ~~invest in BOLI due to its attractive nontaxable return~~earn fees from our customers for deposit-related services, and ~~protection against the loss~~these fees constitute a significant and predictable component of our ~~key employees. We record income based~~noninterest income. Service charges on ~~the growth of the cash surrender value of these policies as well as the annual yield. Income from bank-owned life insurance was $632,000~~deposit accounts were $9.7 million for the year ended December 31, ~~2017 as~~2023, compared to ~~$789,000~~$8.3 million for the ~~same time period~~2022, an increase of $1.4 million, or 17.3%.
Gain on sales of loans.We had gains on sales of loans of $2.0 million in ~~2016, a decrease~~2023, compared to $574,000 in 2022, an increase of ~~$157,000. The decrease was~~$1.4 million, or 243.6%, primarily due to ~~receipt of a death benefit related to a former AGFC employee during 2016.~~increased SBA loan sale activity.

~~Brokerage commissions.~~ Loss on sales of investment securities.We ~~earn commissions from brokerage services provided by our Wealth Solutions Group. Brokerage commissions totaled $957,000~~had losses on the sales of investment securities of $2.6 million in 2023, compared to $48,000 in 2022, an additional loss of $2.5 million. 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 ~~$657,000 for~~reinvested the ~~years ended~~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. As of December 31, ~~2017 and 2016, respectively. The~~2023, we expect to recoup our losses within 1.1 years.
Gain on sales of other real estate owned.We had net gains on the sales or other real estate owned of $646,000 in 2023, compared to $33,000 in 2022, an increase of ~~$300,000~~$613,000. 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.
Loss on sales / disposals of other assets.We had a disposal of former bank premises during 2022 which resulted in a loss of $717,000.
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Table of Contents
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 $964,000 during 2023.
Other.This category includes a variety of other income producing activities, including wire transfer fees, insurance commissions and credit card income. Other income increased $860,000, or ~~45.7%~~22.0%, for the year ended December 31, ~~2017,~~2023, compared to the same ~~time~~ period in ~~2016, was primarily due to recruiting a 4-person advisory team in 2016 and completing the conversion of their book of business from the prior broker-dealer to Business First.~~
~~Correspondent bank income.~~ During the first half of 2016, we renegotiated certain of our correspondent banking relationships and received earnings credit income of $331,000 and $204,000 for the years ended December 31, 2017 and 2016, respectively.
~~Pass-through income from SBIC partnerships~~. We are an investor in several SBIC programs, which are joint ventures between various investors with venture capital, the Small Business Administration (“SBA”), and small business borrowers. During 2016, the programs in which we have invested venture capital were still primarily in the start-up phase. Those programs are maturing and becoming profitable in 2017. Pass-through income from SBIC partnerships was $190,000 for the year ended December 31, 2017, compared to a loss of $44,000 for the same time period in 2016.
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~~Table of Contents~~
~~Rental income.~~ We receive rental income from our other real estate owned and from the sublease of our former corporate offices. Rental income totaled $301,000 and $50,000 for the years ended December 31, 2017 and 2016, respectively. The increase of $251,000 was from the receipt of net rental income of $116,000 upon the disposition of one of our other real estate owned properties which we have held since April 2013, and from an additional sublease of space in our former corporate offices.
~~Gain (loss) on sales of other real estate owned.~~ We incurred a net loss of $276,000 and a net gain of $168,000 on the sale of other real estate owned during the years ended December 31, 2017 and 2016, respectively. During the year ended December 31, 2017, a loss of $335,000 was incurred on the disposal of a single property we have held since April 2013.2022.

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 Federal Deposit Insurance Corporation (“FDIC”) assessments, data processing expenses, and advertising and promotion ~~expenses.~~expenses, among others.

The following table ~~present~~s,presents, for the periods indicated, the major categories of noninterest expense:

For the Years Ended
December 31,

Increase

For the Years Ended December 31,

2017

2016
(Decrease)
2023

2022

Increase (Decrease)

(Dollars in thousands)

(Dollars in thousands)

Salaries and employee benefits
$ 21,482 $ 19,471 $ 2,011 $ 90,611 $ 85,222 $ 5,389
Non-staff expenses:

Occupancy of bank premises
2,674 2,428 246 9,518 9,244 274
Depreciation and amortization
1,457 1,577 (120 ) 6,767 6,853 (86 )
Data processing
1,537 1,528 9 9,034 8,358 676
FDIC assessment fees
803 748 55 3,645 2,854 791
Legal and other professional fees
1,159 1,806 (647 )
Legal and professional fees
3,173 2,359 814
Advertising and promotions
1,193 1,253 (60 ) 4,628 3,949 679
Utilities and communications
981 1,004 (23 ) 2,899 3,193 (294 )
Ad valorem shares tax
804 650 154 3,160 3,400 (240 )
Directors’ fees
400 337 63
Directors' fees
1,079 972 107
Other real estate owned expenses and write-downs
50 221 (171 ) 687 193 494
Merger and conversion related expenses
236 4,808 (4,572 )
Other
4,262 4,046 216 21,265 18,004 3,261
Total noninterest expense
$ 36,802 $ 35,069 $ 1,733 $ 156,702 $ 149,409 $ 7,293

Noninterest expense for the year ended December 31, ~~2017~~2023 increased ~~$1.7~~$7.3 million, or 4.9%, to ~~$36.8~~$156.7 million compared to noninterest expense of ~~$35.1~~$149.4 million for the same period in ~~2016.~~2022. 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 ~~$21.5~~$90.6 million for the year ended December 31, ~~2017,~~2023, an increase of ~~$2.0~~$5.4 million, or ~~10.3%~~6.3%, compared to the same period in ~~2016.~~2022. The increase was primarily due to ~~promotions and~~ additional hires for new positions and our merit increase ~~cycle, and higher commissions paid as a result of the increase in our brokerage services activity.~~cycle. As of December 31, ~~2017,~~2023, we had ~~219~~761 full-time equivalent ~~employees.~~employees, compared to 742 full-time equivalents as of December 31, 2022. Salaries and employee benefits included stock-based compensation ~~income of $134,000 and~~ expense of $456,000 for the years ended December 31, 2017 and 2016, respectively. We had net stock-based compensation income for the year ended December 31, 2017 due to the forfeiture of vested stock options for certain employees in excess of restricted stock awards, stock grants and the expense associated with extending the options expiring in 2017. Net stock-based compensation expense for the year ended December 31, 2016 includes the cost associated with extending the warrants and options expiring in 2016.
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~~Table of Contents~~
~~Occupancy of bank premises.~~Expense associated with occupancy of premises was $2.7 million for the year ended December 31, 2017 and $2.4 million for the same period in 2016. The increase of $246,000 for the year ended December 31, 2017, compared to the same period in 2016, may be attributed primarily to increased rent expense due to new lease commitments as a result of the third quarter 2016 relocation of our corporate offices to downtown Baton Rouge and entering into the Dallas, Texas market in 2017.
~~Depreciation and amortization.~~~~Depreciation and amortization costs were $1.5~~$4.4 million and ~~$1.6~~$4.0 million for the years ended December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. ~~This category includes leasehold, furniture, fixtures and equipment depreciation totaling $1.2~~
Data processing. Data processing fees were $9.0 million and ~~$1.3~~$8.4 million for the years ended December 31, ~~2017~~2023 and ~~2016, respectively. The amortization~~2022, respectively, an increase of ~~intangible assets was $276,000 for both~~$676,000, or 8.1%.
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Table of ~~the years ended December 31, 2017 and 2016, respectively.~~Contents
FDIC assessment fees
~~Legal and other professional fees.~~~~Other professional fees include audit, loan review, compliance, and other consultants. Legal and other professional~~. FDIC assessment fees were ~~$1.2~~$3.6 million and ~~$1.8~~$2.9 million for the years ended December 31, ~~2017~~2023 and ~~2016, respectively. The decrease~~2022, respectively, an increase of ~~$647,000~~$791,000, or 27.7%, mainly due to the increased regulatory rates by the FDIC.
Other real estate owned expenses and write-downs.Other real estate owned expenses and write-downs increased to $687,000 compared to $193,000 for the ~~year~~years ended December 31, ~~2017 was primarily due to~~2023 and 2022, respectively. An increase of $494,000, or 256.0%, resulted mainly from the ~~fees incurred in 2016 in our defense~~write-down of ~~the litigation related to the dissenting former AGFC shareholders who exercised their statutory rights of appraisal.~~$432,000 on one property that we were holding for future expansion.

~~Directors’ fees.~~ ~~Directors’ fees were $400,000~~Merger and ~~$337,000~~conversion related expenses. Merger and conversion related expenses for the years ~~end~~ ended December 31, ~~2017 and 2016, respectively. The increase~~2022 was primarily ~~due~~ to the ~~March 31, 2017 issuance~~acquisition of ~~an aggregate 4,410 shares of our common stock valued at $75,000 to our non-employee directors as non-cash compensation for their board service to Business First.~~TCBI in 2022.
Other
~~Other~~. This category includes various operating and administrative expenses including business development expenses (i.e. travel and entertainment, donations and club ~~memberships)~~dues), insurance, supplies and printing, equipment rent, and software support and maintenance. Other noninterest expense increased ~~$216,000~~$3.3 million, or 18.1%, for the year ended December 31, ~~2017~~2023 compared to the same period in ~~2016. The increase was primarily due to additional workout and collection related expenses incurred with the 4~~^th quarter 2017 impairment of two energy sector loan relationships, as well as $129,000 of merger related costs incurred in conjunction with our acquisition of MBI after the close of business on December 31, 2017.2022.

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, ~~201~~7,2023, income tax expense totaled ~~$4.1~~$19.5 million, an increase of ~~$2.5~~$5.2 million, or ~~154.4%~~36.3%, compared to ~~$1.6~~$14.3 million for the same period in 2016. Included in the provision for income taxes for the year ended December 31, 2017 is $1.7 million recognized as a result of the December 22, 2017 enactment of the Tax Cuts and Jobs Act where we were required to write-down the value of our net deferred tax assets due to the new corporate tax rate structure. Excluding this additional provision, income tax expense for the year ended December 31, 2017 was $2.4 million, compared to $1.6 million for the prior year period. After taking into consideration the adjustment to our deferred taxes, our effective tax rate for2022. For the years ended December 31, ~~2017~~2023 and ~~2016 was 27.2%~~2022, our effective tax rates were 21.6% and ~~24.0%~~20.9%, respectively. Our ~~effective~~income tax rate ~~for both years was affected primarily by tax-exempt income generated by municipal securities and bank-owned life insurance and by other nondeductible expenses.~~expense increased in 2023 largely due to the Section 291 of the Tax Equity an Fiscal Responsibility Act of 1982 (“TEFRA”) disallowance calculation.

Financial Condition

Our total assets increased ~~$215.4~~$594.1 million, or ~~19.5%~~9.9%, from ~~$1.1~~$6.0 billion as of December 31, ~~2016~~2022 to ~~$1.3~~$6.6 billion as of December 31, ~~2017. Our asset growth was~~2023, due primarily ~~driven by~~from the increases in our loan portfolio, as well as our cash and ~~deposit growth.~~cash equivalents due to our increase in deposits.
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~~Table of Contents~~

Loan Portfolio

Our primary source of income is interest on loans to individuals, professionals ~~small to medium-sized~~and small-to-midsized businesses ~~and commercial companies located~~ in ~~Louisiana and Texas.~~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, ~~2017,~~2023, total loans, ~~including~~excluding mortgage loans held for sale, were ~~$975.5 million,~~$5.0 billion, an increase of ~~$164.4~~$386.6 million or 8.4%, compared to ~~$811.1 million~~$4.6 billion as of December 31, ~~2016.~~2022. The increase was primarily due to ~~our continued loan penetration~~the growth in our ~~primary market areas, which was spearheaded by our Northwest~~Dallas/Fort Worth metroplex, North Louisiana ~~market~~ and ~~our loan production offices in~~ New Orleans regions, offset by a reduction in the Bayou region. Additionally, $835,000 and ~~Dallas. Total~~$304,000 in mortgage loans ~~include $201,000 and $180,000 in loans~~were classified as loans held for sale as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

Total loans held for investment as a percentage of deposits were ~~92.4%~~95.1% and ~~87.0%~~95.6% as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. Total loans held for investment as a percentage of assets were ~~73.8%~~75.8% and ~~73.3%~~76.9% as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

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The following table summarizes our loan portfolio by type of loan as of the dates indicated:

As of December 31, 2017

As of December 31, 2016

Amount

Percent

Amount

Percent

(Dollars in
thousands)

(Dollars in
thousands)

Commercial
$ 254,427 26.1 % $ 213,120 26.3 %
Real estate:

Construction and land
143,535 14.7 % 94,426 11.6 %
Farmland
10,480 1.1 % 9,217 1.1 %
1-4 family residential
157,505 16.2 % 129,052 15.9 %
Multi-family residential
20,717 2.1 % 22,737 2.8 %
Nonfarm nonresidential
337,699 34.6 % 298,057 36.8 %
Consumer
50,921 5.2 % 44,342 5.5 %
Total loans held for investment
$ 975,284 100 % $ 810,951 100 %

As of December 31, 2023

As of December 31, 2022

Amount

Percent

Amount

Percent

(Dollars in thousands)

Real Estate Loans:

Commercial
$ 2,217,928 44.4 % $ 2,020,406 43.9 %
Construction
669,798 13.4 722,074 15.7
Residential
682,394 13.7 656,378 14.2
Total Real Estate Loans
3,570,120 71.5 3,398,858 73.8
Commercial
1,358,838 27.2 1,153,873 25.0
Consumer and Other
63,827 1.3 53,445 1.2
Total loans held for investment
$ 4,992,785 100.0 % $ 4,606,176 100.0 %

Real Estate: Commercial ~~loans.~~ 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 $197.5 million, or 9.8%, to $2.2 billion as of December 31, 2023, from $2.0 billion as of December 31, 2022.
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 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 decreased $52.3 million, or 7.2%, to $669.8 million as of December 31, 2023, from $722.1 million as of December 31, 2022.
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 $26.0 million, or 4.0%, to $682.4 million as of December 31, 2023, from $656.4 million as of December 31, 2022.
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 ~~after evaluating and understanding~~based on the borrower’s ability to ~~operate profitably~~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 ~~effectively. These loans are primarily made based on~~those operations may not be successful. Any interruption or discontinuance of operating cash flows from the ~~identified cash flows~~business, which may be influenced by events not under the control of the borrower ~~and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets,~~ such as ~~accounts receivable or inventory,~~economic events and ~~generally include personal guarantees.~~changes in governmental regulations, could materially affect the ability of the borrower to repay the loan.

Commercial loans increased $~~41.3~~$205.0 million, or ~~19.4%~~17.8%, to ~~$254.4~~$1.4 billion as of December 31, 2023, from $1.2 billion as of December 31, 2022.
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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 $10.4 million, or 19.4%, to $63.8 million as of December 31, ~~2017~~2023, from ~~$213.1~~$53.4 million as of December 31, ~~2016. The increase in lending activity was due the efforts of our bankers who attracted new clients and leveraged existing bank relationships to fund expansion and growth opportunities.~~
~~Construction and land.~~ Construction and land development loans are comprised of loans to fund construction, land acquisition and land development construction. The properties securing the portfolio are located throughout Louisiana and Texas and are generally diverse in terms and type.
~~Construction and land loans~~ increased $49.1 million or 52.0% to $143.5 million as of December 31, 2017 from $94.4 million as of December 31, 2016. The increase may be attributable to the improving economy and pent up demand for housing.
~~1-4 family residential.~~ Our 1-4 family residential loan portfolio is comprised of loans secured by single family homes, which are both owner-occupied and investor owned. Our 1-4 family residential loans have a relatively small balance spread between many individual borrowers.
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~~1-4 family~~ residential loans increased $28.5 million or 22.0% to $157.5 million as of December 31, 2017 from $129.1 million as of December 31, 2016. This increase resulted from both the conversion of residential construction to in-house financed owner-occupied term debt and new financing of existing 1-4 family residential.
~~Nonfarm nonresidential.~~ Nonfarm nonresidential loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate. These loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the portfolio are located throughout Louisiana and Texas and are generally diverse in terms and type. This diversity helps reduce the exposure to adverse economic events that affect any single industry.
~~Nonfarm nonresidential~~ loans increased $39.6 million or 13.3% to $337.7 million as of December 31, 2017 from $298.1 million as of December 31, 2016. The increase was primarily driven by the expansion of existing relationships and growth in our newer markets, New Orleans and Dallas.
~~Other loan categories.~~ Other categories of loans included in our loan portfolio include farmland and agricultural loans made to farmers and ranchers relating to their operations, multi-family residential loans, and consumer loans. None of these categories of loans represents a significant portion of our total loan portfolio.
2022.

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, 2017

One Year
or Less

One
Through
Five Years

After Five
Years

Total

(Dollars in thousands)

Commercial
$ 89,665 $ 130,517 $ 34,245 $ 254,427
Real estate:

Construction and land
59,003 59,109 25,423 143,535
Farmland
1,265 6,919 2,296 10,480
1-4 family residential
21,564 56,763 79,178 157,505
Multi-family residential
1,643 7,323 11,751 20,717
Nonfarm nonresidential
36,638 155,602 145,459 337,699
Consumer
10,362 29,191 11,368 50,921
Total loans held for investment
$ 220,140 $ 445,424 $ 309,720 $ 975,284
Amounts with fixed rates
$ 87,703 $ 299,688 $ 216,251 $ 603,642
Amounts with floating rates
$ 132,437 $ 145,736 $ 93,469 $ 371,642

As of December 31, 2016

One Year
or Less

One
Through
Five Years

After Five
Years

Total

(Dollars in thousands)

Commercial
$ 76,596 $ 98,037 $ 38,487 $ 213,120
Real estate:

Construction and land
45,403 39,346 9,677 94,426
Farmland
779 5,973 2,465 9,217
1-4 family residential
14,509 51,557 62,986 129,052
Multi-family residential
12,335 5,268 5,134 22,737
Nonfarm nonresidential
30,371 120,082 147,604 298,057
Consumer
14,560 23,437 6,345 44,342
Total loans held for investment
$ 194,553 $ 343,700 $ 272,698 $ 810,951
Amounts with fixed rates
$ 81,929 $ 252,718 $ 176,540 $ 511,187
Amounts with floating rates
$ 112,624 $ 90,982 $ 96,158 $ 299,764

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

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As of December 31, 2022

One Year or Less

One Through Five
Years

Five Through Fifteen Years

After Fifteen Years

Total

(Dollars in thousands)

Real Estate Loans:

Commercial
$ 229,679 $ 1,024,273 $ 645,257 $ 121,197 $ 2,020,406
Construction
274,027 381,218 59,813 7,016 722,074
Residential
69,444 370,483 157,849 58,602 656,378
Total Real Estate Loans
573,150 1,775,974 862,919 186,815 3,398,858
Commercial
455,809 462,414 235,333 317 1,153,873
Consumer and Other
23,391 24,823 5,021 210 53,445
Total loans held for investment
$ 1,052,350 $ 2,263,211 $ 1,103,273 $ 187,342 $ 4,606,176

Fixed rate loans:

Real Estate Loans:

Commercial
$ 124,261 $ 885,532 $ 508,455 $ 9,339 $ 1,527,587
Construction
95,358 242,554 35,137 3,674 376,723
Residential
41,512 321,796 96,648 12,341 472,297
Total Real Estate Loans
261,131 1,449,882 640,240 25,354 2,376,607
Commercial
146,321 286,908 164,383 - 597,612
Consumer and Other
15,113 19,147 3,884 164 38,308
Total fixed rate loans
$ 422,565 $ 1,755,937 $ 808,507 $ 25,518 $ 3,012,527

Floating rate loans:

Real Estate Loans:

Commercial
$ 105,418 $ 138,741 $ 136,802 $ 111,858 $ 492,819
Construction
178,669 138,664 24,676 3,342 345,351
Residential
27,932 48,687 61,201 46,261 184,081
Total Real Estate Loans
312,019 326,092 222,679 161,461 1,022,251
Commercial
309,488 175,506 70,950 317 556,261
Consumer and Other
8,278 5,676 1,137 46 15,137
Total floating rate loans
$ 629,785 $ 507,274 $ 294,766 $ 161,824 $ 1,593,649

N~~onperforming~~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~~’smanagement’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.~~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.

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 ~~$12.9~~$18.8 million and ~~$8.5~~$12.8 million in nonperforming assets as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. We had ~~$12.7~~$17.1 million in nonperforming loans as of December 31, ~~2017~~2023 compared to ~~$7.3~~$11.4 million as of December 31, ~~2016.~~2022. The increase in nonperforming assets ~~and nonperforming loans~~ from December 31, ~~2016~~2022 to December 31, ~~2017~~2023 is primarily ~~attributed~~due to the ~~oil~~adoption of CECL and ~~gas / energy sector and commercial real estate.~~the elimination of ASC 310-30 which excluded purchased impaired loans accreting interest income from nonperforming loans.

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The following ~~table presents~~tables present information regarding nonperforming loans at the dates indicated:

As of December 31,

2023

2022

2021

As of December 31,
2017
(Dollars in
thousands)

As of December 31,
2016
(Dollars in
thousands)

(Dollars in thousands)

Nonaccrual loans
$ 12,535 $ 7,126 $ 16,943 $ 11,054 $ 12,868
Accruing loans 90 or more days past due
132 168 127 335 222
Total nonperforming loans
12,667 7,294 17,070 11,389 13,090
Nonaccrual debt securities
— —
Other nonperforming assets
- 62 -
Other real estate owned:

Commercial real estate, construction, land and land development
227 1,187 1,326 1,199 1,348
Residential real estate
— — 359 173 79
Total other real estate owned
227 1,187 1,685 1,372 1,427
Total nonperforming assets
$ 12,894 $ 8,481 $ 18,755 $ 12,823 $ 14,517
Restructured loans-nonaccrual
$ 2,008 $ 816
Restructured loans-accruing
$ 1,052 $ 5,115
Ratio of nonperforming loans to total loans held for investment
1.30 % 0.90 % 0.34 % 0.25 % 0.41 %
Ratio of nonperforming assets to total assets
0.98 % 0.77 % 0.28 0.21 0.31
Ratio of nonaccrual loans to total loans held for investment
0.34 0.24 0.40

As of December 31,
2017
(Dollars in
thousands)

As of December 31,
2016
(Dollars in
thousands)

Nonaccrual loans by category:

Real estate:

Construction and land
$ 92 $ 243
1-4 family residential
2,429 2,721
Multi-family residential
— —
Nonfarm nonresidential
5,935 1,201
Commercial
3,638 2,763
Consumer
441 198
Total
$ 12,535 $ 7,126

As of December 31,

2023

2022

2021

(Dollars in thousands)

Nonaccrual loans by category:

Real Estate Loans:

Commercial
$ 3,280 $ 2,644 $ 2,690
Construction
3,543 992 1,341
Residential
7,352 4,080 3,601
Total Real Estate Loans
14,175 7,716 7,632
Commercial
2,395 3,150 5,127
Consumer and Other
373 188 109
Total
$ 16,943 $ 11,054 $ 12,868

As of December 31, 2023, our loan portfolio included 930 loans with an aggregate outstanding balance of $341.4 million that had previously been granted temporary payment deferrals of principal and/or interest due to the effect of the COVID-19 pandemic. As of December 31, 2022, our loan portfolio included 1,164 loans with an aggregate outstanding balance of $425.2 million that had previously been granted temporary payment deferrals. In accordance with FASB and interagency regulatory guidance issued in March 2020, loans that were modified under the terms of our COVID-19 Deferral Assistance Program are not to be considered as troubled debt restructurings to the extent that they meet the terms of such guidance under Section 4013 of the CARES Act. Loans under these deferrals remain in their current risk rating and/or past due status through the deferral period. None of these loans are currently in their deferral period at December 31, 2023 and 2022, respectively.

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. ~~We review the ratings on credits monthly.~~ Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in each ~~credit as of each monthly reporting period.~~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~~;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.

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.

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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 ~~table summarizes~~ tables summarize our internal ratings of ~~our~~ 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, 2017

Pass

Special Mention

Substandard

Doubtful

Total

(Dollars in thousands)

Real estate:

Construction and land
$ 141,128 $ 1,953 $ 362 $ 92 $ 143,535
Farmland
10,480 — — — 10,480
1-4 family residential
148,845 4,657 1,574 2,429 157,505
Multi-family residential
20,677 — 40 — 20,717
Nonfarm nonresidential
325,216 4,861 1,687 5,935 337,699
Commercial
228,157 20,681 1,951 3,638 254,427
Consumer
49,787 672 21 441 50,921
Total
$ 924,290 $ 32,824 $ 5,635 $ 12,535 $ 975,284

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

As of December 31, 2016

Pass

Special Mention

Substandard

Doubtful

Total

(Dollars in thousands)

Real estate:

Construction and land
$ 92,951 $ 932 $ 300 $ 243 $ 94,426
Farmland
9,217 — — — 9,217
1-4 family residential
118,891 4,782 2,658 2,721 129,052
Multi-family residential
22,685 — 52 — 22,737
Nonfarm nonresidential
280,398 14,531 1,927 1,201 298,057
Commercial
186,197 16,783 7,377 2,763 213,120
Consumer
43,414 505 225 198 44,342
Total
$ 753,753 $ 37,533 $ 12,539 $ 7,126 $ 810,951

As of December 31, 2022

Pass

Special Mention

Substandard

Doubtful

Total

(Dollars in thousands)

Real Estate Loans:

Commercial
$ 1,972,611 $ 35,054 $ 10,478 $ 2,263 $ 2,020,406
Construction
716,071 3,496 2,157 350 722,074
Residential
643,763 3,780 7,925 910 656,378
Total Real Estate Loans
3,332,445 42,330 20,560 3,523 3,398,858
Commercial
1,137,555 6,646 6,960 2,712 1,153,873
Consumer and Other
53,041 - 404 - 53,445
Total
$ 4,523,041 $ 48,976 $ 27,924 $ 6,235 $ 4,606,176

Allowance for ~~Loan L~~Credit Losses~~osses~~

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 ~~loan~~credit losses and risks inherent in the loan portfolio. In determining the allowance for ~~loan~~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 ~~loan~~credit losses is based on internally assigned risk classifications of loans, ~~historical loan loss rates,~~ 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 ~~loan~~credit loss rates. For additional discussion of our methodology, please refer to “—Critical Accounting ~~Policies—~~Estimates—Allowance for ~~loan losses.~~Credit Losses.”

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 commercial and industrial 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;
•
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 commercial mortgage loans and multifamily residential 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;

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for 1-4 family residential mortgage 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 construction, land development and other land 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, ~~2017,~~2023, the allowance for ~~loan~~credit losses totaled ~~$8.8~~$43.7 million, or ~~0.90%~~0.88%, of total loans held for investment. As of December 31, ~~2016,~~2022, the allowance for ~~loan~~credit losses totaled ~~$8.2~~$38.8 million, or ~~1.01%~~0.84%, of total loans held for investment. As of December 31, 2021, the allowance for credit losses totaled $29.9 million, or 0.94%, of total loans held for investment.
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Table of Contents

The following ~~table presents,~~tables present, as of and for the periods indicated, an analysis of the allowance for ~~loan~~credit losses and other related data:

As of December 31, 2017
(Dollars in thousands)

As of December 31, 2016
(Dollars in thousands)

Average loans outstanding
$ 890,683 $ 795,625
Gross loans held for investment outstanding at end of period
$ 975,284 $ 810,951
Allowance for loan losses at beginning of period
8,162 7,244
Provision for loan losses
4,237 1,220
Charge-offs:

Real estate:

Construction, land and farmland
2 484
Residential
184 162
Nonfarm non-residential
617 473
Commercial
2,945 667
Consumer
36 3
Total charge-offs
3,784 1,789
Recoveries:

Real estate:

Construction, land and farmland
1 10
Residential
48 140
Nonfarm non-residential
23 1,258
Commercial
40 33
Consumer
38 46
Total recoveries
150 1,487
Net charge-offs
3,634 302
Allowance for loan losses at end of period
$ 8,765 $ 8,162
Ratio of allowance to end of period loans held for investment
0.90 % 1.01 %
Ratio of net charge-offs to average loans
0.41 % 0.04 %

For the Years Ended December 31,

2023

2022

2021

(Dollars in thousands)

Average loans outstanding
$ 4,859,637 $ 4,020,436 $ 3,037,020
Gross loans held for investment outstanding end of period
$ 4,992,785 $ 4,606,176 $ 3,189,608
Allowance for credit losses at beginning of period
$ 38,783 $ 29,936 $ 22,336
Adoption of ASU 2016-13
5,857 - -
Provision for credit losses
4,483 10,667 8,559
Charge-offs:

Real Estate:

Commercial
2,049 51 139
Construction
36 16 29
Residential
42 191 169
Total Real Estate
2,127 258 337
Commercial
2,813 2,139 830
Consumer and other
1,489 424 469
Total charge-offs
6,429 2,821 1,636
Recoveries:

Real Estate:

Commercial
26 50 99
Construction
1 25 3
Residential
18 20 39
Total Real Estate
45 95 141
Commercial
672 739 423
Consumer and other
327 167 113
Total recoveries
1,044 1,001 677
Net charge-offs
5,385 1,820 959
Allowance for credit losses at end of period
$ 43,738 $ 38,783 $ 29,936
Ratio of allowance for credit losses to end of period loans held for investment
0.88 % 0.84 % 0.94 %
Ratio of net charge-offs to average loans
0.11 0.05 0.03
Ratio of allowance for credit losses to nonaccrual loans
258.15 350.85 232.64

For the Years Ended December 31,

2023

2022

2021

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
$ 2,023 0.04 % $ 1 0.00 % $ 40 0.00 %
Construction
35 0.00 % (9 ) 0.00 % 26 0.00 %
Residential
24 0.00 % 171 0.00 % 130 0.01 %
Total Real Estate Loans
2,082 0.04 % 163 0.00 % 196 0.01 %
Commercial
2,141 0.05 % 1,400 0.04 % 407 0.01 %
Consumer and Other
1,162 0.02 % 257 0.01 % 356 0.01 %
Total net charge-offs (recoveries)
$ 5,385 0.11 % $ 1,820 0.05 % $ 959 0.03 %
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Table of Contents

Although we believe that we have established our allowance for loan losses in accordance with ~~U.S. generally accepted accounting principles (“GAAP”)~~GAAP and that the allowance for loan losses was adequate to provide for known and ~~inherent~~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.
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The following table shows the allocation of the allowance for ~~loan~~credit losses among loan categories and certain other information as of the dates indicated. The allocation of the allowance for ~~loan~~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.

As of December 31,
2017

As of December 31,
2016

Amount

Percent
to Total

Amount

Percent
to Total

(Dollars in
thousands)

(Dollars in
thousands)

Real estate:

Construction and land
$ 1,421 16.2 % $ 933 11.4 %
Farmland
76 0.9 % 75 0.9 %
1-4 family residential
1,284 14.7 % 1,228 15.1 %
Multi-family residential
144 1.6 % 172 2.1 %
Nonfarm nonresidential
2,323 26.5 % 2,314 28.4 %
Total real estate
5,248 59.9 % 4,722 57.9 %
Commercial
3,147 35.9 % 3,039 37.2 %
Consumer
370 4.2 % 401 4.9 %
Total allowance for loan losses
$ 8,765 100 % $ 8,162 100 %

For the Years Ended December 31,

2023

2022

2021

Amount

Percent to Total

Amount

Percent to Total

Amount

Percent to Total

(Dollars in thousands)

Real estate:

Commercial
$ 17,882 40.9 % $ 14,922 38.5 % $ 10,841 36.2 %
Construction
8,142 18.6 5,905 15.2 4,772 16.0
Residential
5,662 12.9 5,367 13.8 4,592 15.3
Total real estate
31,686 72.4 26,194 67.5 20,205 67.5
Commercial
11,796 27.0 11,950 30.8 9,077 30.3
Consumer and Other
256 0.6 639 1.7 654 2.2
Total allowance for credit losses
$ 43,738 100.0 % $ 38,783 100.0 % $ 29,936 100.0 %

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, ~~2017,~~2023, the carrying amount of investment securities totaled ~~$179.1~~$879.6 million, a decrease of ~~$19.2~~$11.2 million, or ~~9.7%~~1.3%, compared to ~~$198.3~~$890.8 million as of December 31, ~~2016.~~2022. Securities represented ~~13.6%,~~13.4% and ~~17.9%~~14.9% of total assets as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

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, 2017

As of December 31, 2023

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

Fair Value

(Dollars in thousands)

(Dollars in thousands)

U.S. treasury securities
$ 17,690 $ - $ 1,451 $ 16,239
U.S. government agencies
$ 9,008 $ 13 $ 68 $ 8,953 10,258 - 848 9,410
Corporate bonds
13,074 59 92 13,041 49,609 - 5,770 43,839
Mortgage-backed securities
555,148 976 49,814 506,310
Municipal securities
76,553 353 427 76,479 331,273 298 27,798 303,773
Mortgage-backed securities
81,763 2 1,824 79,941
Other securities
831 — 97 734
Total
$ 181,229 $ 427 $ 2,508 $ 179,148 $ 963,978 $ 1,274 $ 85,681 $ 879,571

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Table of Contents

As of December 31, 2016

As of December 31, 2022

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized
Losses

Fair Value

(Dollars in thousands)

(Dollars in thousands)

U.S. treasury securities
$ 32,783 $ - $ 2,668 $ 30,115
U.S. government agencies
$ 7,580 $ 36 $ 50 $ 7,566 50,288 - 2,916 47,372
Corporate bonds
11,148 31 52 11,127 48,475 25 2,496 46,004
Mortgage-backed securities
506,671 267 55,213 451,725
Municipal securities
80,559 210 1,133 79,636 347,382 11 31,858 315,535
Mortgage-backed securities
101,766 20 2,414 99,372
Other securities
820 — 179 641
Total
$ 201,873 $ 297 $ 3,828 $ 198,342 $ 985,599 $ 303 $ 95,151 $ 890,751

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, ~~structured investment vehicles,~~ private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in our investment ~~portfolio. As~~portfolio as of December 31, ~~2017,~~2023.
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. 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 ~~did not contain any securities that are directly backed by subprime or Alt-A mortgages.~~as of December 31, 2023, was negligible and therefore, no allowance for credit loss was recorded related to our investment securities.

~~Management evaluates~~Prior to the adoption of ASU 2016-13, declines in the fair value of available-for-sale securities ~~for~~below their cost that were deemed to be other than temporary were reflected in earnings as realized losses. In estimating other-than-temporary impairment ~~at least on~~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 ~~quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.~~period of time sufficient to allow for any anticipated recovery in fair value.

The following ~~table sets~~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, 2017

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. government agencies
$ 1,004 0.96 % $ 1,000 1.11 % $ 6,949 2.46 % $ — — % $ 8,953 2.14 %
Corporate bonds
— — % 6,580 2.73 % 6,461 4.28 % — — % 13,041 3.50 %
Municipal securities
7,651 1.52 % 34,373 1.92 % 17,434 2.27 % 17,021 2.74 % 76,479 2.14 %
Mortgage-backed securities
12 0.20 % 6,033 1.67 % 39,619 1.50 % 34,277 1.93 % 79,941 1.70 %
Other securities
— — % — — % — — % 734 3.03 % 734 3.03 %
Total
$ 8,667 1.46 % $ 47,986 1.98 % $ 70,463 2.04 % $ 52,032 2.21 % $ 179,148 2.05 %

As of December 31, 2016

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

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

Amount

Yield

Amount

Yield

Amount

Yield

Amount

Yield

Total

Yield

(Dollars in thousands)

(Dollars in thousands)

U.S. treasury securities
$ - - % $ 16,239 0.80 % $ - - % $ - - % $ 16,239 0.80 %
U.S. government agencies
$ — — % $ 2,025 1.03 % $ 5,541 2.42 % $ — — % $ 7,566 2.05 % - - % 9,410 0.92 % - - % - - % 9,410 0.92 %
Corporate bonds
— — % 6,525 2.26 % 4,602 1.99 % — — % 11,127 2.15 % 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
7,348 1.78 % 35,213 1.74 % 19,806 2.26 % 17,269 2.53 % 79,636 2.04 % 16,766 1.56 % 96,739 1.55 % 117,092 1.91 % 73,176 2.38 % 303,773 1.89 %
Mortgage-backed securities
1 2.24 % 4,571 1.77 % 30,550 1.33 % 64,250 1.62 % 99,372 1.54 %
Other securities
— — % — — % — — % 641 2.34 % 641 2.34 %
Total
$ 7,349 1.78 % $ 48,334 1.78 % $ 60,499 1.78 % $ 82,160 1.82 % $ 198,342 1.80 % $ 17,126 1.54 % $ 171,117 1.63 % $ 349,660 2.65 % $ 341,668 2.66 % $ 879,571 2.43 %

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As of December 31, 2022

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
$ - - % $ 30,115 1.00 % $ - - % $ - - % $ 30,115 1.00 %
U.S. government agencies
- - % 47,372 1.63 % - - % - - % 47,372 1.63 %
Corporate bonds
151 - % 2,500 4.08 % 43,353 4.49 % - - % 46,004 4.45 %
Mortgage-backed securities
2,458 0.97 % 41,738 1.65 % 172,301 1.69 % 235,228 1.94 % 451,725 1.81 %
Municipal securities
15,299 1.76 % 97,064 1.44 % 120,905 1.79 % 82,267 2.13 % 315,535 1.77 %
Total
$ 17,908 1.64 % $ 218,789 1.49 % $ 336,559 2.08 % $ 317,495 1.99 % $ 890,751 1.90 %

The contractual maturity of mortgage-backed securities, collateralized mortgage obligations and ~~asset backed~~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 ~~pre-pay.~~prepay. Monthly ~~pay downs~~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 ~~4.78~~4.57 years with an estimated effective duration of ~~41.19 months~~3.81 years as of December 31, ~~2017.~~2023.

As of December 31, ~~2017~~2023 and ~~2016,~~2022, 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, 2023 and 2022, the Company held other equity securities of $33.9 million and $37.5 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, ~~2017~~2023 were ~~$1.1~~$5.2 billion, an increase of ~~$122.7~~$428.4 million, or ~~13.2%~~8.9%, compared to ~~$932.8 million~~$4.8 billion as of December 31, ~~2016. Deposit growth was primarily due~~2022. Total uninsured deposits were $2.0 billion, or 38.9% of deposits as of December 31, 2023 compared to ~~an increased awareness at~~$1.5 billion, or 31.9%, or total deposits as of December 31, 2022. Since it is not reasonably practicable to provide a precise measure of uninsured deposits, the ~~market level through a specific deposit incentive plan launched in Q3 of 2017, an increase in~~amounts are estimated and are based on the ~~offering rate on interest-bearing demand accounts~~same methodologies and ~~certificates of deposit, and continued focus on non-interest-bearing demand deposit accounts. Each of those~~assumptions that are ~~important in order to attract and retain deposit customers and thereby continue deposit penetration in our primary market area.~~used for regulatory reporting requirements for the call report.

Noninterest-bearing deposits as of December 31, ~~2017~~2023 were ~~$264.6 million~~$1.3 billion compared to ~~$223.7 million~~$1.5 billion as of December 31, ~~2016, an increase~~2022, a decrease of ~~$40.9~~$250.3 million, or ~~18.3%~~16.2%.

Average deposits for the year en~~ded~~ended December 31, ~~2017~~2023 were ~~$988.0 million,~~$5.0 billion, an increase of ~~$43.0~~$431.4 million, or ~~4.5% over the full year average for~~9.5%, compared to the year ended December 31, ~~2016~~2022 of ~~$945.0 million.~~$4.5 billion. The average rate paid on total interest-bearing deposits increased over this period from ~~0.71%~~0.81% for the year ended December 31, ~~2016~~2022 to ~~0.86%~~3.00% for the year ended December 31, ~~2017.~~2023. The increase in average rates was driven by ~~a strategic increase in~~ the ~~pricing of interest-bearing demand accounts~~federal reserve raising interest rates during the years ended December 31, 2023 and ~~certificates of deposit in order to improve liquidity.~~2022. In addition, the stability and the continued growth of noninterest-bearing demand accounts served to reduce the cost of deposits to ~~0.64%~~2.15% for the year ended December 31, ~~2017~~2023 and ~~0.55%~~0.54% for the year ended December 31, ~~2016.~~2022.

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Table of Contents

The following table presents the ~~daily~~monthly average balances and weighted average rates paid on deposits for the periods indicated:

For the Year Ended
December 31, 2017

For the Year Ended
December 31, 2016

Average
Balance

Average
Rate

Average
Balance

Average
Rate

(Dollars in thousands)

(Dollars in thousands)

Interest-bearing demand accounts
$ 35,258 0.65 % $ 36,200 0.19 %
Negotiable order of withdrawal (“NOW”) accounts
116,296 0.25 % 109,763 0.24 %
Limited access money market accounts and savings
236,766 0.51 % 241,577 0.41 %
Certificates and other time deposits > $250k
75,801 1.55 % 55,678 1.33 %
Certificates and other time deposits < $250k
269,143 1.27 % 280,778 1.10 %
Total interest-bearing deposits
733,264 0.86 % 723,996 0.71 %
Noninterest-bearing demand accounts
254,765 — % 221,047 — %
Total deposits
$ 988,029 0.64 % $ 945,043 0.55 %
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~~Table of Contents~~

For the Years Ended December 31

2023

2022

Average Balance

Average Rate

Average Balance

Average Rate

(Dollars in thousands)

Interest-bearing demand accounts
$ 507,782 3.40 % $ 298,845 1.31 %
Negotiable order of withdrawal ("NOW") accounts
468,094 1.33 % 536,742 0.30 %
Limited access money market accounts and savings
1,441,836 2.77 % 1,483,763 0.81 %
Certificates and other time deposits > $250k
498,054 4.01 % 208,661 1.03 %
Certificates and other time deposits < $250k
650,450 3.61 % 479,871 0.98 %
Total interest-bearing deposits
3,566,216 3.00 % 3,007,882 0.81 %
Noninterest-bearing demand accounts
1,412,979 - % 1,539,938 - %
Total deposits
$ 4,979,195 2.15 % $ 4,547,820 0.54 %

The ratio of average noninterest-bearing deposits to average total deposits for the years ended December 31, ~~2017~~2023 and ~~2016~~2022 was ~~25.8%~~28.4% and ~~23.4%~~33.9%, respectively.

The following table sets forth the ~~amount~~contractual maturities of certain certificates of deposit ~~that are~~ ~~greater than $250,000 by time remaining until maturity:~~at December 31, 2023:

As of
December 31, 2017

As of
December 31, 2016

(Dollars in thousands)

1 year or less
$ 52,402 $ 54,866
More than 1 year but less than 3 years
21,198 9,451
3 years or more but less than 5 years
16,930 9,029
5 years or more
— —
Total
$ 90,530 $ 73,346

Certificates of
Deposit More Than
$250,000

Certificates of
Deposit of
$100,000 Through
$250,000

(Dollars in thousands)

3 months or less
$ 119,176 $ 194,474
More than 3 months but less than 6 months
96,520 61,216
More than 6 months but less than 12 months
214,937 167,749
12 months or more
192,703 43,702
Total
$ 623,336 $ 467,141

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 isare discussed below.

FHFHLB advancesL~~B advances~~. The FHLB allows us to borrow on a blanket floating lien status collateralized by certain securities and loans. As of December 31, ~~2017~~2023 and ~~2016,~~2022, total borrowing capacity of ~~$399.5 million and $321.1 million, respectively,~~$1.8 billion, for both periods, was available under this arrangement and ~~$75.0~~$211.2 million and ~~$47.1~~$410.1 million, respectively, was outstanding with a weighted average stated interest rate of ~~1.96%~~3.65% as of December 31, ~~2017~~2023 and ~~2.64%~~3.88% as of December 31, ~~2016.~~2022. Our current longest dated FHLB ~~advances mature~~advance matures within ~~five~~ten years. We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio.

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Table of Contents
As
The following table presents our FHLB borrowings at the dates indicated.

FHLB Advances

(Dollars in Thousands)

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 %

December 31, 2022

Amount outstanding at year-end
$ 410,100
Weighted average stated interest rate at year-end
3.88 %
Maximum month-end balance during the year
$ 534,059
Average balance outstanding during the year
$ 271,025
Weighted average interest rate during the year
2.39 %
Bank Term Funding Program (“BTFP”). On March 12, 2023, the Federal Reserve launched the BTFP, which offers loans to banks with a ~~result~~term of up to one year. The loans are secured by pledging participating banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities will be valued at par for collateral purposes. The Bank participated in the ~~merger with AGFC,~~ ~~we assumed the~~BTFP and had outstanding ~~FHLB advances~~debt of ~~American Gateway Bank.~~$300.0 million at December 31, 2023. These ~~advances were recorded at fair value as~~loans bear a fixed interest rate of ~~acquisition which totaled $41.2 million, resulting in a market value adjustment of $2.0 million which was accreted over the life of the respective advances as a reduction of interest expense~~4.38% and mature on ~~borrowings.~~
March 22, 2024.

The following table presents our ~~FHLB~~Bank Term Funding Program borrowings at the ~~dates~~date indicated.

FHLB
Advances

(Dollars in
Thousands)

December 31, 2017

Amount outstanding at year-end
$ 75,000
Weighted average stated interest rate at year-end
1.96 %
Maximum month-end balance during the year
$ 75,000
Average balance outstanding during the year
$ 65,513
Weighted average interest rate during the year
1.13 %

December 31, 2016

Amount outstanding at year-end
$ 47,064
Weighted average stated interest rate at year-end
2.64 %
Maximum month-end balance during the year
$ 80,973
Average balance outstanding during the year
$ 53,516
Weighted average interest rate during the year
1.05 %
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~~Table of Contents~~

BTFP

(Dollars in Thousands)

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 %

~~First National Bankers Bank~~Subordinated Note Purchase Agreement (““Subordinated Debt”~~FNBB~~)”~~) long term advances~~. ~~On September 12, 2016~~ In December 2018 we borrowed $3.0 million from FNBB with a maturity date of September 12, 2026. This advance is due in nine annual principal payments of $300,000 beginning on September 12, 2017 and one final principal and interest payment of $303,000 due on September 12, 2026. This advance is secured by a pledge of and security interestissued subordinated notes in the ~~common stock~~amount of ~~our wholly-owned subsidiary, Business First Bank.~~$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 ~~was $2.7 million and $3.0 million~~ at both December 31, ~~2017~~2023 and ~~2016, respectively. The advance carries a variable interest equal to the Wall Street Journal Prime rate. The rate~~2022 was ~~4.25% and 3.75% at December 31, 2017 and 2016, respectively, and adjusts based on changes in the index rate. This FNBB long term advance was established~~$25.0 million. These subordinated notes were issued for the purpose of paying off ~~the revolving~~our long term advance and line of credit with ~~First Tennessee Bank National Association.~~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, 2023 and 2022 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, 2023 and 2022 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 $1.1 million and $2.9 million remaining at December 31, 2023 and December 31, 2022, 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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The following table presents the ~~FNBB~~ ~~long term advances~~Subordinated Debt at the dates indicated.

FNBB
Long Term
Advances

(Dollars in
Thousands)

December 31, 2017

Amount outstanding at year-end
$ 2,700
Weighted average stated interest rate at year-end
4.25 %
Maximum month-end balance during the year
$ 3,000
Average balance outstanding during the year
$ 2,924
Weighted average interest rate during the year
3.98 %

December 31, 2016

Amount outstanding at year-end
$ 3,000
Weighted average stated interest rate at year-end
3.75 %
Maximum month-end balance during the year
$ 3,000
Average balance outstanding during the year
$ 910
Weighted average interest rate during the year
3.54 %

Subordinated Debt

(Dollars in Thousands)

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 %

December 31, 2022

Amount outstanding at year-end
$ 110,749
Weighted average stated interest rate at year-end
5.57 %
Maximum month-end balance during the year
$ 111,209
Average balance outstanding during the year
$ 106,054
Weighted average interest rate during the year
4.82 %

FNBB revolving advances. FNBB ~~allows~~allowed us to borrow on a revolving basis up to $5.0 million. This line of credit, established on September 12, 2016, iswas secured by a pledge of and security interest in the common stock of our wholly-owned subsidiary, ~~Business First Bank. The balance on this line of credit was $862,000 at both December 31, 2017 and 2016.~~b1BANK. This line of credit ~~bears~~carried a variable interest rate equal to the Wall Street Journal Prime rate. The rate was 4.25% and 3.75% at December 31, 2017 and 2016, respectively, and adjusts based on changes in the index rate. This FNBB line matured on September 12, 2017 and renewed on September 29, 2017 for another one year term on the same terms and will mature on September 29, 2018. This FNBB line was established for the purpose of repurchasing shares of our common stock from certain of our shareholders and for general corporate purposes.This line of credit was paid in full in March 2021. This line of credit was re-established on November 3, 2021. This line of credit did not have a balance at December 31, 2021. In May 2022, we utilized the full amount of this line of $5.0 million. This line of credit carried a variable interest rate equal to the Wall Street Journal Prime rate not to be less than 3.50%. This line of credit was paid in full, and not renewed, in November 2022.

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 ~~following table presents~~agreement indenture governing the ~~FNBB~~ ~~short term advances at~~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 ~~dates indicated.~~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.

FNBB
Short Term
Advances

(Dollars in
Thousands)

December 31, 2017

Amount outstanding at year-end
$ 862
Weighted average stated interest rate at year-end
4.25 %
Maximum month-end balance during the year
$ 862
Average balance outstanding during the year
$ 862
Weighted average interest rate during the year
3.98 %

December 31, 2016

Amount outstanding at year-end
$ 862
Weighted average stated interest rate at year-end
3.75 %
Maximum month-end balance during the year
$ 862
Average balance outstanding during the year
$ 24
Weighted average interest rate during the year
3.75 %

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~~Correspondent Bank~~ Federal Funds Purchased Lines of Credit Relationships

We maintain Federal Funds Purchased Lines of Credit Relationships with the following ~~financial institutions~~correspondent banks and limits as of December 31, ~~2017:~~2023:

(Dollars in
Thousands)

FNBB
$ 30,000
The Independent Bankers Bank
$ 25,000
Compass Bank
$ 22,500
FTN
$ 17,000
ServisFirst Bank
$ 10,000
Center State Bank
$ 9,000
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Fed Funds Purchase Limits

(Dollars in thousands)

TIB National Association
$ 45,000
PNC Bank
38,000
FNBB
35,000
First Horizon Bank
17,000
ServisFirst Bank
10,000
Total
$ 145,000

The following table represents combined Federal Funds Purchased Lines of Credit for all relationships at the dates indicated.

Fed Funds
Purchased

Fed Funds Purchased

(Dollars in
Thousands)

(Dollars in Thousands)

December 31, 2017

December 31, 2023

Amount outstanding at year-end
$ — $ -
Weighted average interest rate 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
$ 190 $ 474
Weighted average interest rate during the year
1.72 % 1.96 %

December 31, 2016

December 31, 2022

Amount outstanding at year-end
$ — $ 14,057
Weighted average interest rate at year-end
— %
Weighted average stated interest rate at year-end
4.50 %
Maximum month-end balance during the year
$ 2,385 $ 14,057
Average balance outstanding during the year
$ 544 $ 1,970
Weighted average interest rate during the year
1.35 % 1.06 %

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, ~~2017~~2023 and ~~2016,~~2022, liquidity needs were primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios. ~~Although access to~~In addition, we utilize, or have available, brokered deposits, purchased funds from correspondent banks, the Bank Term Funding Program (while available), the Federal Reserve discount window, and overnight advances from the ~~FHLB and our FNBB revolving line are available and have been utilized on occasion to take advantage of investment opportunities, we do not generally rely on these external funding sources.~~FHLB. As of December 31, ~~2017~~2023 and ~~2016,~~2022, we maintained five and six lines of credit, respectively, with ~~commercial~~correspondent banks which ~~provide~~provided for extensions of credit with an availability to borrow up to an aggregate ~~$113.5~~of $145.0 million and ~~$109.5~~$154.0 million as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. At December 31, 2022, we had $14.1 million outstanding under these lines of credit. There were no funds under these lines of credit outstanding as of December 31, ~~2017 and 2016.~~2023.

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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 ~~$1.2~~$6.3 billion and ~~$1.1~~$5.5 billion for the years ended December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

For the Year Ended
December 31, 2017

For the Year Ended
December 31, 2016

For the Years Ended December 31,

Sources of Funds:

2023

2022

Source of Funds:

Deposits:

Noninterest-bearing
21.2 % 19.6 % 22.3 % 28.1 %
Interest-bearing
61.1 % 64.2 % 56.2 55.0
Subordinated debt (excluding trust preferred securities)
1.7 1.9
Advances from FHLB
5.5 % 4.7 % 5.2 4.9
Other borrowings
0.5 % 0.6 % 0.4 0.6
Bank Term Funding Program
4.0 -
Other liabilities
0.7 % 0.6 % 0.7 0.7
Shareholders’ equity
11.0 % 10.3 %
Shareholders' equity
9.5 8.8
Total
100 % 100 % 100.0 % 100.0 %

Uses of Funds:

Loans
73.5 % 69.9 %
Loans, net of allowance for loan losses
76.0 % 72.9 %
Securities available for sale
16.3 % 18.7 % 14.2 17.5
Interest-bearing deposits in other banks
1.7 % 2.3 % 2.8 2.1
Other noninterest-earning assets
8.5 % 9.1 % 7.0 7.5
Total
100 % 100 % 100.0 % 100.0 %
Average noninterest-bearing deposits to average deposits
25.8 % 23.4 % 28.4 % 33.9 %
Average loans to average deposits
90.1 % 84.2 % 97.6 88.4

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 ~~11.9%~~20.9% for the year ended December 31, ~~2017~~2023 compared to the same period in ~~2016.~~2022. We predominantly invest excess ~~deposits~~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 ~~4.78~~4.57 years and an effective duration of ~~41.19 months~~3.81 years as of December 31, ~~2017~~2023 and a weighted average life of ~~4.76~~4.88 years and an effective duration of ~~44.72 months~~4.09 years as of December 31, ~~2016.~~2022.

As of December 31, ~~2017,~~2023, we had outstanding ~~$256.9 million~~$1.2 billion in commitments to extend credit and ~~$9.5~~$45.2 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, ~~2016,~~2022, we had outstanding ~~$196.2 million~~$1.3 billion in commitments to extend credit and ~~$12.5~~$45.6 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, ~~2017,~~2023, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material ~~nature other than our acquisition of MBI. As of December 31, 2017, we~~nature. We had cash and cash equivalents, including federal funds sold, of ~~$107.6 million.~~$377.2 million and $168.3 million as of December 31, 2023 and 2022, respectively.

Capital Resources

Total s~~hareholders’~~shareholders’ equity increased to ~~$179.9~~$644.3 million as of December 31, ~~2017,~~2023, compared to ~~$113.6~~$580.5 million as of December 31, ~~2016,~~2022, an increase of ~~$66.4~~$63.8 million, or ~~58.5%~~11.0%. This increase was primarily ~~the result of the $62.5 million net proceeds raised from our fourth quarter 2017 private placement offering and $4.8 million in~~due to net income ~~net~~available to common shareholders of $65.6 million, other comprehensive income of $7.6 million resulting from the ~~funds returned to~~after tax effect of unrealized gains in our ~~shareholders through quarterly dividends.~~investment securities portfolio, and offset by dividends paid on common shares of $12.7 million.

~~We commenced the payment~~On January 23, 2024, our board of directors declared a quarterly ~~dividends~~dividend in the ~~second quarter~~amount of ~~2016 based upon~~$18.75 per preferred share to the ~~previous quarter’s financial performance.~~ preferred shareholders of record as of February 15, 2024. The dividend was paid on February 28, 2024.
On January ~~18, 2018,~~23, 2024, our ~~Board~~board of ~~Directors (the “Board”)~~directors declared a quarterly dividend based upon our financial performance for the three months ended December 31, ~~2017~~2023 in the amount of ~~$0.06~~$0.14 per common share to the common shareholders of record as of February 15, ~~2018.~~2024. The dividend was paid on February 28, ~~2018.~~2024.

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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 ~~bank~~ holding company, our ability to pay dividends is largely dependent upon the receipt of dividends from our subsidiary, ~~Business First Bank.~~b1BANK. There can be no assurance that we will declare and pay any dividends to our shareholders.

Capital management co~~nsists~~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 ~~bank~~ holding company and bank levels. As of December 31, ~~2017~~2023 and ~~2016,~~December 31, 2022, we and ~~Business First Bank~~b1BANK were in compliance with all applicable regulatory capital requirements, and ~~Business First Bank~~b1BANK was classified as “well-capitalized,” for purposes of ~~the~~ 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 ~~Business First Bank~~b1BANK as of the dates indicated.

As of December 31, 2017

As of December 31, 2016

As of December 31,

Amount

Ratio

Amount

Ratio

2023

2022

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Business First Bancshares, Inc.

(Dollars in thousands)

Business First

Total capital (to risk weighted assets)
$ 181,565 15.23 % $ 115,437 11.63 % $ 754,990 12.85 % $ 704,840 12.75 %
Tier 1 capital (to risk weighted assets)
172,800 14.49 % 107,275 10.81 % 614,975 10.46 % 557,088 10.07 %
Common Equity Tier 1 capital (to risk weighted assets)
172,800 14.49 % 107,275 10.81 % 538,045 9.15 % 480,158 8.68 %
Tier 1 Leveraged capital (to average assets)
172,800 13.53 % 107,275 9.67 %
Tier 1 Leverage capital (to average assets)
614,975 9.52 % 557,088 9.49 %

Business First Bank

b1BANK

Total capital (to risk weighted assets)
$ 120,806 10.24 % $ 117,909 11.89 % $ 730,117 12.43 % $ 657,588 11.91 %
Tier 1 capital (to risk weighted assets)
112,041 9.50 % 109,747 11.07 % 686,379 11.69 % 618,805 11.20 %
Common Equity Tier 1 capital (to risk weighted assets)
112,041 9.50 % 109,747 11.07 % 686,379 11.69 % 618,805 11.20 %
Tier 1 Leveraged capital (to average assets)
112,041 8.78 % 109,747 9.91 %
Tier 1 Leverage capital (to average assets)
686,379 10.63 % 618,805 10.55 %
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.

Long Term Debt

For information on our ~~borrowings from FNBB,~~subordinated debt, please refer to “Borrowings”.

FHLB Advances
Advances from the FHLB totaled approximately $211.2 million and $410.1 million at December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, the FHLB advances were collateralized by a blanket floating lien on certain securities and loans, had a weighted average stated rate of 3.65% and 3.88%, respectively, and mature within ten years. At December 31, 2022, $262.0 million in advances were short term with a rate of 4.55% and none at December 31, 2023.
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Bank Term Funding Program (“BTFP”)
On March 12, 2023, the Federal Reserve launched the BTFP, which offers loans to banks with a term of up to one year. The loans are secured by pledging participating banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities will be 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 bear a fixed interest rate of 4.38% and mature on March 22, 2024.

Contractual Obligations

The following ~~table~~tables summarizes contractual obligations and other commitments to make future payments as of December 31, ~~2017~~2023 and ~~2016~~2022 (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, ~~long-term borrowings,~~ 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 ~~$75.0~~$211.2 million and ~~$47.1~~$410.1 million as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. As of December 31, ~~2017~~2023 and ~~2016,~~2022, the FHLB advances were collateralized by a blanket floating lien on certain securities and loans, had a weighted average stated rate of ~~1.96%~~3.65% and ~~2.64%~~3.88%, respectively, and ~~maturities ranging from 2018 through 2022.~~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 expect to either refinance the debt or pay it off with additional funding sources of which we have sufficient borrowing capacity as of December 31, 2023. The ~~advance under the FNBB long-term borrowing~~subordinated debt totaled ~~$2.7~~$100.0 million and ~~$3.0~~$110.7 million as of December 31, 2023 and 2022. 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 $1.1 million and $2.9 million remaining at December 31, ~~2017~~2023 and 2016, respectively. This advance was secured by a pledge of and security interest in the common stock of our wholly-owned subsidiary, Business First Bank, bearing interest at a variable rate of 4.25% and 3.75% at December 31, ~~2017 and 2016, respectively, and maturing~~2022, respectively. We recognized $1.5 million in ~~2026. We also had a line~~gains on the extinguishment of ~~credit with FNBB with an outstanding balance of $862,000 at both~~this debt during the year ended December 31, 2017 and 2016. This line of credit was secured by a pledge of and security interest in the common stock our wholly-owned subsidiary, Business First Bank, bearing interest at a variable rate of 4.25% and 3.75% at December 31, 2017 and 2016, respectively. This line of credit matured in September 2017 and was renewed on the same terms for a one year term to mature on September 29, 2018.2023.

As of December 31, 2017

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

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)

(Dollars in thousands)

Non-cancelable future operating leases
$ 2,354 $ 3,403 $ 2,150 $ 5,282 $ 13,189 $ 4,429 $ 7,166 $ 6,426 $ 5,617 $ 23,638
Time deposits
252,493 67,298 34,468 150 354,409 1,027,366 238,222 35,490 21 1,301,099
Subordinated debt
- - 17,500 81,427 98,927
Advances from FHLB
45,000 — 30,000 — 75,000 - 111,198 25,000 75,000 211,198
Advances from FNBB
1,162 600 600 1,200 3,562
BTFP
300,000 - - - 300,000
Subordinated debt - trust preferred securities
- - - 5,000 5,000
Securities sold under agreements to repurchase
1,939 — — — 1,939 18,885 - - - 18,885
Standby and commercial letters of credit
5,107 4,385 — — 9,492 43,704 927 546 - 45,177
Commitments to extend credit
132,269 88,307 6,144 30,149 256,869 625,521 330,138 106,171 112,477 1,174,307
Total
$ 440,324 $ 163,993 $ 73,362 $ 36,781 $ 714,460 $ 2,019,905 $ 687,651 $ 191,133 $ 279,542 $ 3,178,231

As of December 31, 2016

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
$ 1,591 $ 2,781 $ 1,776 $ 5,154 $ 11,302
Time deposits
239,062 77,963 20,937 250 338,212
Advances from FHLB
32,064 15,000 — — 47,064
Advances from FNBB
1,162 600 600 1,500 3,862
Securities sold under agreements to repurchase
2,720 — — — 2,720
Standby and commercial letters of credit
9,439 3,081 18 — 12,538
Commitments to extend credit
100,204 72,283 3,409 20,305 196,201
Total
$ 386,242 $ 171,708 $ 26,740 $ 27,209 $ 611,899
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As of December 31, 2022

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
$ 4,135 $ 6,496 $ 4,247 $ 4,298 $ 19,176
Time deposits
601,980 145,606 38,971 20 786,577
Subordinated debt
- - 8,900 98,927 107,827
Advances from FHLB
262,000 875 147,225 - 410,100
Subordinated debt - trust preferred securities
- - - 5,000 5,000
Securities sold under agreements to repurchase
20,208 - - - 20,208
Standby and commercial letters of credit
18,706 26,468 377 - 45,551
Commitments to extend credit
654,067 342,844 200,971 147,288 1,345,170
Total
$ 1,561,096 $ 522,289 $ 400,691 $ 255,533 $ 2,739,609

Off-Balance Sheet Items

In the normal course of business, we enter into various transactions which, in accordance with ~~generally accepted accounting principles, or~~ 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.

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 ~~below.~~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.

As of December 31, 2017

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)

Standby and commercial letters of credit
$ 5,107 $ 4,385 $ — $ — $ 9,492
Commitments to extend credit
132,269 88,307 6,144 30,149 256,869
Total
$ 137,376 $ 92,692 $ 6,144 $ 30,149 $ 266,361
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As of December 31, 2016

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)

Standby and commercial letters of credit
$ 9,439 $ 3,081 $ 18 $ — $ 12,538
Commitments to extend credit
100,204 72,283 3,409 20,305 196,201
Total
$ 109,643 $ 75,364 $ 3,427 $ 20,305 $ 208,739

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.

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Interest Rate Sensitivity and Market Risk

As a financial institution, our primary component of market risk is sensitivity to movement in interest ~~rate volatility.~~rates. Our asset ~~liability~~ and ~~funds~~liability management policy provides management with the guidelines for effective ~~funds~~interest rate risk management, and we have established a measurement system for monitoring our ~~net~~ interest rate sensitivity position. We manage our sensitivity position within our established guidelines.

Fluctuations in interest rates will ultimately impact ~~both~~ the level of income and expense recorded on ~~most~~many of our assets and liabilities and the market value of all interest-earning assets and interest-bearing ~~liabilities, other than those which have a short term to maturity.~~liabilities. Interest rate risk is the potential of economic losses due to ~~future~~ interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of the current fair market ~~values.~~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 ~~adjust~~position the balance sheet to minimize the ~~inherent~~ risk ~~while at~~of losses and maximize the ~~same time maximizing income.~~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. We do not~~business however we may enter into ~~instruments such as leveraged~~ derivatives contracts to hedge interest rate ~~swaps, financial options, financial futures contracts or forward delivery contracts for the purpose of reducing interest rate risk.~~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 ~~Business First Bank,~~b1BANK, in accordance with policies approved by our board of directors. ~~The committee formulates strategies based on appropriate levels of interest rate risk.~~ 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.
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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 ininto the model as are prepayment assumptions, maturity data and ~~call options within the investment portfolio. Average life of~~optionality. Deposit assumptions such as repricing betas and non-maturity ~~deposit accounts are based on standard regulatory~~balance decay ~~assumptions and~~rates are also incorporated into the model. Model assumptions are revised and updated on a regular basis as directed by policy, and more ~~accurate information becomes available.~~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.

On at least a quarterly basis, we run ~~two~~ simulation models ~~including a static balance sheet and dynamic growth balance sheet. These models test the impact on~~to calculate potential impacts to net interest income and ~~fair~~the economic value of equity from changes in market interest rates under various scenarios. Under the static and dynamic growth models, rates are shocked instantaneously based upon parallel and non-parallel yield curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Non-parallel simulation involves analysis of interest income and expense under various changes in the shapeequity. Specific details of the ~~yield curve. Internal~~simulations are reflected in policy regarding internal rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net income at risk for the subsequent one-year period should not declineas directed by more than 5.0% for a 100 basis point shift, 10% for a 200 basis point shift, and 12.5% for a 300 basis point shift. Internal policy regarding interest rate simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated fair value of equity at risk for the subsequent one-year period should not decline by more than 10.00% for a 100 basis point shift, 15.00% for a 200 basis point shift, and 25.00% for a 300 basis point shift.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,

As of December 31, 2017

As of December 31, 2016

2023

2022

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

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
3.00 % (3.54 %) 3.80 % (9.03 %) (5.50 %) (5.59 %) (8.60 %) (5.55 %)
+200
1.50 % (2.53 %) 3.60 % (5.27 %) (3.20 %) (3.47 %) (5.90 %) (3.65 %)
+100
0.30 % (0.11 %) 2.60 % (2.73 %) (1.10 %) (1.39 %) (3.50 %) (1.94 %)
Base
0.00 % 0.00 % 0.00 % 0.00 % - % - % - % - %
-100 (2.20 %) (1.28 %) 0.20 % 0.16 % 0.30 % 1.40 % (0.70 %) 1.76 %
-200 0.50 % 2.67 % (2.30 %) 3.38 %

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The results of the simulations are primarily ~~due to~~ driven by the contractual characteristics of all balance sheet ~~mix~~instruments and behavior of demand, money market and savings deposits during such rate fluctuations. We have found that, historically, interest rates on these deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes, as well as changes in market conditions and the application and timing of various strategies.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.
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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.

~~The~~This discussion and analysis section includes certain non-GAAP financial measures ~~that~~ ~~we discuss should~~(e.g., referenced as “core” or “tangible”) intended to supplement, not ~~be considered in isolation or as a~~ substitute for, ~~the most directly~~ comparable GAAP measures. These measures typically adjust income available to common shareholders for certain significant activities or ~~other financial~~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 ~~calculated in accordance with GAAP. Moreover, the manner in which we calculate the~~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 disclosures are not necessarily comparable to non-GAAP measures that may ~~differ from that of~~be presented by other ~~companies reporting measures with similar names.~~companies. You should understand how such other banking organizations calculate their financial ~~measures similar~~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, 2023 was $66.3 million, or $2.62 per diluted common share, compared to core net income available to common shareholders of $57.6 million, or $2.52 per diluted common share, for the year ended December 31, 2022. Core net income available to common shareholders for the year ended December 31, 2023 included an adjustment for $2.5 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, compared to $48,000 in losses on the sales of securities, $687,000 in insurance reimbursements from storm expenditures, the incurrence of $717,000 in losses attributed to former bank premises and equipment, $5.2 million in acquisition-related expenses and $501,000 million in hurricane repair expenses for the year ended December 31, 2022.
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For the Years Ended December 31,

2023

2022

2021

(Dollars in thousands, except per share data) (Unaudited)

Interest Income:

Interest income
$ 353,327 $ 236,114 $ 170,438
Core interest income
353,327 236,114 170,438
Interest Expense:

Interest expense
138,198 36,537 16,554
Core interest expense
138,198 36,537 16,554
Provision for Credit Losses:

Provision for credit losses
4,483 10,886 8,047
Core provision expense
4,483 10,886 8,047
Other Income:

Other income
36,642 29,310 35,782
Losses on former bank premises and equipment
- 717 1,010
(Gains) losses on sale of securities
2,565 48 (378 )
Insurance reimbursement of storm expenditures
- (687 ) -
Gain on sale of branch
(945 ) - (492 )
Gain on extinguishment of debt
(1,458 ) - -
Core other income
36,804 29,388 35,922
Other Expense:

Other expense
156,702 149,409 117,061
Acquisition-related expenses (2)
(236 ) (5,178 ) (515 )
Write-down of former bank premises
(432 ) - -
Occupancy and bank premises - storm repair
- (501 ) (1,556 )
Core other expense
156,034 143,730 114,990
Pre-Tax Income:

Pre-tax income
90,586 68,592 64,558
Losses on former bank premises and equipment
- 717 1,010
(Gains) losses on sale of securities
2,565 48 (378 )
Insurance reimbursement of storm expenditures
- (687 ) -
Gain on sale of branch
(945 ) - (492 )
Gain on extinguishment of debt
(1,458 ) - -
Acquisition-related expenses (2)
236 5,178 515
Write-down of former bank premises
432 - -
Occupancy and bank premises - storm repair
- 501 1,556
Core pre-tax income
91,416 74,349 66,769
Provision for Income Taxes: (1)

Provision for income taxes
19,543 14,337 12,422
Tax on losses on former bank premises and equipment
- 151 211
Tax on (gains) losses on sale of securities
542 10 (79 )
Tax on insurance reimbursement of storm expenditures
- (144 ) -
Tax on gain on sale of branch
(200 ) - (138 )
Tax on gain on extinguishment of debt
(308 ) - -
Tax on acquisition-related expenses (2)
21 942 108
Tax on write-down of former bank premises
91 - -
Tax on occupancy and bank premises - storm repair
- 106 326
Core provision for income taxes
19,689 15,402 12,850
Preferred Dividends

Preferred dividends
5,401 1,350 -
Core preferred dividends
5,401 1,350 -
Net Income Available to Common Shareholders:

Net income available to common shareholders
65,642 52,905 52,136
Losses on former bank premises and equipment , net of tax
- 566 799
(Gains) losses on sale of securities, net of tax
2,023 38 (299 )
Insurance reimbursement of storm expenditures, net of tax
- (543 ) -
Gain on sale of branch, net of tax
(745 ) - (354 )
Gain on extinguishment of debt, net of tax
(1,150 ) - -
Acquisition-related expenses (2), net of tax
215 4,236 407
Write-down of former bank premises, net of tax
341 - -
Occupancy and bank premises - storm repair, net of tax
- 395 1,230
Core net income available to common shareholders
$ 66,326 $ 57,597 $ 53,919
Diluted Earnings Per Common Share:

Diluted earnings per common share
$ 2.59 $ 2.32 $ 2.53
Losses on former bank premises and equipment , net of tax
- 0.02 0.04
(Gains) losses on sale of securities, net of tax
0.08 - (0.02 )
Insurance reimbursement of storm expenditures, net of tax
- (0.02 ) -
Gain on sale of branch, net of tax
(0.03 ) - (0.02 )
Gain on extinguishment of debt, net of tax
(0.04 ) - -
Acquisition-related expenses (2), net of tax
0.01 0.18 0.02
Write-down of former bank premises, net of tax
0.01 - -
Occupancy and bank premises - storm repair, net of tax
- 0.02 0.06
Core diluted earnings per common share
$ 2.62 $ 2.52 $ 2.61
(1)
Tax rates, exclusive of certain nondeductible acquisition-related expenses and goodwill, utilized were 21% for both 2023 and 2022.  These rates approximate the marginal tax rates for the applicable periods.
(2)
Includes merger and conversion-related expenses and salary and employee benefits.
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Tangible Book Value Per Common ~~Share~~.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 ~~intangible~~ and ~~other~~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.
We believe this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing tangible book value.

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,

2017

2016

2015

2014

(Dollars in thousands, except per share data)

Tangible Common Equity

Total shareholders’ equity
$ 179,935 $ 113,559 $ 112,449 $ 78,845
Adjustments:

Goodwill
(6,824 ) (6,824 ) (3,376 ) —
Core deposit and other intangibles
(2,003 ) (2,279 ) (2,555 ) —
Total tangible common equity
$ 171,108 $ 104,456 $ 106,518 $ 78,845
Common shares outstanding⁽¹⁾
10,232,495 6,916,673 7,035,913 5,314,925
Book value per common share
$ 17.58 $ 16.42 $ 15.98 $ 14.83
Tangible book value per common share
$ 16.72 $ 15.10 $ 15.14 $ 14.83

As of December 31,

2023

2022

(Dollars in thousands, except per share data) (Unaudited)

Tangible Common Equity

Total shareholders' equity
$ 644,259 $ 580,481
Preferred stock
(71,930 ) (71,930 )
Total common shareholders' equity
572,329 508,551
Adjustments:

Goodwill
(88,391 ) (88,543 )
Core deposit and customer intangibles
(11,895 ) (14,042 )
Total tangible common equity
$ 472,043 $ 405,966
Common shares outstanding (1)
25,351,809 25,110,313
Book value per common shares (1)
$ 22.58 $ 20.25
Tangible book value per common shares (1)
18.62 16.17

(1)
Excludes the dilutive effect, if any, of ~~918,705, 1,086,105, 1,040,905~~217,094 and ~~1,041,245~~184,015 shares of common stock issuable upon exercise of outstanding stock options and ~~warrants~~restricted stock awards as of December 31, ~~2017, December 31, 2016, December 31, 2015,~~2023 and ~~December 31, 2014,~~2022, respectively.

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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 ~~intangible~~ and ~~other~~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.
We believe this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total shareholders’ equity and assets while not increasing our tangible common equity or tangible assets.

The following table reconciles, as of the dates set forth below, total s~~hareholders’~~shareholders’ equity to tangible common equity and total assets to tangible assets:

As of December 31,

As of December 31,

2017

2016

2015

2014

2023

2022

(Dollars in thousands, except per share data)

(Dollars in thousands, except per share data) (Unaudited)

Tangible Common Equity

Total shareholders’ equity
$ 179,935 $ 113,559 $ 112,449 $ 78,845
Total shareholders' equity
$ 644,259 $ 580,481
Preferred stock
(71,930 ) (71,930 )
Total common shareholders' equity
572,329 508,551
Adjustments:

Goodwill
(6,824 ) (6,824 ) (3,376 ) — (88,391 ) (88,543 )
Core deposit and other intangibles
(2,003 ) (2,279 ) (2,555 ) —
Core deposit and customer intangibles
(11,895 ) (14,042 )
Total tangible common equity
$ 171,108 $ 104,456 $ 106,518 $ 78,845 $ 472,043 $ 405,966
Tangible Assets

Total assets
$ 1,321,256 $ 1,105,841 $ 1,076,089 $ 684,502
Total Assets
$ 6,584,550 $ 5,990,460
Adjustments:

Goodwill
(6,824 ) (6,824 ) (3,376 ) — (88,391 ) (88,543 )
Core deposit and other intangibles
(2,003 ) (2,279 ) (2,555 ) —
Core deposit and customer intangibles
(11,895 ) (14,042 )
Total tangible assets
$ 1,312,429 $ 1,096,738 $ 1,070,158 $ 684,502 $ 6,484,264 $ 5,887,875
Common Equity to Total Assets
13.6 % 10.3 % 10.4 % 11.5 %
Common Equity to Total Assets
8.7 % 8.5 %
Tangible Common Equity to Tangible Assets
13.0 % 9.5 % 10.0 % 11.5 % 7.3 6.9

Critical Accounting ~~Policies~~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.

~~Investment Securities~~Acquired Loans
Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them until maturity. Securities to be held for indefinite periods of time are classified as available for sale and carried at fair value, with the unrealized holding gains and losses reported in other comprehensive income, net of tax. Management determines the appropriate classification of securities at the time of purchase.
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Interest income includes amortization of purchase premiums and discounts. Realized gains and losses are derived from the amortized cost of the security sold. Credit related declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses, with the remaining unrealized loss recognized as a component of other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of us to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
~~Loans and Allowance for Loan Losses~~
Loans, excluding certain purchased loans which have shown evidence of deterioration since origination as of the date of the acquisition, that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at the amount of unpaid principal, reduced by unearned income and an allowance for loan losses. Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Fees associated with the originating of loans and certain direct loan origination costs are netted, and the net amount is deferred and recognized over the life of the loan as an adjustment of yield.

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 ~~and, therefore, no corresponding allowance~~are accounted for loan losses is recorded for these loans at acquisition. Methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit impaired at acquisition are similar to originated loans; however, the estimatebased upon a determination of losses is based on the unpaid principal balance and then compared to any remaining unaccreted purchase discount. To the extent the calculated loss is greater than the remaining unaccreted discount, an allowance is recorded for such amount.
~~Certain acquired impaired loans, where there is evidence~~whether they were purchased with more-than insignificant amount of credit deterioration ~~since origination and it is probable~~ ~~we will be unable to collect all contractually required payments, are accounted for in accordance with FASB ASC 310-30~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~~~. The expected cash flows for each loan meeting this criteria are estimated to determine the excess of the contractually required principal and interest at acquisition as~~(“PCD” loans) or an insignificant amount that should not be accreted (nonaccretable difference). The expected cash flows for the purchased impaired credits approximated fair value as of the merger date and, as a result, no accretable yield was recognized at acquisition. A discount was recorded on these loans at acquisition to record them at their estimated fair values. As a result, the purchased impaired credits are excluded from the calculation of the allowance for loan losses as of the acquisition date. Under current accounting principles, if we determine that losses arose after the acquisition date, the additional losses will be reflected as a provision to the allowance for loan losses.
~~The accrual of interest on loans is discontinued when there is a clear indication that the borrower~~’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured in accordance with the terms of the loan agreement.
The allowance for loan losses is an estimated amount management believes is adequate to absorb inherent losses on existing loans that may be uncollectible based upon review and evaluation of the loan portfolio. Management’s periodic evaluation of the allowance is based on general economic conditions, the financial condition of borrowers, the value and liquidity of collateral, delinquency, prior loan loss experience, and the results of periodic reviews of the portfolio.
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The allowance for loan losses is comprised of two components. The first component, the general reserve, is determined in accordance with current authoritative accounting guidance that considers historical loss rates for the twelve quarter lookback period adjusted for qualitative factors based upon general economic conditions and other qualitative risk factors both internal and external to us. Such qualitative factors include current local economic conditions and trends including unemployment, changes in lending staff, policies and procedures, changes in credit concentrations, changes in the trends and severity of problem loans, and changes in trends in volume and terms of loans. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in our historical loss factors. For purposes of determining the general reserve, the loan portfolio, less cash secured loans, government guaranteed loans and impaired loans, is multiplied by our adjusted historical loss rate. The second component of the allowance for loan losses, the specific reserve, is determined in accordance with current authoritative accounting guidance based on probable losses on specific classified loans.
~~The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries).~~
~~Due to~~ our growth over the past several years, a portion of the loans in our portfolio and our lending relationships are of relatively recent origin. The new loan portfolios have limited delinquency and credit loss history and have not yet exhibited an observable loss trend. The credit quality of loans in these loan portfolios are impacted by delinquency status and debt service coverage generated by the borrowers’ business, and fluctuations in the value of real estate collateral. Management considers delinquency status to be the most meaningful indicator of the credit quality of one-to-four single family residential, home equity loans and lines of credit and other consumer loans. In general, loans do not begin to show signs of credit deterioration ~~or default until they have been outstanding for some period of time, a process we refer~~(“non-PCD” loans), in either case as compared to ~~as “seasoning”. As a result, a portfolio of older loans will usually behave more predictably than a portfolio of newer loans. Because~~origination. In either case, the majority of our portfolio is relatively new, the current level of delinquencies and defaults may not be representative of the level that will prevail when the portfolio becomes more seasoned, which may be higher than current levels. If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which would adversely affect our results of operations and financial condition.
Delinquency statistics are updated at least monthly. Internal risk ratings are considered the most meaningful indicator of credit quality for new commercial, construction, and commercial real estate loans. Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management~~’s estimates of loss factors used in determining the amount of the allowance for loan losses. Internal risk ratings are updated on a continuous basis.~~
~~Loans are considered impaired when, based on current information and events, it is probable~~ we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. If a loan is impaired, a specific valuation allowance is allocated, if necessary. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.
~~Our~~ policy requires measurement of the allowance for an impaired collateral dependent loan based on the fair value of the collateral. Other loan impairments are measured based on the present value of expected future cash flows or the loan’s observable market price. At December 31, 2017 and 2016, all significant impaired loans have been determined to be collateral dependent and the allowance for loss has been measured utilizingdifference between the estimated fair value of the ~~collateral.~~
~~From time~~acquired loan related to ~~time,~~ ~~we modify our loan agreement with a borrower. A modified loan~~non-credit deterioration is ~~considered a troubled debt restructuring when two conditions are met: (i)~~treated as an adjustment to the ~~borrower is experiencing financial difficulty~~contractual yield and ~~(ii) concessions are made by us that would not otherwise be considered for a borrower with similar credit risk characteristics. Modifications to loan terms may include a lower~~accreted into interest ~~rate, a reduction of principal, or a longer term to maturity. We review each troubled debt restructured loan and determine on a case by case basis if~~income over the loan is subject to impairment and the need for a specific allowance for loan loss allocation. An allowance for loan loss allocation is based on either the present value of estimated future cash flows or the estimated fair valueremaining life of the ~~underlying collateral.~~
We have certain lending policies and procedures in place that are designed to maximize loan income with an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis and makes changes as appropriate. Management receives frequent reports related to loan originations, quality, concentrations, delinquencies, non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geography.loan.

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~~Commercial loans are underwritten after evaluating and understanding the borrower~~’s ability to operate profitably and effectively. Underwriting standards are designed to determine whether the borrower possesses sound business ethics and practices and to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and include personal guarantees.
Real estate loans are also subject to underwriting standards and processes similar to commercial loans. These loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate. The repayment of real estate loans is generally largely dependent on the successful operation of the property securing the loans or the business conducted on the property securing the loan. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing our real estate portfolio are generally diverse in terms of type and geographic location, throughout the state of Louisiana and Texas. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.
We utilize methodical credit standards and analysis to supplement our policies and procedures in underwriting consumer loans. Our loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimize risk.

~~Emerging Growth Company~~Allowance for Credit Losses on Loans and Unfunded Commitments

The ~~JOBS Act permits~~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 ~~“emerging growth company”~~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 ~~take advantage~~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 ~~extended transition period to comply with new or revised accounting standards applicable to public companies. However, we have “opted out”~~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 ~~this provision. As a result, we will comply with new or revised accounting standards~~our estimated allowance for credit losses also incorporate the reserve for unfunded lending commitments. This reserve methodology is similar to the ~~same extent that compliance is required~~methodology for ~~non-emerging growth companies. This decision to opt out~~loans, however, an added estimate of the ~~extended transition period under~~expected use of unfunded credit commitments is included in the ~~JOBS Act~~estimate.
Overall, the allowance for credit losses is ~~irrevocable.~~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 by the Company 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.

~~The disclosure contemplated by Item 7A~~Reference is ~~not required because~~ ~~we are a smaller reporting company.~~
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~~Table~~made to the subheading entitled “Interest Rate Sensitivity and Market Risk” of ~~Contents~~
the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this report.

ITEM 8. Financial Statements and Supplementary ~~Data~~.Data.

CONTENTS

Annual Audited Financial Statements:

Report of Independent Registered Public Accounting Firm
82
77

Consolidated Balance Sheets
84
81

Consolidated Statements of Income
85
82

Consolidated Statements of Comprehensive Income
86
83

Consolidated Statements of Changes in Shareholders' Equity
87
84

Consolidated Statements of Cash Flows
8885 - 8986

Notes to Consolidated Financial Statements
9087 - ~~133~~127

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~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee
S~~hareholders of~~ Business First Bancshares, Inc. ~~and Subsidiaries~~
~~Baton Rouge, Louisiana~~

~~Opinions~~Opinion on the Consolidated Financial Statements ~~and Internal Control over Financial~~ ~~Reporting~~

We have audited the accompanying consolidated balance sheets of Business First Bancshares, Inc. ~~and Subsidiaries~~ (the ~~Company)~~“Company”) as of December 31, ~~201~~72023 and ~~2016, and~~2022, 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, ~~2017,~~2023, and the related notes (collectively referred to as the ~~financial statements)~~“financial statements”). ~~We have also audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in~~ ~~Internal Control-Integrated Framework (2013)~~ ~~issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).~~
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, ~~2017~~2023 and ~~2016,~~2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2017,~~2023, in conformity with accounting principles generally accepted in the United States of America. ~~Also~~
We also have audited, in ~~our opinion,~~accordance with the standards of the Public Company ~~maintained, in all material respects, effective~~Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, ~~2017,~~2023, based on criteria established in Internal ~~Control-Integrated~~Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(COSO).~~and our report dated March 1, 2024, expressed an unqualified opinion thereon.

Change in Accounting Principle
As discussed in Notes 1 and 7 to the consolidated 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

~~The Company’s management is responsible for these~~These financial statements ~~for maintaining effective internal control over financial reporting, and for its assessment~~are the responsibility of the ~~effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.~~Company’s management. Our responsibility is to express an opinion on ~~these~~the Company’s financial statements ~~and an opinion on the Company’s internal control over financial reporting~~ based on our audits.
We are a public accounting firm registered with the ~~Public Company Accounting Oversight Board (United States) (PCAOB)~~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 ~~conduct~~edconducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the ~~consolidated~~ financial statements are free of material misstatement, whether due to error or ~~fraud, and whether effective internal control over financial reporting was maintained in all material respects.~~fraud.
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Our audits ~~of the financial statements~~ included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures ~~included~~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. ~~Our~~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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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 $40.4 million as of December 31, 2023. 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, currently one year, 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 determination of the reasonable and supportable economic forecast and the use of the qualitative factor adjustments. 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:
o
Controls over the completeness and accuracy of data input into the model used to determine the allowance for loan losses, and
o
Controls over management’s review and approval of the allowance for loan losses, including management’s determination of a reasonable and supportable economic forecast and qualitative factor adjustments applied within the qualitative framework to address risks not already incorporated within the model.
●
We evaluated management’s determination of reasonable and supportable economic forecasts, including comparing the factors to independent sources, as well as involving our internal specialists in testing the application of forecasts in the model calculation.
●
We evaluated the reasonableness and adequacy of management’s qualitative factor adjustment framework (including substantively testing management’s identification of risks not already incorporated within the model), the application of qualitative factor adjustments within the framework, and the completeness and accuracy of data utilized in development of the qualitative factor adjustments.
●
We evaluated the mathematical accuracy of the allowance for loan losses, including the mathematical application of the reasonable and supportable economic forecasts and qualitative adjustments on the loans sharing risk characteristics grouped into pools.
/s/ FORVIS, LLP
We have served as the Company’s auditor since 2019.
Fort Worth, Texas
March 1, 2024
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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, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by 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, 2023 and 2022, and for each of the three years in the period ended December 31 2023, and our report dated March 1, 2024, expressed an unqualified opinion on those consolidated 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 on Internal Control over Financial Reporting. 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 ~~audits~~audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our ~~audits provide~~audit provides a reasonable basis for our ~~opinions.~~opinion.

~~Definition~~Definitions and Limitations of Internal Control ~~over~~over Financial Reporting

A ~~company~~’scompany’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 athe 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.
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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.
~~Respectfully submitted,~~

/s/ ~~Hannis T. Bourgeois,~~FORVIS, LLP

~~We have~~ ~~served as the Company’s auditor since 2006.~~Fort Worth, Texas

~~Baton Rouge, Louisiana~~
March ~~8, 2018~~1, 2024

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BUSINESS FIRST BANCSHARES,, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

		December 31,						December 31,
		2017			2016			2023			2022
ASSETS	ASSETS
Cash and Due from Banks		$	107,591		$	42,173		$	226,110		$	152,740
Federal Funds Sold			8,820			2,556			151,134			15,606
Securities Available for Sale, at Fair Values			179,148			198,342
Securities Available for Sale, at Fair Values (Amortized Cost of $963,978 at December 31, 2023 and $985,599 at December 31, 2022)									879,571			890,751
Mortgage Loans Held for Sale			201			180			835			304
Loans and Lease Receivable, Net of Allowance for Loan Losses of $8,765 in 2017 and $8,162 in 2016			966,519			802,789
Loans and Lease Receivable, Net of Allowance for Loan Losses of $40,414 and $38,178 at December 31, 2023 and 2022, respectively									4,952,371			4,567,998
Premises and Equipment, Net			8,780			9,281			69,480			63,177
Accrued Interest Receivable			4,110			3,384			29,916			25,666
Other Equity Securities			8,627			6,120			33,942			37,467
Other Real Estate Owned			227			1,187			1,685			1,372
Cash Value of Life Insurance			23,200			22,567			96,478			91,958
Deferred Taxes									27,323			31,194
Goodwill			6,824			6,824			88,391			88,543
Core Deposit Intangible			2,003			2,279
Core Deposit and Customer Intangible									11,895			14,042
Other Assets			5,206			8,159			15,419			9,642
Total Assets		$	1,321,256		$	1,105,841		$	6,584,550		$	5,990,460

LIABILITIES	LIABILITIES
Deposits:
Noninterest Bearing		$	264,646		$	223,705		$	1,299,090		$	1,549,381
Interest Bearing			790,887			709,090			3,949,700			3,270,964
Total Deposits			1,055,533			932,795			5,248,790			4,820,345
Federal Funds Purchased									-			14,057
Securities Sold Under Agreements to Repurchase			1,939			2,720			18,885			20,208
Short Term Borrowings			862			862
Long Term Borrowings			2,700			3,000
Bank Term Funding Program									300,000			-
Federal Home Loan Bank Borrowings			75,000			47,064			211,198			410,100
Subordinated Debt									99,990			110,749
Subordinated Debt - Trust Preferred Securities									5,000			5,000
Accrued Interest Payable			890			920			14,841			2,092
Other Liabilities			4,397			4,921			41,587			27,428
Total Liabilities			1,141,321			992,282			5,940,291			5,409,979

Commitments and Contingencies (See Notes 18, 20 and 23)
Commitments and Contingencies (See Notes 19 and 22)

SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY
Preferred Stock, No Par Value; 5,000,000 Shares Authorized			-			-
Common Stock, $1 Par Value; 50,000,000 Shares Authorized; 10,232,495 and 6,916,673 Shares Issued and Outstanding at December 31, 2017 and 2016, respectively			10,232			6,917
Preferred Stock, No Par Value; 5,000,000 Shares Authorized; 72,010 Shares ($1,000 Liquidation Preference) Issued and Outstanding at both December 31, 2023 and 2022									71,930			71,930
Common Stock, $1 Par Value; 50,000,000 Shares Authorized; 25,351,809 and 25,110,313 Shares Issued and Outstanding at December 31, 2023 and 2022, respectively									25,352			25,110
Additional Paid-in Capital			144,172			85,133			397,447			393,690
Retained Earnings			27,175			23,839			216,115			163,955
Accumulated Other Comprehensive Loss			(1,644	)		(2,330	)		(66,585	)		(74,204	)
Total Shareholders' Equity			179,935			113,559			644,259			580,481
Total Liabilities and Shareholders' Equity		$	1,321,256		$	1,105,841		$	6,584,550		$	5,990,460

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

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in ~~thousands)~~thousands, except per share data)

Years Ended December 31,

2017

2016

2015

Interest Income:

Interest and Fees on Loans
$ 47,516 $ 39,468 $ 35,244
Interest and Dividends on Securities
3,829 3,781 3,186
Interest on Federal Funds Sold and Due From Banks
256 169 187
Total Interest Income
51,601 43,418 38,617

Interest Expense:

Interest on Deposits
6,328 5,152 3,858
Interest on Borrowings
901 674 609
Total Interest Expense
7,229 5,826 4,467
Net Interest Income
44,372 37,592 34,150

Provision for Loan Losses
4,237 1,220 1,200
Net Interest Income after Provision for Loan Losses
40,135 36,372 32,950

Other Income:

Service Charges on Deposit Accounts
2,109 2,033 1,553
Gain (Loss) on Sales of Securities
31 232 (15 )
Other Income
3,478 3,156 1,642
Total Other Income
5,618 5,421 3,180

Other Expenses:

Salaries and Employee Benefits
21,482 19,471 16,145
Occupancy and Equipment Expense
4,820 4,574 3,941
Other Expenses
10,500 11,024 10,423
Total Other Expenses
36,802 35,069 30,509

Income Before Income Taxes
8,951 6,724 5,621

Provision for Income Taxes
4,103 1,613 1,525

Net Income
$ 4,848 $ 5,111 $ 4,096

Earnings Per Share:

Basic
$ 0.63 $ 0.73 $ 0.61
Diluted
$ 0.61 $ 0.70 $ 0.59

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

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~~BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES~~

~~CONSOL~~~~IDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(Dollars in thousands)~~

Years Ended December 31,

2017

2016

2015

Consolidated Net Income
$ 4,848 $ 5,111 $ 4,096

Other Comprehensive Income (Loss):

Unrealized Gain (Loss) on Investment Securities
1,419 (2,568 ) (206 )
Reclassification Adjustment for Gains (Loss) included in Net Income
31 232 (15 )
Income Tax Effect
(493 ) 795 75
Other Comprehensive Income (Loss)
957 (1,541 ) (146 )
Consolidated Comprehensive Income (Loss)
$ 5,805 $ 3,570 $ 3,950

	Years Ended December 31,
	2023			2022			2021
Interest Income:
Interest and Fees on Loans	$	323,327		$	218,032		$	156,791
Interest and Dividends on Non-taxable Securities		4,340			4,131			4,274
Interest and Dividends on Taxable Securities		15,785			12,372			9,246
Interest on Federal Funds Sold and Due From Banks		9,875			1,579			127
Total Interest Income		353,327			236,114			170,438
Interest Expense:
Interest on Deposits		106,908			24,413			12,183
Interest on Borrowings		31,290			12,124			4,371
Total Interest Expense		138,198			36,537			16,554
Net Interest Income		215,129			199,577			153,884
Provision for Credit Losses		4,483			10,886			8,047
Net Interest Income after Provision for Credit Losses		210,646			188,691			145,837
Other Income:
Service Charges on Deposit Accounts		9,704			8,272			6,813
Gain (Loss) on Sales of Securities		(2,565	)		(48	)		378
Gain on Sales of Loans		1,972			574			10,117
Other Income		27,531			20,512			18,474
Total Other Income		36,642			29,310			35,782
Other Expenses:
Salaries and Employee Benefits		90,611			85,222			65,825
Occupancy and Equipment Expense		20,859			19,367			15,750
Other Expenses		45,232			44,820			35,486
Total Other Expenses		156,702			149,409			117,061
Income Before Income Taxes		90,586			68,592			64,558
Provision for Income Taxes		19,543			14,337			12,422
Net Income		71,043			54,255			52,136
Preferred Stock Dividends		5,401			1,350			-
Net Income Available to Common Shareholders	$	65,642		$	52,905		$	52,136
Earnings Per Common Share:
Basic	$	2.62		$	2.34		$	2.54
Diluted	$	2.59		$	2.32		$	2.53

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

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~~BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF~~ ~~CHANGES IN S~~~~HARE~~~~HOLDERS’ EQUITY~~

~~(Dollars in thousands)~~

Accumulated

Additional

Other

Total

Common

Paid-In

Retained

Comprehensive

Shareholders'

Stock

Capital

Earnings

Income (Loss)

Equity

Balances at December 31, 2014
$ 5,315 $ 57,225 $ 16,948 $ (643 ) $ 78,845

Comprehensive Income:

Net Income
- - 4,096 - 4,096

Other Comprehensive Income (Loss)
- - - (146 ) (146 )

Merger Consideration - net
1,891 30,519 - - 32,410

Stock Based Compensation Cost
- 49 - - 49

Stock Repurchase
(170 ) (1,880 ) (755 ) - (2,805 )

Balances at December 31, 2015
7,036 85,913 20,289 (789 ) 112,449

Comprehensive Income:

Net Income
- - 5,111 - 5,111

Other Comprehensive Income (Loss)
- - - (1,541 ) (1,541 )

Cash Dividends Declared, $0.15 Per Share
- - (1,056 ) - (1,056 )

Stock Based Compensation Cost
- 456 - - 456

Reclass of Shares Issued
5 (5 ) - - -

Exercise of Stock Warrants
1 14 - - 15

Stock Repurchase
(125 ) (1,245 ) (505 ) - (1,875 )

Balances at December 31, 2016
6,917 85,133 23,839 (2,330 ) 113,559

Comprehensive Income:

Net Income
- - 4,848 - 4,848

Other Comprehensive Income
- - - 957 957

Reclassify Stranded Tax Effects
271 (271 ) -

Cash Dividends Declared, $0.23 Per Share
- - (1,792 ) - (1,792 )

Stock Issuance
3,299 59,156 - - 62,455

Stock Based Compensation Cost
18 (77 ) - - (59 )

Stock Repurchase
(2 ) (40 ) 9 - (33 )

Balances at December 31, 2017
$ 10,232 $ 144,172 $ 27,175 $ (1,644 ) $ 179,935

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

~~Table of Contents~~

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

	Years Ended December 31,
	2023			2022			2021
Consolidated Net Income	$	71,043		$	54,255		$	52,136

Other Comprehensive Income (Loss):
Unrealized Gain (Loss) on AFS Investment Securities		13,006			(93,418	)		(14,985	)
Unrealized Gain (Loss) on Share of Other Equity Investments		(782	)		874			(336	)
Reclassification Adjustment for Gains (Losses) on Sales of AFS
Investment Securities Included in Net Income		(2,565	)		(48	)		378
Income Tax Effect		(2,040	)		19,565			3,138
Other Comprehensive Income (Loss)		7,619			(73,027	)		(11,805	)
Consolidated Comprehensive Income (Loss)	$	78,662		$	(18,772	)	$	40,331

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

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except per share data)

												Accumulated
						Additional						Other			Total
	Preferred		Common			Paid-In			Retained			Comprehensive			Shareholders'
	Stock		Stock			Capital			Earnings			Income (Loss)			Equity

Balances at December 31, 2020	$	-	$	20,621		$	299,540		$	79,174		$	10,628		$	409,963
Comprehensive Income:
Net Income		-		-			-			52,136			-			52,136
Other Comprehensive Loss		-		-			-			-			(11,805	)		(11,805	)
Cash Dividends Declared, $0.46 Per Share		-		-			-			(9,436	)		-			(9,436	)
Stock Issuance		-		262			3,302			-			-			3,564
Stock Based Compensation Cost		-		97			2,764			-			-			2,861
Surrendered Shares of Options Exercised		-		(105	)		(2,887	)		-			-			(2,992	)
Stock Repurchase		-		(475	)		(10,448	)		-			-			(10,923	)
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

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

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Years Ended December 31,									Years Ended December 31,
	2017			2016			2015			2023			2022			2021
Cash Flows From Operating Activities:
Consolidated Net Income	$	4,848		$	5,111		$	4,096		$	71,043		$	54,255		$	52,136
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
Provision for Loan Losses		4,237			1,220			1,200
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses											4,483			10,886			8,047
Depreciation and Amortization		1,181			1,299			1,192			4,670			4,818			4,163
Amortization of Purchase Accounting Valuations		(4,529	)		(1,818	)		(2,332	)
Noncash Compensation (Income) Expense		(59	)		456			49
Net Accretion of Purchase Accounting Adjustments											(7,615	)		(7,949	)		(7,122	)
Stock Based Compensation Cost											3,999			3,696			2,861
Net Amortization of Securities		1,750			1,929			1,511			4,197			6,005			7,021
(Gain) Loss on Sales of Securities		(31	)		(232	)		15			2,565			48			(378	)
Noncash (Income) Loss on Other Equity Securities		(243	)		14			(10	)
(Gain) Loss on Sale of Premises and Equipment		-			(24	)		157
Gain on Sale Loans											(671	)		(398	)		(9,179	)
Income on Other Equity Securities											(3,045	)		(1,554	)		(2,399	)
(Gain) Loss on Sale of Other Real Estate Owned, Net of Writedowns		276			(72	)		(58	)		(214	)		92			1,404
Increase in Cash Value of Life Insurance		(633	)		(788	)		(637	)		(2,247	)		(1,931	)		(1,396	)
Provision (Credit) for Deferred Income Taxes		3,126			953			(74	)
Deferred Income Tax Expense (Benefit)											(2,052	)		(1,368	)		586
Gain on Sale of Branch											(945	)		-			(492	)
Changes in Assets and Liabilities:
Increase in Accrued Interest Receivable		(726	)		(561	)		(314	)
(Increase) Decrease in Accrued Interest Receivable											(4,250	)		(3,466	)		4,298
(Increase) Decrease in Other Assets		(675	)		659			(971	)		(1,683	)		6,075			(3,500	)
Increase (Decrease) in Accrued Interest Payable		(30	)		354			(76	)		12,749			519			(1,145	)
Decrease in Other Liabilities		(524	)		(350	)		(350	)
Increase (Decrease) in Other Liabilities											11,443			(151	)		1,538
Net Cash Provided by Operating Activities		7,968			8,150			3,398			92,427			69,577			56,443

Cash Flows From Investing Activities:
Purchases of Securities Available for Sale		(8,581	)		(45,935	)		(58,648	)		(131,038	)		(102,809	)		(528,059	)
Proceeds from Maturities / Sales of Securities Available for Sale		7,881			30,589			9,528			91,981			38,951			29,945
Proceeds from Paydowns of Securities Available for Sale		19,625			23,828			19,376			53,916			95,019			96,408
Net Cash Received in Merger		-			-			87,377
Net Cash Received (Paid) in Acquisition											-			163,460			(7,256	)
Net Cash Paid in Sale of Branch											(14,506	)		-			(13,727	)
Purchases of Other Equity Securities		(2,453	)		(866	)		(3,375	)		(15,573	)		(22,670	)		(4,438	)
Redemption of Other Equity Securities		189			82			1,912			21,361			10,327			2,575
Life Insurance Proceeds		-			560			-
Purchase of Life Insurance											(2,273	)		(18,000	)		(15,928	)
Proceeds from Death Benefit of Cash Value of Life Insurance											-			499			1,974
Proceeds from Sale of SBA PPP Loans											-			-			243,607
Net Increase in Loans		(164,419	)		(38,326	)		(70,443	)		(379,073	)		(1,070,354	)		(431,236	)
Proceeds from Sale of Premises and Equipment		-			68			-
Purchases of Premises and Equipment		(505	)		(1,390	)		(962	)
Net Purchases of Premises and Equipment											(11,648	)		(7,781	)		(3,971	)
Loss on Disposal of Premises and Equipment											-			717			4
Proceeds from Sales of Other Real Estate		1,084			1,659			2,697			1,240			682			7,640
Improvements to Other Real Estate		-			(102	)		-
Consideration Settlement to Former AGFC Shareholders		-			(3,448	)		(243	)
Net Increase in Federal Funds Sold		(6,264	)		(60	)		(1,339	)
Net (Increase) Decrease in Federal Funds Sold											(135,528	)		211,438			(52,892	)
Net Cash Used in Investing Activities		(153,443	)		(33,341	)		(14,120	)		(521,141	)		(700,521	)		(675,354	)

(CONTINUED)

Table of Contents

	Years Ended December 31,									Years Ended December 31,
	2017			2016			2015			2023			2022			2021
Cash Flows From Financing Activities:
Net Increase in Deposits		122,738			28,559			33,775			444,780			265,827			480,124
Net Increase (Decrease) in Securities Sold Under Agreements to Repurchase		(781	)		285			(1,841	)		(1,323	)		1,087			(2,704	)
Net Increase (Decrease) in Federal Funds Purchased											(14,057	)		14,057			-
Net Advances (Repayments) on Federal Home Loan Bank Borrowings		28,606			(1,349	)		(6,511	)		(198,902	)		327,203			39,022
Net Increase (Decrease) in Short Term Borrowings		-			(2,138	)		3,000
Net Proceeds (Repayments) from Long Term Borrowings		(300	)		3,000			-
Proceeds from Issuance of Common Stock		62,455			-			-
Net Proceeds on Bank Term Funding Program											300,000			-			-
Net Proceeds (Repayments) from Short Term Borrowings											-			(11	)		(5,000	)
Net Repayments from Long Term Borrowings											-			-			(6,000	)
Proceeds from Issuance of Subordinated Debt											-			-			52,500
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			-
Proceeds from Issuance of Common Stock, Net of Issuance Costs											-			48,492			3,564
Surrendered Shares of Options Exercised											-			(1,102	)		(2,992	)
Repurchase of Common Stock		(33	)		(863	)		(2,805	)		-			-			(10,923	)
Proceeds from Exercise of Stock Warrants		-			15			-
Payment of Dividends on Preferred Stock											(5,401	)		(1,350	)		-
Payment of Dividends on Common Stock		(1,792	)		(1,056	)		-			(12,655	)		(10,824	)		(9,436	)
Net Cash Provided by Financing Activities		210,893			26,453			25,618			502,084			715,309			538,155
Net Increase (Decrease) in Cash and Cash Equivalents											73,370			84,365			(80,756	)
Cash and Cash Equivalents at Beginning of Period											152,740			68,375			149,131
Cash and Cash Equivalents at End of Period										$	226,110		$	152,740		$	68,375

Net Increase in Cash and Cash Equivalents		65,418			1,262			14,896

Cash and Cash Equivalents at Beginning of Period		42,173			40,911			26,015

Cash and Cash Equivalents at End of Period	$	107,591		$	42,173		$	40,911

Supplemental Disclosures for Cash Flow Information:
Cash Payments for:
Interest on Deposits	$	6,351		$	4,779		$	3,813		$	104,811		$	23,846		$	13,249
Interest on Borrowings										$	20,638		$	11,953		$	4,450
Income Tax Payments										$	16,095		$	13,550		$	15,711

Interest on Borrowings	$	908		$	693		$	467

Income Tax Payments	$	1,800		$	1,016		$	2,513

Supplemental Schedule for Noncash Investing and Financing Activities:
Change in the Unrealized Gain (Loss) on Securities Available for Sale	$	1,450		$	(2,336	)	$	(221	)	$	10,441		$	(93,466	)	$	(14,607	)
Change in the Unrealized Gain (Loss) on Equity Securities										$	(782	)	$	874		$	(336	)
Change in Deferred Tax Effect on the Unrealized (Gain) Loss on Securities Available for Sale and Equity Securities										$	(2,040	)	$	19,565		$	3,138
Transfer of Loans to Other Real Estate										$	1,339		$	719		$	1,420
Acquisitions:
Fair Value of Tangible Assets Acquired										$	-		$	531,510		$	1,343
Other Intangible Assets Acquired											-			3,875			4,300
Liabilities Assumed											-			508,991			6
Net Identifiable Assets Acquired Over Liabilities Assumed										$	-		$	26,394		$	5,637

Change in Deferred Tax Effect on the Unrealized (Gain) Loss on Securities Available for Sale	$	(493	)	$	795		$	75

Transfer of Loans to Other Real Estate	$	566		$	648		$	1,033

Transfer of Other Real Estate to Premises and Equipment	$	175		$	-		$	-
Subordinated Debt Issued as Part of Consideration of Smith Shellnut Wilson										$	-		$	-		$	3,927

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

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Note 1 –Nature of Operations –Summary of Significant Accounting Policies–

The accounting principles followed by Business First Bancshares, Inc. ~~(the Company or Bancshares)~~ and its wholly-owned subsidiary, ~~Business First Bank~~b1BANK (the ~~Bank)~~“Bank”), and ~~its~~the Bank’s wholly-owned ~~subsidiary,~~subsidiaries, Business First Insurance, LLC and Smith Shellnut Wilson, LLC (“SSW”) 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, ~~Business First Bank (the Bank),~~b1BANK, and the Bank’s wholly-owned ~~subsidiary,~~subsidiaries, Business First Insurance, LLC and SSW (collectively, the ~~Company)~~“Company”). All significant intercompany balances and transactions have been eliminated.

Nature of Operations

The Bank operates out of ~~branch locations,~~full-service banking centers and loan production offices ~~and~~ ~~one~~ ~~wealth solutions office~~ 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.

~~After~~ On March 22, 2021, the ~~close~~Company, through b1BANK, entered into a definitive agreement to acquire SSW, a registered investment advisor with approximately $3.5 billion in assets under management, specializing in managing investment portfolios for corporations, foundations and individuals. The acquisition of ~~business~~SSW was consummated onApril 1, 2021. At March 31, ~~2015,~~2021, the Company merged with American Gateway Financial Corporation (“AGFC”), parent bank holding company for American Gateway Bank, pursuant to which the operations of AGFC were merged with the Company. Prior to the merger, AGFC was a full service bank with 10 ~~branches located~~SSW reported $3.6 million in ~~the Baton Rouge metro region. Total~~total assets ~~acquired were~~ ~~$371.5~~and $2.3 million ~~which included loans of~~ ~~$143.2~~ ~~million and investment securities of~~ ~~$108.4~~ ~~million, and deposits of~~ ~~$283.3~~ ~~million were assumed~~ in ~~the transaction. Shareholders of AGFC received merger consideration of~~ ~~$10~~ ~~in cash and~~ ~~11.88~~ ~~shares of Business First Bancshares, Inc. common stock in exchange for each share of AGFC common stock, representing a~~ total ~~consideration of~~ ~~$47.9~~ ~~million.~~liabilities.

~~Estimates~~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.

Estimates

Preparation of financial statements in conformity with U.S. GAAP ~~requires~~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. ~~Estimates are used in~~Critical accounting ~~for, among other items, the allowance for loan losses, useful lives for depreciation and amortization, fair value of financial instruments, deferred taxes, and contingencies. Estimates~~estimates that are particularly susceptible to significant change for the Company include the determination of the acquired loans and allowance for ~~loan~~credit losses and purchase accounting adjustments (other than loans). Other estimates include goodwill, fair value of financial instruments, investment securities and the assessment of ~~deferred tax assets and liabilities, and therefore are critical accounting policies.~~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 in ~~our~~the Company’s markets, and changes in applicable banking regulations. Actual results may ultimately differ from ~~estimates, although management does~~ ~~not~~ ~~generally believe such differences~~ ~~would materially affect the consolidated financial statements in any individual reporting period presented.~~

~~Table of Contents~~

~~BUSINESS FIRST BANCSHARES, INC.~~ ~~AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~estimates.

The ~~Bank~~’sBank’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.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Acquisition Accounting

Acquisitions are accounted for u~~nder~~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. ~~Fair~~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~~

Securities

Management ~~determin~~esdetermines the appropriate classification of debt securities (held to maturity, available for sale or trading) at the time of purchase and re-evaluates this classification ~~periodically.~~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, ~~2017~~2023 and ~~2016.~~2022.

~~Table of Contents~~

~~BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

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 asas trading at December 31, ~~2017~~2023 and ~~2016.~~2022.

Other Equity Securities

The Bank has invested in Federal Home Loan Bank ~~(FHLB)~~(“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 ~~amoun~~tamount 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~~

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 ~~commercial and individual~~ loans is accrued daily b~~ased~~based on the principal 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 ~~intere~~stinterest is reversed ~~to income or charged to the allowance for loan losses.~~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.

~~The~~Prior to January 1, 2023, the Bank ~~classifies~~classified loans as impaired when it iswas probable the Bank ~~will~~would be unable to collect the scheduled payments of principal andand interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or the loan’s observable market price, or based on the fair value of the collateral if the loan is collateral dependent.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Acquired Loans

Purchased loans acquired in a business combination are initially recorded at their estimated fair value as of the acquisition ~~date and there is~~ no ~~carryover~~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 ~~seller’s allowance for~~acquired loan ~~losses.~~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.

~~The~~Effective January 1, 2023, the Company ~~accounts~~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 ~~in accordance~~ ~~with~~were accounted for according to ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality (“(“ASC 310-30”). ~~An acquired loan is considered impaired when there is evidence of credit deterioration since origination and it is probable at~~Under this method, adjustments to cash flows from the original acquisition date ~~of acquisition that the Company will be unable to collect all contractually required payments. Purchased credit impaired loans are~~estimates were accounted for ~~individually. The Company estimates the amount and timing of undiscounted expected cash flows~~as adjustments to accretion for each loan, and the expected cash flows in excess of fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over the expected cash flows is ~~not~~ recorded (nonaccretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the expected cash flows decrease, a provision for loan losses and the establishment of an allowance for loan losses with respect to the acquired impaired loan is recorded. If the expected cash flows increase, it is recognized as part of future interest income.these loans.

~~The performing loans are accounted~~

Allowance for ~~under ASC~~ ~~310~~-~~20,~~~~Nonrefundable Fees and Other Costs (“ASC~~ ~~310~~-~~20”~~)~~, with the related discount being adjusted for over the life of the loan and recognized as interest income.~~Credit Losses

~~Table of Contents~~

~~BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

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 ~~loan~~credit losses is ~~maintained at a level which, in management’s judgment, is adequate~~increased through provisions charged to ~~absorb credit losses inherent in~~earnings and reduced by net charge-offs, inclusive of recoveries. Management evaluates the ~~loan portfolio. The allowance for loan losses is based upon management’s review and evaluation of the loan portfolio. Factors considered in the establishment~~appropriateness of the allowance for ~~loan~~credit losses ~~include management’s evaluation~~on a quarterly basis. The allowance considers expected losses for the remaining lives of ~~specific loans;~~ the ~~level~~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 classified loans; historical loss experience; results of examinations by regulatory agencies; an internal asset review process; expectations of future economic conditions and their impact on particular borrowers; and other judgmental factors. Allowances for impaired loans are generally determined based on collateral values or the ~~present value of estimated cash flows. Management obtains independent appraisals for significant collateral in determining collateral values. Although management uses available information~~current loan portfolio, to ~~recognize~~estimate losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

~~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 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 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.”

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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, 2023, was negligible and therefore, no ~~corresponding~~ allowance for ~~loan losses i~~scredit loss was recorded ~~for these loans at acquisition. Methods utilized~~related to ~~estimate any subsequently required allowance for loan losses for acquired loans~~ ~~not~~ deemed credit-impaired at acquisition are similar to originated loans; however, the estimate of loss is based on the unpaid principal balance and then compared to any remaining unaccreted purchase discount. To the extent the calculated loss is greater than the remaining unaccreted discount, an allowance is recorded for such difference.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.

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 ~~loan losses is~~credit losses on accrued interest for loans held-for-investment or debt securities based on ~~estimates of potential future losses, and ultimate losses~~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 ~~may~~ no~~vary from the current estimates. These estimates are reviewed periodically and as adjustments~~ later than 90 days after a loan has become ~~necessary, the effect~~past due, although certain loans accrue interest after 90 days based on management’s evaluation of the ~~change in estimate~~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 ~~charged to operating expenses~~included within Accrued Interest Receivable in the period incurred. All losses are charged to the allowance for loan losses when the loss actually occurs or when management believes that the collectability of the principal is unlikely. Recoveries are credited to the allowance at the time of recovery.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 ~~and accelerated~~ ~~methods for tax 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.~~capitalized and expensed over their estimated depreciable lives.

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~~(Dollars in thousands)~~

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. ~~There was~~ no ~~carrying amount of residential real estate included in other real estate owned at~~ ~~December 31, 2017~~ ~~and~~ ~~2016.~~

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 su~~bject~~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. ~~Core~~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.~~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 ~~core deposit~~these intangibles on a ~~straight line~~straight-line basis over their estimated useful ~~life of~~ 10 ~~years.~~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 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~~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~~’sentity’s income adjusted for permanent differences.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

The Company evaluates all significant tax positions as required by accounting principles generally accepted in the United States of America. As of December 31, ~~2017,~~2023 and 2022,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 ~~the state of Louisiana.~~applicable states. With few exceptions, the Company is no longer subject to federal and state income tax examinations by tax authorities for years before ~~2014.~~2020. Any interest and penalties assessed by income taxing authorities are not significant, and are included in other expenses in these financial statements, as applicable.

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Stock Based Compensation

As described in Note ~~15,~~16, the Company has issued ~~stock warrants,~~ stock options, stock grants and restricted stock awards which incorporate ~~stock based~~stock-based compensation. The Company has adopted a fair ~~value based~~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 ~~required~~requisite service period, which is usually the vesting period. Forfeitures are recognized as they occur.

Statements of Cash Flows

For purposes of ~~reporting~~reporting cash flows, cash and cash equivalents include cash on hand and ~~deposits in other financial institutions.~~due from banks.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. ~~Although~~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~~

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, ~~2017,~~2023, ~~2016~~2022 and ~~2015,~~2021, the Company expensed costs of ~~$762,000,~~~~$849,000~~$4.6 million, $3.9 million and ~~$437,000,~~$2.7 million, respectively.

~~Recent Accounting Pronouncements~~

In ~~May 2014,~~ ~~the FASB issued ASU~~ ~~2014~~-~~09,~~Recognition of Revenue from Contracts with Customers ~~(Topic~~

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 ~~606~~not)~~. This ASU implements~~ extend beyond a ~~common revenue standard~~reporting period. Fees, which are typically billed and ~~clarifies~~collected after services are rendered, are readily determinable and allocated individually to each service. In the ~~principles used for recognizing revenue. The amendments~~normal course of business, the ASU clarify that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This guidanceCompany does not ~~apply to revenue associated with financial instruments, including loans and securities that are accounted~~generally grant refunds for ~~under other GAAP, which comprises a significant portion of our revenue stream. The amendments of~~services provided. As such, the ~~ASU will be effective for the~~ Company ~~beginning~~ ~~January 1, 2018.~~ ~~The Company will adopt the amendments beginning~~ ~~January 1, 2018~~ ~~and~~ does not ~~expect a significant impact to the Company’s consolidated financial statements.~~

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~~(Dollars in thousands)~~establish provisions for estimated returns.

Accounting Standards Adopted in ~~January 2016,~~ 2023~~the FASB issued ASU~~ ~~No.~~~~2016~~-~~01,~~~~Financial Instruments - Overall (Subtopic~~ ~~825~~-10~~), Recognition and Measurement of Financial Assets and Financial Liabilities.~~ ~~The provisions of the update require equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity~~ ~~may~~ ~~choose to measure equity investments that do~~ ~~not~~ have readily determinable fair values at cost minus impairment. The update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. It also eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are ~~not~~ public business entities, and eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the ~~balance sheet. ASU~~ ~~No.~~~~2016~~-01 requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. It also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The update requires separate presentation of financial assets and financial liabilities by category and form on the balance sheet or the accompanying notes to the financial statements. In addition, the update clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, the amendments in the update are effective for fiscal years beginning after ~~December 15, 2017,~~ ~~including interim periods. The adoption of this ASU is~~ ~~not~~ ~~expected to have a material impact on the Company’s consolidated financial statements. ASU~~ ~~No.~~~~2016~~-01 ~~will be effective for the Company on~~

Effective January 1, ~~2018.~~

In ~~February 2016,~~2023, the ~~FASB issued ASU~~ ~~2016~~-~~02,~~~~Leases (Topic~~ ~~842~~~~), Conforming Amendments Related to Leases~~. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. The ASU is effective for the Company on ~~January 1, 2019.~~ ~~We expect recorded assets and liabilities to increase upon adoption of the standard as it relates to operating leases in which the Company is the lessee. See Note~~ 20 ~~for a summary of minimum future lease payments under operating leases as of~~ ~~December 31, 2017.~~

In ~~March 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~09,~~~~Compensation - Stock Compensation (Topic~~ ~~718~~~~), Improvements to Employee Share-Based Payment Accounting~~. The ASU amends the codification to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification in the statement of cash flows. The amendments also allow an accounting policy election to account for forfeitures as they occur. This ASU is effective for annual and interim periods beginning after ~~December 15, 2016,~~ ~~with early adoption permitted. The Company elected an accounting policy to account for forfeitures as they occur upon adoption of this ASU. The adoption of this ASU did~~ ~~not~~ ~~have a material effect on the Company’s consolidated financial statements.~~

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~~(Dollars in thousands)~~

In ~~June 2016,~~ ~~the FASB issued~~adopted ASU 2016-13, Financial ~~Instruments~~ Instrument – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments~~. The amendments introduce an~~related to the impairment of financial instruments. This guidance, commonly referred to as Current Expected Credit Loss (“CECL”), changes impairment recognition to a model that is based on ~~current~~ expected ~~credit~~ losses ~~(“CECL”),~~ rather than incurred losses, to estimate credit losses on certain types of financial instruments (ex. loans and held to maturity securities), including certain off-balance sheet financial instruments (ex. commitments to extend credit and standby letters of credit that are ~~not~~ unconditionally cancellable). The “CECL” should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics ~~may~~ ~~be grouped together when estimating the “CECL”.~~losses. The allowance for credit losses is established for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial estimate ofcurrent expected credit losses on the Company’s loan portfolio, including unfunded credit commitments. Prior to January 1, 2023, the allowance for credit losses was established based on an incurred loss ~~would~~model. Upon the adoption of CECL, certain loan classification and segmentation categories were changed to align with the requirements of the standard and more effectively model the CECL estimate. The updated CECL segmentation is reflected in the disclosures beginning January 1, 2023, and prior period classifications have been adjusted to reflect CECL segmentations. Results from periods prior to January 1, 2023, are presented using the previously applicable GAAP.

Upon adoption of the guidance on January 1, 2023, the Company recognized an $827,000 reduction to retained earnings, after recording the related deferred tax asset adjustment at our effective tax rate. The Company and b1BANK are subject to various regulatory capital requirements. Although the federal banking regulatory agencies have provided relief for an initial capital decrease at adoption of the CECL standard, the Company did not opt into the relief as the impact of adoption was not significant to the Company’s regulatory capital.

The adoption of this guidance did not have a material impact on the Company’s available-for-sale securities as most of this portfolio consists of U.S. treasury and agency securities as well as highly rated residential agency mortgage-backed, corporate, and municipal securities. However, any subsequent estimated credit losses are required to be recognized through an allowance for credit losses associated with ~~an offset (i.e. increase)~~the applicable securities.

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The Company also adopted ASU 2022-02,Financial Instruments – Credit Losses (Topic 326),Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023. The standard modifies the criteria for identification of troubled debt restructurings as well as enhancing disclosure requirements. Additionally, the guidance requires vintage table disclosures and presentation of gross write-offs during the current period by year of origination for financing receivables within scope of the standard. The implementation of the standard did not have a material impact of the identification of troubled debt restructurings and the vintage and charge-off disclosures have been presented in the footnotes below.

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 ~~purchase price at acquisition. Only subsequent changes~~rate reconciliation for federal, state and foreign income taxes. In addition, the updates also require more details about reconciling items in the ~~allowance~~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 ~~credit losses are recorded as~~annual periods and to disaggregate the information by jurisdiction based on a ~~credit loss expense for these assets. The~~quantitative threshold. ASU also amends the current available for sale security impairment model for debt securities whereby credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. This ASU2023-09 is effective for the Company onstarting January 1, ~~2020.~~2025, ~~The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the~~ ~~first~~ ~~reporting period in which the guidance~~though early adoption is ~~effective. The Company is currently planning for the implementation of this ASU. While we are currently unable to reasonably estimate the impact of adopting~~permitted. ASU ~~2016~~2023-~~13,~~09 we expect that the impact of adoption could be significantly influenced by the composition, characteristics and quality of our loan portfolio as well as the prevailing economic conditions and forecasts as of the adoption date. As part of our evaluation process, we have established a working group that includes individuals from various functional areas to assess processes, portfolio segregation, systems requirements and needed resources to implement this new accounting standard.

In ~~January 2017,~~ ~~the FASB issued ASU~~ ~~2017~~-~~01,~~~~Business Combinations (Topic~~ ~~805~~~~): Clarifying the Definition of a Business,~~ which introduces amendments intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments will be applied prospectively and are effective for annual reporting periods beginning after ~~January 1, 2018,~~ ~~including interim reporting periods within those periods. The adoption of this ASU~~ is not expected to have a significant impact on ~~the Company’s consolidated~~our financial statements.

On ~~January 26, 2017,~~ ~~the FASB issued ASU~~ ~~2017~~-~~04,~~~~Intangibles – Goodwill and Other (Topic~~ ~~350~~) ~~which simplifies the accounting for goodwill impairment. The guidance in this ASU removes Step~~ 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. The goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, ~~not~~ to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same ~~one~~~~-step impairment test will be applied to goodwill at all reporting units, even those with~~ ~~zero~~ ~~or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with~~ ~~zero~~ ~~or negative carrying amounts. The revised guidance will be applied prospectively, and is effective for the Company on~~ ~~January 1, 2020.~~ ~~Early adoption is permitted for any impairment tests performed after~~ ~~January 1, 2017.~~ ~~The adoption of this ASU is~~ ~~not~~ ~~expected to have a material effect on the Company’s consolidated financial statements.~~

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~~(Dollars in thousands)~~

In ~~May 2017,~~ ~~the FASB issued ASU~~ ~~2017~~-~~09,~~~~Compensation – Stock Compensation (Topic~~ ~~718~~~~): Scope of Modification Accounting~~ ~~which clarifies when changes to terms or conditions of a share-based payment award must be accounted for as a modification. Under the new guidance, an entity will~~ ~~not~~ apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the fair value of the award, (ii) the vesting conditions of the award, and (iii) the classification of the award as either an equity or liability instrument. ASU ~~2017~~-09 ~~will be effective for the Company beginning~~ ~~January 1, 2018.~~ ~~The guidance requires companies to apply the requirements prospectively to awards modified on or after the adoption date. The adoption of this ASU is~~ ~~not~~ ~~expected to have a significant impact on the Company’s consolidated financial statements.~~

On ~~February 14, 2018,~~ ~~the FASB issued Accounting Standards Update (ASU)~~ ~~2018~~-~~02,~~~~Income Statement—Reporting Comprehensive Income (Topic~~ ~~220~~~~): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~~~. The amendments in this ASU address a narrow-scope financial reporting issue related to the tax effects that~~ ~~may~~ ~~become stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (TCJA). Under the amendments in ASU~~ ~~2018~~-~~02,~~ ~~an entity~~ ~~may~~ ~~elect to reclassify the income tax effects of the TCJA on items within accumulated other comprehensive income to retained earnings.~~ ~~The Company has adopted this ASU effective~~ ~~December 31, 2017.~~ Under the provisions of this ASU, the Company has reclassified the stranded income tax effects associated with TCJA from accumulated other comprehensive income to retained earnings. The stranded income tax effects were associated with unrealized losses on securities available for sale at ~~December 31, 2017.~~

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 ~~2017.~~2023.

Specifically for the adoption of CECL, prior to January 1, 2023, the allowance for credit losses was established based on an incurred loss model. Upon adoption of ASU 2016-13 (i.e. ASC 326), certain loan classification and segmentation categories were changed to align with the requirements of the standard and more effectively model the CECL estimate. The updated CECL segmentation is reflected in the disclosures beginning January 1, 2023. Results from periods prior to January 1, 2023 are presented using the previously applicable GAAP.

These reclassifications have no material effect on previously reported shareholders’ equity or net income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~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.

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

The Company has recorded approximately $236,000 and $5.2 million of acquisition-related costs within merger and conversion-related expenses and salaries and benefits for the years ended December 31, 2023 and 2022, 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.

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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.

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 were impractical to include due to the cost versus benefit of including such disclosures.

Smith Shellnut Wilson, LLC

On April 1, 2021, the Company consummated the acquisition, through b1BANK, of SSW, headquartered in Ridgeland, Mississippi, pursuant to the terms of the definitive agreement dated as of March 22, 2021. Pursuant to the terms of the agreement, upon consummation of the acquisition, the Company paid $7.3 million in cash and issued $3.9 million in subordinated debt, which is further described in Note 11, to the former owners of SSW. At March 31, 2021, SSW reported $3.6 million in total assets and $2.3 million in total liabilities. As part of the acquisition, the Company recorded $6.5 million in goodwill and $4.3 million in customer intangibles to be amortized over a 10 year period.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 43– – Earnings per Common Share–

Basic earnings per common share ~~(EPS)~~(“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 ~~warrants~~options and unvested restricted stock ~~options.~~awards (“RSAs”), excluding any that were antidilutive. In addition, nonvested share-based payment awards that 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,						Years Ended December 31,
	2017		2016		2015		2023		2022		2021
	(Dollars in thousands, except per share data)						(Dollars in thousands, except per share data)
Numerator:
Net Income							$	71,043	$	54,255	$	52,136
Less: Preferred Stock Dividends								5,401		1,350		-
Net Income Available to Common Shares	$	4,848	$	5,111	$	4,096	$	65,642	$	52,905	$	52,136

Denominator:
Weighted Average Common Shares Outstanding		7,658,137		7,033,476		6,694,075		25,079,106		22,633,478		20,502,249
Dilutive Effect of Stock Options and Warrants		345,822		281,607		288,981
Dilutive Effect of Stock Options and Restricted Stock Awards								217,094		184,015		132,032
Weighted Average Dilutive Common Shares		8,003,959		7,315,083		6,983,056		25,296,200		22,817,493		20,634,281

Basic Earnings Per Common Share From Net Income Available to Common Shares	$	0.63	$	0.73	$	0.61	$	2.62	$	2.34	$	2.54

Diluted Earnings Per Common Share From Net Income Available to Common Shares	$	0.61	$	0.70	$	0.59	$	2.59	$	2.32	$	2.53

Note 5–4 – Cash and Due From Bank –

The Bank is required to maintain funds in cash or on deposit with the Federal Reserve Bank. ~~There were~~ The Bank had no required reserves atas of December 31, ~~2017~~2023 and ~~2016.~~2022.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Note 65– – Securities –

The amortized cost and fair values of securities available for sale as of December 31, ~~2017~~2023 and ~~2016~~2022 are summarized as follows:

	December 31, 2017								December 31, 2023
	(Dollars in thousands)								(Dollars in thousands)
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury Securities									$	17,690	$	-	$	1,451	$	16,239
U.S. Government Agencies	$	9,008	$	13	$	68	$	8,953		10,258		-		848		9,410
Corporate Securities		13,074		59		92		13,041		49,609		-		5,770		43,839
Mortgage-Backed Securities		81,763		2		1,824		79,941		555,148		976		49,814		506,310
Municipal Securities		76,553		353		427		76,479		331,273		298		27,798		303,773
Other Securities		831		-		97		734
Total Securities Available for Sale	$	181,229	$	427	$	2,508	$	179,148	$	963,978	$	1,274	$	85,681	$	879,571

	December 31, 2022
	(Dollars in thousands)
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Treasury Securities	$	32,783	$	-	$	2,668	$	30,115
U.S. Government Agencies		50,288		-		2,916		47,372
Corporate Securities		48,475		25		2,496		46,004
Mortgage-Backed Securities		506,671		267		55,213		451,725
Municipal Securities		347,382		11		31,858		315,535
Total Securities Available for Sale	$	985,599	$	303	$	95,151	$	890,751

December 31, 2016

(Dollars in thousands)

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

U.S. Government Agencies
$ 7,580 $ 36 $ 50 $ 7,566
Corporate Securities
11,148 31 52 11,127
Mortgage-Backed Securities
101,766 20 2,414 99,372
Municipal Securities
80,559 210 1,133 79,636
Other Securities
820 - 179 641
Total Securities Available for Sale
$ 201,873 $ 297 $ 3,828 $ 198,342

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following ~~table is~~tables present a summary of securities with gross unrealized losses and fair values at December 31, ~~2017~~2023 and ~~2016,~~2022, 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 ~~a temporary impairment~~non-credit related.

	December 31, 2023
	Less Than 12 Months				12 Months or Greater				Total
	(Dollars in thousands)
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		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

	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	(Dollars in thousands)
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury Securities	$	9,702	$	374	$	20,413	$	2,294	$	30,115	$	2,668
U.S. Government Agencies		24,405		595		22,967		2,321		47,372		2,916
Corporate Securities		19,564		1,359		6,385		1,137		25,949		2,496
Mortgage-Backed Securities		115,692		7,473		324,043		47,740		439,735		55,213
Municipal Securities		143,035		10,206		131,944		21,652		274,979		31,858
Total Securities Available for Sale	$	312,398	$	20,007	$	505,752	$	75,144	$	818,150	$	95,151

As of December 31,2023,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.~~securities are impaired due to credit quality. This determination is based on the Company’s analysis of the underlying risk characteristics including credit ratings, 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.

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~~NOTES TO~~ ~~CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

December 31, 2017

Less Than 12 Months

12 Months or Greater

Total

(Dollars in thousands)

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

U.S. Government Agencies
$ 4,136 $ 56 $ 2,004 $ 12 $ 6,140 $ 68
Corporate Securities
4,448 69 2,007 23 6,455 92
Mortgage-Backed Securities
8,320 71 71,182 1,753 79,502 1,824
Municipal Securities
25,798 168 11,927 259 37,725 427
Other Securities
- - 734 97 734 97
Total Securities Available for Sale
$ 42,702 $ 364 $ 87,854 $ 2,144 $ 130,556 $ 2,508

December 31, 2016

Less Than 12 Months

12 Months or Greater

Total

(Dollars in thousands)

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

U.S. Government Agencies
$ 4,535 $ 50 $ - $ - $ 4,535 $ 50
Corporate Securities
2,010 31 4,515 21 6,525 52
Mortgage-Backed Securities
86,091 1,974 9,885 440 95,976 2,414
Municipal Securities
54,533 1,128 207 5 54,740 1,133
Other Securities
- - 641 179 641 179
Total Securities Available for Sale
$ 147,169 $ 3,183 $ 15,248 $ 645 $ 162,417 $ 3,828

~~Management evaluates~~For the period ended December 31, 2022, management evaluated securities for other than temporary ~~impairment when economic and market conditions warrant such evaluations.~~impairment. Consideration iswas given to the extent and length of time the fair value ~~has~~had been below cost, the reasons for the decline in value, and the Company’s intent to sell a security or whether it iswas more likely than not that the Company ~~will~~would be required to sell the security before the recovery of its amortized cost. The Company ~~developed~~utilized a process to identify securities that could potentially have a credit impairment that iswas other than temporary. ~~This~~The process ~~involves~~involved evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. ~~When the~~The Company ~~determines that a security is deemed to be~~determined no other than ~~temporarily impaired, an~~temporary impairment ~~loss is recognized.~~existed at December 31, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

The amortized cost and fair values of ~~securities~~securities available for sale as of December 31, ~~2017~~2023 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		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in thousands)				(Dollars in thousands)
Less Than One Year	$	8,671	$	8,667	$	17,287	$	17,126
One to Five Years		48,041		47,986		181,791		171,117
Over Five to Ten Years		71,636		70,463		384,160		349,660
Over Ten Years		52,881		52,032		380,740		341,668
Total Securities Available for Sale	$	181,229	$	179,148	$	963,978	$	879,571

Securities available for sale with a fair value of $~~103.2~~$629.7 million and ~~$86.0~~$482.7 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law as of December 31, ~~2017~~2023 and ~~2016.~~2022.

At December 31, 2023 and 2022, accrued interest receivable on securities was $4.7 million and $4.4 million, respectively, and is included within accrued interest receivable on the consolidated balance sheets.

There were ~~$31,000,~~~~$260,000~~$9,000 and ~~$3,000~~$593,000 realized gross gains from sales or redemptions of securities for the years ended December 31, ~~2017,~~2022 ~~2016~~and ~~2015,~~2021, ~~respectively.~~ respectively, and none for the year ended December 31, 2023. There were ~~$28,000~~$2.6 million, $57,000 and ~~$18,000~~$215,000 realized gross losses from sales or redemptions of securities for the years ended December 31, ~~2016~~2023, 2022and ~~2015,~~2021, ~~respectively,~~respectively.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Equity Securities and no ~~realized gross losses from sales or redemptions of securities for the year ended~~ ~~December 31, 2017.~~VIEs

The ~~Bank~~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 ~~$4.0~~$14.8 million and ~~$3.6~~$19.7 million, respectively, at December 31, ~~2017~~2023 and ~~2016.~~2022. The Federal Home Loan Bank stock is pledged to secure advances from the Federal Home Loan Bank of Dallas at both December 31, ~~2017~~2023 and ~~2016.~~2022. The ~~Bank~~Company also has investments of ~~$100,000~~ ~~and~~ ~~$100,000~~$302,000 in ~~The Independent Bankers Bank,~~ ~~$1.8~~ ~~million and~~ ~~$1.6~~ ~~million in McLarty Capital Partners SBIC, L.P.,~~ ~~$654,000~~ ~~and~~ ~~$348,000~~ ~~in Bluehenge Capital Secured Debt SBIC, L.P.,~~ ~~$226,000~~ ~~and~~ ~~$234,000~~TIB National Association, $562,000 in Bankers Insurance, LLC, and ~~$252,000~~ ~~and~~ ~~$252,000~~$2.2 million in First National ~~Bankers~~Banker’s Bank at both December 31, 2023 and 2022. The Company also had an investment in Senior Housing Crime Prevention Foundation stock of $501,000 at December 31, ~~2017~~2022. ~~and~~ ~~2016,~~ ~~respectively. At~~ ~~December 31, 2017,~~ ~~the Bank also had a~~ ~~$1.6~~ ~~million investment in McLarty Capital Partners SBIC II, L.P., and a~~ ~~$13,000~~ ~~investment in New Louisiana Angel Fund~~ 2, ~~LLC.~~ 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.

Small Business Investment Companies (“SBIC”) and financial technology (“Fintech”) funds at December 31, 2023 and 2022 are summarized below.

	December 31,
	2023		2022
	(Dollars in thousands)

McLarty Capital Partners SBIC, L.P.	$	457	$	878
McLarty Capital Partners SBIC II, L.P.		2,520		2,437
Firmament Capital Partners SBIC III, L.P.		1,870		1,787
Firmament Capital Partners SBIC IV, L.P.		493		-
Bluehenge Capital Secured Debt SBIC, L.P.		3,220		3,934
Bluehenge Capital Secured Debt SBIC II, L.P.		1,146		296
New Louisiana Agnel Fund 2, LLC		49		49
Pharos Capital Partners IV-A, L.P.		457		356
Valesco Fund II, LP		1,227		1,147
Valesco Fund III, LP		37		-
GP Capital Partners, LP		624		277
BankTech Ventures, LP		284		77
Jam Fintop BankTech, LP		531		340
Ledyard Capital Managers, LLC		769		928
Mendon Ventures Banktech Fund I, LP		1,308		896
Castle Creek Launchpad Fund I, LP		607		211
Work America Capital Fund I, LP		425		629
	$	16,024	$	14,242

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Note 7–6 – Loans and the Allowance for Loan Losses –

Loans receivable at December 31, ~~2017~~2023 and ~~2016~~2022 are summarized as follows:

	December 31,						December 31,
	2017			2016			2023			2022
	(Dollars in thousands)						(Dollars in thousands)
Real estate loans:
Construction and land	$	143,535		$	94,426
Farmland		10,480			9,217
1-4 family residential		157,505			129,052
Multi-family residential		20,717			22,737
Nonfarm nonresidential		337,699			298,057
Commercial		254,427			213,120		$	2,217,928		$	2,020,406
Consumer		50,921			44,342
Construction								669,798			722,074
Residential								682,394			656,378
Total real estate loans								3,570,120			3,398,858
Commercial								1,358,838			1,153,873
Consumer and other								63,827			53,445
Total loans held for investment		975,284			810,951			4,992,785			4,606,176

Less:
Allowance for loan losses		(8,765	)		(8,162	)		(40,414	)		(38,178	)
Net loans	$	966,519		$	802,789		$	4,952,371		$	4,567,998

The performing ~~one~~1~~-to-~~-~~four~~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, ~~2017~~2023 and ~~2016.~~2022. Commercial and agricultural loans are pledged against the Federal Reserve Banks’ discount window as of December 31, 2023.

Net deferred loan origination fees were $~~1.3~~$12.6 million and ~~$761,000~~$13.1 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively, 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, ~~2017~~2023 and ~~2016,~~2022, overdrafts of ~~$129,000~~$2.2 million and ~~$232,000,~~$2.0 million, respectively, have been reclassified to loans.

The Bank is the lead lender on participations sold, without recourse, to other financial institutions which ~~amounts~~amounts are not included in the consolidated balance ~~sheet.~~sheets. The unpaid principal balances of mortgages and other loans serviced for others were approximately ~~$82.4~~$723.5 million and ~~$55.5~~$683.3 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. The Company has servicing rights of $1.1 million and $1.7 million recorded at December 31, 2023 and 2022, 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 ~~loan~~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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BUSINESS FIRST BANCSHARES, INC. AND ~~SUB~~~~SIDIARIES~~

SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~Real Estate Portfolio Segment

~~Loans acquired in business combinations~~Real Estate: Commercial loans are ~~initially recorded at fair value,~~ ~~which includes an estimate~~extensions of credit ~~losses expected to be realized over~~secured by owner-occupied and non-owner-occupied collateral. Repayment is generally dependent on the ~~remaining lives~~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 ~~therefore,~~ no ~~corresponding allowance~~unemployment trends. Real estate commercial loans also include farmland loans that can be, or are, used for ~~loan losses is recorded~~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 ~~at acquisition. Methods utilized~~include fluctuations in the value of real estate, project completion risk and changes in market trends. The Company is also exposed to ~~estimate any subsequently required allowance~~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, ~~losses~~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 ~~acquired~~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 ~~deemed credit-impaired at acquisition are similar~~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 ~~originated loans; however,~~repay the ~~estimate~~loan.

Consumer and Other Portfolio Segment

Consumer and other loans include a variety of ~~loss~~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 ~~unpaid principal balance~~borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and ~~then compared to any remaining unaccreted purchase discount. To~~fluctuations in the ~~extent~~value of the ~~calculated loss is greater than~~real estate or personal property securing the ~~remaining unaccreted discount, an allowance is recorded for such difference.~~consumer loan, if any.

~~Acquired loans are those associated with our acquisition~~

102

Table of ~~AGFC. These loans were recorded at estimated fair value at the acquisition date with~~ no ~~carryover of the related allowance for loan losses.~~

~~Total loans held for investment~~ at ~~December 31, 2017~~ ~~includes~~ ~~$46.1~~ ~~million of loans acquired in an acquisition that were recorded at fair value as of the acquisition date. Included in the acquired balances at~~ ~~December 31, 2017~~ ~~were acquired impaired loans accounted for under the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification~~ ~~310~~-~~30,~~~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ ~~(“ASC~~ ~~310~~-~~30”~~~~) with a net carrying amount of~~ ~~$696,000~~ ~~and acquired performing loans~~ ~~not~~ ~~accounted for under ASC~~ ~~310~~-30 ~~totaling~~ ~~$47.2~~ ~~million with a related purchase discount of~~ ~~$1.8~~ ~~million.~~

~~Total loans held for investment at~~ ~~December 31, 2016~~ ~~includes~~ ~~$65.3~~ ~~million of loans acquired in an acquisition that were recorded at fair value as of the acquisition date. Included in the acquired balances at~~ ~~December 31, 2016~~ ~~were acquired impaired loans with a net carrying amount of~~ ~~$1.8~~ ~~million and acquired performing loans totaling~~ ~~$65.9~~ ~~million with a related purchase discount of~~ ~~$2.4~~ ~~million.~~

Contents

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth, as of December 31, 2023, ~~201~~7 ~~and~~ ~~2016,~~the balance of the allowance for ~~loan~~credit losses by loan portfolio ~~segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually.~~segment. The allowance for ~~loan~~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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~~BUSINESS FIRST BANCSHARES, INC. AND SUB~~~~SIDIARIES~~

~~NOTES TO CONSOLIDATED~~ ~~FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

Allowance for Credit Losses and Recorded Investment in Loans Receivable

December 31, 2017

(Dollars in thousands)

Real Estate:

Real Estate:

Real Estate:

Real Estate:

Construction

Real Estate:

1-4 Family

Multi-family

Nonfarm

and Land

Farmland

Residential

Residential

Nonresidential

Commercial

Consumer

Total

Allowance for credit losses:

Beginning Balance
$ 933 $ 75 $ 1,228 $ 172 $ 2,314 $ 3,039 $ 401 $ 8,162
Charge-offs
(2 ) - (184 ) - (617 ) (2,945 ) (36 ) (3,784 )
Recoveries
1 - 48 - 23 �� 40 38 150
Provision
489 1 192 (28 ) 603 3,013 (33 ) 4,237
Ending Balance
$ 1,421 $ 76 $ 1,284 $ 144 $ 2,323 $ 3,147 $ 370 $ 8,765

Ending Balance:

Individually evaluated for impairment
$ 36 $ - $ 125 $ - $ 46 $ 329 $ - $ 536

Collectively evaluated for impairment
$ 1,385 $ 76 $ 1,125 $ 144 $ 2,277 $ 2,818 $ 370 $ 8,195

Purchased Credit Impaired (1)
$ - $ - $ 34 $ - $ - $ - $ - $ 34

Loans receivable:

Ending Balance
$ 143,535 $ 10,480 $ 157,505 $ 20,717 $ 337,699 $ 254,427 $ 50,921 $ 975,284

Ending Balance:

Individually evaluated for impairment
$ 92 $ - $ 2,817 $ - $ 5,831 $ 4,268 $ 441 $ 13,449

Collectively evaluated for impairment
$ 143,443 $ 10,480 $ 154,480 $ 20,717 $ 331,380 $ 250,159 $ 50,480 $ 961,139

Purchased Credit Impaired (1)
$ - $ - $ 208 $ - $ 488 $ - $ - $ 696

	December 31, 2023
	(Dollars in thousands)
	Real Estate:			Real Estate:			Real Estate:						Consumer
	Commercial			Construction			Residential			Commercial			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

(1~~) Purchased credit impaired loans are evaluated for impairment on an individual basis.~~

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.

	December 31, 2023				January 1, 2023
	Loan Balance		Specific Allocations		Loan Balance		Specific Allocations
	(Dollars in thousands)
Real estate loans:
Commercial	$	883	$	-	$	3,008	$	1,915
Construction		2,334		513		1,424		513
Residential		1,533		-		1,558		3
Total real estate loans		4,750		513		5,990		2,431
Commercial		-		-		6,096		1,779
Consumer and other		-		-		-		-
Total	$	4,750	$	513	$	12,086	$	4,210

~~105~~103

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

December 31, 2016

(Dollars in thousands)

Real Estate:

Real Estate:

Real Estate:

Real Estate:

Construction

Real Estate:

1-4 Family

Multi-family

Nonfarm

and Land

Farmland

Residential

Residential

Nonresidential

Commercial

Consumer

Total

Allowance for credit losses:

Beginning balance
$ 600 $ 30 $ 1,021 $ 101 $ 1,416 $ 3,618 $ 458 $ 7,244
Charge-offs
(484 ) - (162 ) - (473 ) (667 ) (3 ) (1,789 )
Recoveries
10 - 140 - 1,258 33 46 1,487
Provision
807 45 229 71 113 55 (100 ) 1,220
Ending Balance
$ 933 $ 75 $ 1,228 $ 172 $ 2,314 $ 3,039 $ 401 $ 8,162

Ending Balance:

Individually evaluated for impairment
$ - $ - $ 252 $ - $ 98 $ 501 $ 36 $ 887

Collectively evaluated for impairment
$ 933 $ 75 $ 943 $ 172 $ 2,216 $ 2,538 $ 365 $ 7,242

Purchased Credit Impaired (1)
$ - $ - $ 33 $ - $ - $ - $ - $ 33

Loans receivable:

Ending Balance
$ 94,426 $ 9,217 $ 129,052 $ 22,737 $ 298,057 $ 213,120 $ 44,342 $ 810,951

Ending Balance:

Individually evaluated for impairment
$ 143 $ - $ 3,263 $ - $ 1,073 $ 7,332 $ 198 $ 12,009

Collectively evaluated for impairment
$ 94,117 $ 9,217 $ 125,573 $ 22,737 $ 295,590 $ 205,788 $ 44,144 $ 797,166

Purchased Credit Impaired (1)
$ 166 $ - $ 216 $ - $ 1,394 $ - $ - $ 1,776

(1~~) Purchased credit impaired loans are evaluated for impairment on an individual basis.~~

~~Management further disaggregates the loan portfolio segments into classes of loans, which are based on~~ ~~the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.~~

AsThe following table sets forth, as of December 31, ~~2017~~ 2022 (~~and~~prior to the adoption of ASU 2016-13), the balance of the allowance for credit losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. 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.

	December 31, 2022
	(Dollars in thousands)
	Real Estate:			Real Estate:			Real Estate:						Consumer
	Commercial			Construction			Residential			Commercial			and Other			Total
Allowance for Loan Losses:
Beginning Balance	$	10,515		$	4,498		$	4,565		$	9,016		$	518		$	29,112
Charge-offs		(51	)		(16	)		(191	)		(2,139	)		(424	)		(2,821	)
Recoveries		50			25			20			739			167			1,001
Provision		4,188			1,261			960			4,105			372			10,886
Ending Balance	$	14,702		$	5,768		$	5,354		$	11,721		$	633		$	38,178
Ending Balance:
Individually Evaluated for Impairment	$	59		$	21		$	99		$	2,020		$	15		$	2,214
Collectively Evaluated for Impairment	$	14,643		$	5,747		$	5,255		$	9,701		$	618		$	35,964
Purchased Credit Impaired	$	-		$	-		$	-		$	-		$	-		$	-
Loans Receivable:
Ending Balance	$	2,020,406		$	722,074		$	656,378		$	1,153,873		$	53,445		$	4,606,176
Ending Balance:
Individually Evaluated for Impairment	$	3,053		$	992		$	4,028		$	6,442		$	192		$	14,707
Collectively Evaluated for Impairment	$	1,989,831		$	720,129		$	637,195		$	1,141,957		$	52,570		$	4,541,682
Purchased Credit Impaired	$	27,522		$	953		$	15,155		$	5,474		$	683		$	49,787

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

The following table sets forth the credit quality indicators, disaggregated by ~~class~~loan segment, as of ~~loan, are as follows:~~December 31, 2023:

~~Credit Quality Indicators~~

~~December 31, 2017~~

~~Pass~~

~~Special Mention~~

~~Substandard~~

~~Doubtful~~

~~Total~~

~~(Dollars in thousands)~~

~~Real Estate Loans:~~

~~Construction and land~~

~~141,128~~

~~1,953~~

~~362~~

~~143,535~~

~~Farmland~~

~~10,480~~

~~1-4 family residential~~

~~148,845~~

~~4,657~~

~~1,574~~

~~2,429~~

~~157,505~~

~~Multi-family residential~~

~~20,677~~

~~20,717~~

~~Nonfarm nonresidential~~

~~325,216~~

~~4,861~~

~~1,687~~

~~5,935~~

~~337,699~~

~~Commercial~~

~~228,157~~

~~20,681~~

~~1,951~~

~~3,638~~

~~254,427~~

~~Consumer~~

~~49,787~~

~~672~~

~~441~~

~~50,921~~

~~Total~~

~~924,290~~

~~32,824~~

~~5,635~~

~~12,535~~

~~975,284~~

	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

~~106~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the credit quality indicators, disaggregated by loan segment, as of December 31, 2022 (~~Dollars in thousands)~~prior to the adoption of ASU 2016-13):

December 31, 2016

Pass

Special Mention

Substandard

Doubtful

Total

(Dollars in thousands)

Real Estate Loans:

Construction and land
$ 92,951 $ 932 $ 300 $ 243 $ 94,426
Farmland
9,217 - - - 9,217
1-4 family residential
118,891 4,782 2,658 2,721 129,052
Multi-family residential
22,685 - 52 - 22,737
Nonfarm nonresidential
280,398 14,531 1,927 1,201 298,057
Commercial
186,197 16,783 7,377 2,763 213,120
Consumer
43,414 505 225 198 44,342
Total
$ 753,753 $ 37,533 $ 12,539 $ 7,126 $ 810,951

	December 31, 2022
	Pass (Risk Grade 10-45)		Special Mention (Risk Grade 50)		Substandard (Risk Grade 60)		Doubtful (Risk Grade 70)		Total
	(Dollars in thousands)
Real Estate Loans:
Commercial	$	1,972,611	$	35,054	$	10,478	$	2,263	$	2,020,406
Construction		716,071		3,496		2,157		350		722,074
Residential		643,763		3,780		7,925		910		656,378
Total Real Estate Loans		3,332,445		42,330		20,560		3,523		3,398,858
Commercial		1,137,555		6,646		6,960		2,712		1,153,873
Consumer and Other		53,041		-		404		-		53,445
Total	$	4,523,041	$	48,976	$	27,924	$	6,235	$	4,606,176

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~~questionable management capabilities and possible reduction in the collateral values.

●

Substandard loans have an existing specific and ~~well defined~~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, 2023 ~~201~~7and ~~2016,~~2022, loan balances outstanding more than 90 days past due and still accruing interest amounted to ~~$132,000~~$127,000 and ~~$168,000,~~$335,000, respectively. As of December 31, ~~2017~~2023 and ~~2016,~~2022, loan balances outstanding on ~~non-accrual~~nonaccrual status amounted to ~~$12.5~~$16.9 million and ~~$7.1~~$11.1 million, respectively. The Bank considers all loans more than 90 days past due as nonperforming loans.

The following ~~table reflects certain information with respect to~~tables provide an analysis of the ~~loan portfolio delinquencies by loan class~~aging of loans and ~~amount~~leases as of December 31, 2023 ~~201~~7and ~~2016.~~December 31, 2022. For the year ended December 31, 2022, past due and nonaccrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as prior to the adoption of CECL, the Company accreted interest income over the expected life of the loans. With the adoption of CECL and deconstruction of acquired impaired accounting, those amounts are no longer excluded for the period ended December 31, 2023. All loans greater than 90 days past due are generally placed on ~~non-accrual~~nonaccrual status.

~~107~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Aged Analysis of Past Due Loans Receivable

December 31, 2017

(Dollars in thousands)

Recorded

Greater

Investment Over

30-59 Days

60-89 Days

Than 90 Days

Total

Total Loans

90 Days Past Due

Past Due

Past Due

Past Due

Past Due

Current

Receivable

and Still Accruing

Real Estate Loans:

Construction and land
$ - $ - $ 91 $ 91 $ 143,444 $ 143,535 $ -
Farmland
- - - - 10,480 10,480 -
1-4 family residential
470 319 939 1,728 155,777 157,505 73
Multi-family residential
- - - - 20,717 20,717 -
Nonfarm nonresidential
2,344 103 3,329 5,776 331,923 337,699 -
Commercial
- - 3,274 3,274 251,153 254,427 59
Consumer
6 - 367 373 50,548 50,921 -
Total
$ 2,820 $ 422 $ 8,000 $ 11,242 $ 964,042 $ 975,284 $ 132

	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

December 31, 2016

(Dollars in thousands)

Recorded

Greater

Investment Over

30-59 Days

60-89 Days

Than 90 Days

Total

Total Loans

90 Days Past Due

Past Due

Past Due

Past Due

Past Due

Current

Receivable

and Still Accruing

Real Estate Loans:

Construction and land
$ 465 $ - $ 106 $ 571 $ 93,855 $ 94,426 $ -
Farmland
- - - - 9,217 9,217 -
1-4 family residential
989 579 963 2,531 126,521 129,052 117
Multi-family residential
- - - - 22,737 22,737 -
Nonfarm nonresidential
1,370 173 532 2,075 295,982 298,057 -
Commercial
45 372 262 679 212,441 213,120 51
Consumer
66 - 149 215 44,127 44,342 -
Total
$ 2,935 $ 1,124 $ 2,012 $ 6,071 $ 804,880 $ 810,951 $ 168

~~Loan Receivables on Nonaccrual Status~~

December 31,

2017

2016

(Dollars in thousands)

Real Estate Loans:

Construction and land
$ 92 $ 243
Farmland
- -
1-4 family residential
2,429 2,721
Multi-family residential
- -
Nonfarm nonresidential
5,935 1,201
Commercial
3,638 2,763
Consumer
441 198
Total
$ 12,535 $ 7,126

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~~NOTES TO~~ ~~CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars~~ ~~in thousands)~~

~~The following is a summary of information pertaining to impaired loans as of~~ ~~December 31, 2017~~ ~~and~~ ~~2016.~~ Acquired non-impaired loans are placed on nonaccrual status and reported as impaired using the same criteria applied to the originated portfolio. Purchased impaired credits are excluded from this table. The interest income recognized for impaired loans was ~~$247,000~~ ~~and~~ ~~$464,000~~ ~~for the years ended~~ ~~December 31, 2017~~ ~~and~~ ~~2016,~~ ~~respectively.~~

December 31, 2017

(Dollars in thousands)

Unpaid

Average

Recorded

Principal

Related

Recorded

Investment

Balance

Allowance

Investment

With an allowance recorded:

Real Estate Loans:

Construction and land
$ 90 $ 90 $ 36 $ 74
Farmland
- - - -
1-4 family residential
491 540 125 787
Multi-family residential
- - - -
Nonfarm nonresidential
316 341 46 462
Other Loans:

Commercial
539 572 329 502
Consumer
- - - 5
Total
$ 1,436 $ 1,543 $ 536 $ 1,830

With no allowance recorded:

Real Estate Loans:

Construction and land
$ 3 $ 9 $ - $ 44
Farmland
- - - -
1-4 family residential
2,325 2,744 - 2,188
Multi-family residential
- - - -
Nonfarm nonresidential
5,515 5,653 - 3,402
Other Loans:

Commercial
3,729 5,581 - 5,898
Consumer
441 472 - 243
Total
$ 12,013 $ 14,459 $ - $ 11,775

Total Impaired Loans:

Real Estate Loans:

Construction and land
$ 93 $ 99 $ 36 $ 118
Farmland
- - - -
1-4 family residential
2,816 3,284 125 2,975
Multi-family residential
- - - -
Nonfarm nonresidential
5,831 5,994 46 3,864
Other Loans:

Commercial
4,268 6,153 329 6,400
Consumer
441 472 - 248
Total
$ 13,449 $ 16,002 $ 536 $ 13,605

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars~~ ~~in thousands)~~

December 31, 2016

(Dollars in thousands)

Unpaid

Average

Recorded

Principal

Related

Recorded

Investment

Balance

Allowance

Investment

With an allowance recorded:

Real Estate Loans:

Construction and land
$ - $ - $ - $ 655
Farmland
- - - -
1-4 family residential
440 470 252 372
Multi-family residential
- - - -
Nonfarm nonresidential
368 368 98 31
Other Loans:

Commercial
695 709 501 1,252
Consumer
36 36 36 12
Total
$ 1,539 $ 1,583 $ 887 $ 2,322

With no allowance recorded:

Real Estate Loans:

Construction and land
$ 143 $ 152 $ - $ 124
Farmland
- - - -
1-4 family residential
2,823 3,276 - 3,296
Multi-family residential
- - - -
Nonfarm nonresidential
705 729 - 3,730
Other Loans:

Commercial
6,637 7,826 - 3,680
Consumer
162 162 - 43
Total
$ 10,470 $ 12,145 $ - $ 10,873

Total Impaired Loans:

Real Estate Loans:

Construction and land
$ 143 $ 152 $ - $ 779
Farmland
- - - -
1-4 family residential
3,263 3,746 252 3,668
Multi-family residential
- - - -
Nonfarm nonresidential
1,073 1,097 98 3,761
Other Loans:

Commercial
7,332 8,535 501 4,932
Consumer
198 198 36 55
Total
$ 12,009 $ 13,728 $ 887 $ 13,195

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~~NOTES TO CONSOLIDATED FINANCIAL~~ ~~STATEMENTS~~

~~(Dollars in thousands)~~

~~The Company elected to~~ ~~account for certain loans acquired in the AGFC merger as acquired impaired loans under ASC~~ ~~310~~-30 due to evidence of credit deterioration at acquisition and the probability that the Company will be unable to collect all contractually required payments. The expected cash flows approximated fair value as of the date of merger and, as a result, no ~~accretable yield was recognized at acquisition for the AGFC purchased impaired credits.~~

~~The following table presents the changes in the carrying amount of the purchased impaired credits accounted for under ASC~~ ~~310~~-30 ~~for the periods presented.~~

Purchased

Impaired Credits

(Dollars in thousands)

Carrying amount - December 31, 2015
$ 3,634
Payments received, net of discounts realized
(1,181 )
Charge-offs
(352 )
Transfer to other real estate
(325 )
Carrying amount - December 31, 2016
1,776
Payments received, net of discounts realized
(924 )
Purchased impaired credit participation interest sales proceeds, net of discount realized
511
Charge-offs
(667 )
Carrying amount - December 31, 2017
$ 696

	December 31, 2022
	(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	$	1,491	$	210	$	1,681	$	3,382	$	2,017,024	$	2,020,406	$	98
Construction		320		41		638		999		721,075		722,074		-
Residential		1,590		423		1,781		3,794		652,584		656,378		-
Total Real Estate Loans		3,401		674		4,100		8,175		3,390,683		3,398,858		98
Commercial		1,183		1,934		2,186		5,303		1,148,570		1,153,873		222
Consumer and Other		295		28		182		505		52,940		53,445		15
Total	$	4,879	$	2,636	$	6,468	$	13,983	$	4,592,193	$	4,606,176	$	335

The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans w~~ithin~~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, ~~2017~~2023 and ~~2016,~~2022, the concessions granted to certain borrowers included extending the payment due dates ~~lowering the~~and offering below market contractual interest ~~rate, reducing accrued interest,~~rates, and ~~reducing~~were not significant to the ~~debt’s face or maturity amount.~~consolidated financial statements.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

~~Once modified in a troubled debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, the loan is evalu~~ated for an asset-specific allowance for credit losses. The Bank continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured, the Bank provides an allowance for credit losses for the amount of the loan that exceeds the value of the related collateral.

~~The following tables present informative data regarding~~ ~~troubled debt restructurings as of~~ ~~December 31, 2017~~ ~~and~~ ~~2016.~~

Modifications as of December 31, 2017:

Pre-Modification

Post-Modification

Number

Outstanding

Outstanding

of

Recorded

Recorded

Contracts

Investment

Investment

(Dollars in thousands)

Troubled Debt Restructuring

Real Estate Loans:

1-4 family residential
2 $ 703 $ 455
Other Loans:

Commercial
4 4,498 2,605
Total
6 $ 5,201 $ 3,060

Modifications as of December 31, 2016:

Pre-Modification

Post-Modification

Number

Outstanding

Outstanding

of

Recorded

Recorded

Contracts

Investment

Investment

(Dollars in thousands)

Troubled Debt Restructuring

Real Estate Loans:

1-4 family residential
3 $ 870 $ 608
Other Loans:

Commercial
6 6,880 5,323
Total
9 $ 7,750 $ 5,931

~~The~~ ~~Bank had~~ ~~$3.3~~ ~~million in troubled debt restructurings that subsequently defaulted during the year ended~~ ~~December 31, 2017~~ ~~and~~ ~~none~~ ~~that subsequently defaulted during the year ended~~ ~~December 31, 2016.~~

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NOTES TO CONSOLIDATED FI~~NANCIAL~~FINANCIAL STATEMENTS

~~(Dollars in thousands)~~Upon adoption of ASU 2016-13, the Company eliminated the pooling of purchased impaired credit loans. As a result, $7.0 million of purchased credit deterioration loans were recognized as non-accrual loans as of January 1, 2023. The following table presents non-accrual loans by segment as of December 31, 2023, January 1, 2023, and December 31, 2022, respectively.

	December 31,		January 1,		December 31,
	2023		2023		2022
	(Dollars in thousands)
Real Estate Loans:
Commercial	$	3,280	$	5,847	$	2,644
Construction		3,543		2,421		992
Residential		7,352		6,518		4,080
Total Real Estate Loans		14,175		14,786		7,716
Commercial		2,395		3,045		3,150
Consumer and Other		373		257		188
Total	$	16,943	$	18,088	$	11,054

Accrued interest receivable of $4.2 million and $5.4 million was outstanding as of December 31, 2023, and December 31, 2022, 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, 2023 and December 31, 2022, accrued interest receivable on loans was $25.2 million and $21.2 million, respectively, and included within accrued interest receivable on the consolidated balance sheets.

Note 8–7 – Premises and Equipment –

Bank premises and equipment at December 31, 2023 ~~201~~7and ~~2016~~2022 consist of the following:

	2017			2016			2023			2022
	(Dollars in thousands)						(Dollars in thousands)
Land	$	2,098		$	2,098
Buildings and Leasehold Improvements		7,143			6,875
Furniture and Equipment		5,697			6,007

Total Bank Premises and Equipment		14,938			14,980

Less: Accumulated Depreciation		(6,158	)		(5,699	)

Total Bank Premises and Equipment, net	$	8,780		$	9,281
Land							$	7,545		$	7,831
Buildings and Leasehold Improvements								56,513			52,167
Furniture and Equipment								35,252			33,913
Right of Use Asset								20,836			17,477
Total Bank Premises and Equipment								120,146			111,388
Less: Accumulated Depreciation								(50,666	)		(48,211	)
Total Bank Premises and Equipment, net							$	69,480		$	63,177

The provision for depreciation and amortization attributable to bank premises and equipment charged to operating expenses was ~~$1.2~~$4.7 million, ~~$1.3~~$4.8 million and ~~$1.2~~$4.2 million for the years ended December 31, ~~2017,~~2023, ~~2016~~2022 and ~~2015,~~2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 89 - Goodwill and Other Intangible Assets –

Goodwill was ~~acquired during the year ended~~ ~~December 31, 2015~~ recorded as a result of ~~the AGFC merger effective after the close of business~~ ~~March 31, 2015.~~ acquisitions. The carrying amount of goodwill as of December 31, ~~2017~~2023 and ~~2016~~2022 was $88.4 million and $88.5 million, respectively. In ~~$6.8~~2023, ~~million.~~goodwill was reduced by $153,000 due to the sale of the Leesville branch. In 2022, the increase of $28.6 million in goodwill was the result of the acquisition of TCBI. The Company performed the required annual goodwill impairment test as of October 1, 2023. 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, 2023.

Core deposit ~~intangibles~~and customer intangible assets were acquired in conjunction with the ~~AGFC merger.~~business combinations. A summary of the core deposit and customer intangible ~~asset~~assets as of December 31, ~~2017~~2023 and ~~2016~~2022 is as follows:

2017

2016

(Dollars in thousands)

(Dollars in thousands)

Gross Carrying Amount
$ 2,762 $ 2,762

Less: Accumulated Amortization
(759 ) (483 )

Net Carrying Amount
$ 2,003 $ 2,279

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~~NOTES TO CONSOLIDATED~~ ~~FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

	2023			2022
	(Dollars in thousands)
Gross Carrying Amount	$	21,100		$	17,225
Adjustment for Sale of Branch		(50	)		-
Acquired in TCBI Acquisition		-			3,875
Less: Accumulated Amortization		(9,155	)		(7,058	)
Net Carrying Amount	$	11,895		$	14,042

Amortization expense on the core deposit and customer intangible ~~asset recorded in other expenses~~assets totaled approximately ~~$276,000,~~~~$276,000~~$2.1 million, $2.0 million and ~~$207,000~~$1.6 million during the years ended December 31, ~~2017,~~2023, ~~2016~~2022 and ~~2015,~~2021, respectively. The following table presents the estimated aggregate amortization expense for the periods indicated:

December 31,

(Dollars in thousands)

2018
$ 276
2019
276
2020
276
2021
276
2022
276
Thereafter
623
Total Core Deposit Intangible
$ 2,003

December 31,
	(Dollars in thousands)
2024	$	2,093
2025		1,885
2026		1,816
2027		1,816
2028		1,539
Thereafter		2,746
Total Core Deposit and Customer Intangible	$	11,895

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 109– – Deposits –

Deposit accounts at December 31, ~~2017~~2023 and ~~2016~~2022 are summarized as follows:

	2017		2016		2023		2022
	(Dollars in thousands)				(Dollars in thousands)
Noninterest Bearing - DDA	$	264,646	$	223,705	$	1,299,090	$	1,549,381
Noninterest Bearing Deposits		264,646		223,705		1,299,090		1,549,381
Interest Bearing - DDA		40,603		43,237		502,077		455,117
NOW and Super NOW Accounts		139,302		109,949		496,845		579,789
Money Market Accounts		219,035		182,511		1,425,808		1,136,597
Savings Accounts		37,538		35,181		223,871		312,884
Certificates of Deposit Over $250,000		90,530		73,346		623,336		279,781
Other Certificates of Deposit		263,879		264,866		677,763		506,796
Interest Bearing Deposits		790,887		709,090		3,949,700		3,270,964
Total Deposits	$	1,055,533	$	932,795	$	5,248,790	$	4,820,345

Approximately 7~~1.3%~~79.0% of certificates of deposit as of December 31, ~~2017~~2023 have stated maturity dates during ~~2018~~2024 and the remaining ~~28.7%~~21.0% have stated maturity dates during ~~2019~~2025 and beyond.

At December 31, 2023 ~~201~~7and ~~2016,~~2022, total deposits for the top three customer relationships was approximately ~~$111.2~~$168.3 million and ~~$114.2~~$168.9 million, respectively, which represented ~~10.5%~~3.2% and ~~12.3%~~3.5% of total deposits, respectively. Brokered and reciprocal deposits were approximately ~~$78.3~~ ~~million~~$1.0 billion and ~~$102.8~~$550.2 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. Included in these brokered and reciprocal deposits are public fund deposits of approximately ~~$23.1~~$145.9 million and ~~$27.2~~$131.9 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. Other public fund deposits were approximately ~~$147.7~~$511.6 million and ~~$113.5~~$504.1 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Note 1110– – Borrowings –

The Bank had outstanding advances from the ~~Federal Home Loan Bank (FHLB)~~FHLB of ~~$75.0~~$211.2 million and ~~$46.4~~$410.1 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively, consisting of:

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, 2023 and December 31, 2022 was $35.3 million and $47.2 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 ~~$15.0~~ ~~million,~~$875,000 at both December 31, ~~2017~~2023, and ~~2016,~~December 31, 2022, that was acquired during the TCBI acquisition, with interest at ~~1.90%~~4.88% paid monthly. Principal is due at maturity in ~~December 2018~~ April 2025.~~with quarterly call options beginning in~~ ~~2013.~~

One fixed rate loan of $~~30.0~~$25.0 million at December 31, ~~2017,~~2023, with interest at ~~1.53%~~4.89% paid monthly. Principal is due at maturity in ~~March 2018.~~July 2025.

One fixed rate loan of $~~30.0~~$25.0 million at December 31, ~~2017,~~2023, with interest at ~~2.41%~~4.65% paid monthly. Principal is due at maturity in ~~November 2022.~~January 2026.

~~Three fixed rate loans~~ ~~totaling~~ ~~$30.0~~ ~~million at~~ ~~December 31, 2016,~~ ~~with interest rates ranging from~~ ~~2.92%~~ to ~~3.07%~~ ~~paid monthly. Principal was due at maturity in~~ ~~November 2017~~ ~~with quarterly call options beginning in~~ ~~2008.~~

One fixed rate loan of $~~1.4~~$25.0 million at December 31, ~~2016,~~2023, with interest at ~~3.18%~~4.56% paid monthly. Principal is due at maturity in July 2026.

One fixed rate loan of $25.0 million at December 31, 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 December 31, 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 December 31, 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 December 31, 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 of $100.0 million at December 31, 2022, with interest at 3.53% paid monthly. Principal is due at maturity in October 2027. This advance had put options beginning in October 2023 and was paid ~~monthly~~off in October 2023.

One short term, seven-day, fixed rate loan of $262.0 million at December 31, 2022, with interest at 4.55%. Principal and ~~matured~~interest was due, paid and renewed, at maturity in ~~December 2017.~~January 2023. This loan was rolled into the $230.0 million short term, overnight, fixed rate loan outstanding at March 31, 2023, which was paid off during the second quarter of 2023.

These advances are collateralized by the ~~Bank~~’sCompany’s investment in ~~Federal Home Loan Bank~~FHLB stock and a blanket lien on qualifying loans in the Bank’s loan ~~portfolio consisting of performing~~ 1-4 ~~family mortgages and certain small business, small farm and small agriculture loans.~~portfolio. The blanket lien totaled approximately ~~$399.5~~ ~~million~~$1.8 billion at December 31, ~~2017~~2023 with unused availability for advances and letters of credit of approximately ~~$243.5~~ ~~million.~~

~~As a result of the merger with AGFC, the Bank assumed the outstanding FHLB advances of American Gateway Bank. These advances were recorded at fair value as of acquisition, which totaled~~ ~~$41.2~~ ~~million, and resulted in a market value adjustment of~~ ~~$2.0~~ ~~million which was accreted over the life of the respective advances as a reduction of interest expense on borrowings. The unaccreted market value adjustment totaled~~ ~~$670,000~~ at ~~December 31, 2016~~ ~~and was fully accreted during the year ended~~ ~~December 31, 2017.~~$1.2 billion.

The ~~Bank~~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, ~~2017~~2023 and ~~2016~~2022 were ~~$113.5~~$145.0 million and ~~$109.5~~$154.0 million, respectively. ~~There was~~ no ~~balance~~The Company purchased $14.1 million on these lines at December 31, ~~2017~~2022 and was not in a purchased position on these lines at ~~2016.~~December 31, 2023.

On ~~September 12, 2016~~~~, the~~The Company ~~borrowed~~ ~~$3.0~~ ~~million from~~had a line of credit with First National ~~Bankers~~Banker’s Bank ~~(FNBB) with~~(“FNBB”) and was allowed to borrow on a ~~maturity date~~revolving basis up to $5.0 million. This line of ~~September 12, 2026.~~ ~~This advance is due in~~ ~~nine~~ ~~annual principal payments of~~ ~~$300,000~~ ~~beginning~~credit, established on ~~September 12, 2017,~~November 3, 2021, ~~and~~ ~~one~~ ~~final principal and interest payment of~~ ~~$303,000~~ ~~due on~~ ~~September 12, 2026.~~ ~~This advance is~~was secured by a pledge of and security interest in the common stock of ~~our wholly-owned subsidiary, Business First Bank.~~the Bank and established for general corporate purposes. The Company drew down the full amount in 2022 and did not have a balance ~~outstanding was~~ ~~$2.7~~ ~~million and~~ ~~$3.0~~ ~~million as~~on the line of credit at December 31, ~~2017~~2021. ~~and~~ ~~2016,~~ ~~respectively.~~ The ~~advance carries~~line of credit carried a variable interest rate equal to the Wall Street Journal Prime ~~rate.~~Rate with a minimum rate of 3.50%, and matured in November 2022. This FNBB line was paid in full at maturity, and was not renewed, in November, 2022.

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On March 12, 2023, the Federal Reserve launched the Bank Term Funding Program (“BTFP”), which offers loans to banks with a term of up to one year. The ~~rate was~~ ~~4.25%~~loans are secured by pledging the banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and ~~3.75%~~ asany other qualifying assets. These pledged securities will be valued at par for collateral purposes. The Bank participated in the BTFP and had outstanding debt of $300.0 million at December 31, 2023. ~~2017~~These loans bear a fixed interest rate of 4.38% and ~~2016,~~ ~~respectively, and adjusts based~~mature on ~~changes~~March 22, 2024.

In December 2018, the Company issued subordinated notes in the ~~index rate. This FNBB long term advance~~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, 2023 and 2022 was ~~established~~$25.0 million. The subordinated notes were issued for the purpose of paying off the ~~revolving~~long term advance and line of credit with ~~First Tennessee Bank National Association (FTN).~~

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~~(Dollars~~FNBB, for general corporate purposes and to provide Tier 2 capital. The subordinated notes are redeemable by the Company at its option beginning in ~~thousands)~~2028.

~~FNBB~~ ~~also~~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 ~~borrow~~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 ~~revolving~~subordinated basis, updistributions 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 ~~$5.0~~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 as discussed in Note 3. 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. ~~This line of credit, established on~~ ~~September 12, 2016,~~ ~~is secured by a pledge of and security interest~~One tranche in the ~~common stock~~amount of ~~our wholly-owned subsidiary, Business First Bank.~~ $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 ~~balance~~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 ~~line~~debt during 2023. These notes carried an aggregate $1.1 million and $2.9 million fair value adjustment, respectively, as of ~~credit was~~ ~~$862,000~~ ~~at both~~ December 31, ~~2017~~2023 and ~~2016.~~2022. ~~The line of credit bears a variable interest rate equal to the Wall Street Journal Prime rate. The rate was~~ ~~4.25%~~ ~~and~~ ~~3.75%~~ at ~~December 31, 2017~~ ~~and~~ ~~2016,~~ ~~respectively, and adjusts based on changes in the index rate. This FNBB line matured on~~ ~~September 12, 2017~~ ~~and renewed on~~ ~~September 29, 2017~~ ~~for another~~ ~~one~~ ~~year term on the same terms and will mature on~~ ~~September 29, 2018.~~ ~~This FNBB line was established for the purpose of repurchasing shares of our common stock from certain of our shareholders and for general corporate purposes.~~

Note 112–1 – Securities Sold Under Agreements to Repurchase –

At December 31, 2023 ~~201~~7and ~~2016,~~2022, the Bank had 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 have coupon rates ranging from ~~2.0%~~0.9% to ~~3.5%~~8.0% and maturity dates ranging from ~~2027~~2025 to ~~2036.~~2041. The related liability to repurchase these securities was ~~$1.9~~$18.9 million and ~~$2.7~~$20.2 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

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Note 13–12 – Income Taxes –

The consolidated provision (credit) for income taxes consists of the following at December 31, ~~2017,~~2023, ~~2016~~2022 and ~~2015:~~2021:

2017

2016

2015

(Dollars in thousands)

Provision (Credit) for Current Taxes - Federal
$ 977 $ 660 $ 1,599
Provision (Credit) for Deferred Taxes
1,458 953 (74 )
Adjustment to Deferred Taxes for Enactment of 21%

Federal Statutory Rate on December 22, 2017
1,668 - -
Total Provision for Income Taxes
$ 4,103 $ 1,613 $ 1,525

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

	2023		2022		2021
	(Dollars in thousands)
Provision for Current Taxes - Federal	$	17,491	$	12,969	$	13,008
Provision (Credit) for Deferred Taxes		2,052		1,368		(586	)
Total Provision for Income Taxes	$	19,543	$	14,337	$	12,422

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, ~~2017,~~2023, ~~2016~~2022 and ~~2015:~~2021:

	2017			2016			2015			2023			2022			2021
	(Dollars in thousands)									(Dollars in thousands)
Federal Statutory Income Tax at 34%	$	3,043		$	2,286		$	1,911
Federal Statutory Income Tax										$	19,023		$	14,404		$	13,557
Tax Exempt Income		(701	)		(708	)		(559	)		(188	)		(690	)		(815	)
Adjustment to Deferred Taxes for Enactment of 21%
Federal Statutory Rate on December 22, 2017		1,668			-			-
Stock Based Compensation											197			16			(220	)
Goodwill Write-off for Branch Sale											32			-			35
Other - Net		93			35			173			479			607			(135	)
Total Provision for Income Taxes	$	4,103		$	1,613		$	1,525		$	19,543		$	14,337		$	12,422

D~~eferred~~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.

~~The net deferred tax asset at~~ ~~December 31,~~ ~~201~~7 ~~and~~ ~~2016~~ ~~is included in other assets.~~ The components of the deferred tax assets ~~(liabilities)~~and liabilities are as follows:

	2017			2016			2023			2022
	(Dollars in thousands)						(Dollars in thousands)
Allowance for Loan Losses	$	1,841		$	2,775
Acquried Loans Fair Market Value Adjustment		470			2,168
Acquired Securities Difference in Basis		(450	)		(744	)
Amortization of Start-Up Costs		26			55
Stock Warrants and Options		693			1,217
Depreciation		(476	)		(799	)
Interest on Acquired Nonaccrual Loans		25			42
Unrealized Loss on Securities		437			1,201
Other Real Estate		35			110
Core Deposit Intangible		(421	)		(775	)
Acquired FHLB Debt Fair Market Value Adjustment		-			228
Deferred Compensation		473			723
Alternative Minimum Tax Credit		310			345
Net Operating Loss Carryforward		42			78
Net Deferred Tax Asset	$	3,005		$	6,624
State NOL							$	2,885		$	2,285
State NOL Valuation Allowance								(2,885	)		(2,285	)
Net Operating Loss Carryforward								583			1,700
Unrealized Loss on Securities								17,835			20,040
Acquired Loans Fair Market Value Adjustment								2,596			5,705
Allowance for Loan Losses								8,539			8,067
Lease Liability								4,472			3,731
Deferred Compensation								2,231			1,589
Stock Awards								1,277			1,135
Other								1,156			940
Deferred Tax Assets								38,689			42,907

Right of Use Asset								4,402			3,693
Core Deposit Intangible								2,513			2,967
Depreciation								2,409			2,512
Acquired Securities Difference in Basis								1,209			1,477
Other								833			1,064
Deferred Tax Liabilities								11,366			11,713
Net Deferred Tax Asset							$	27,323		$	31,194

The Company acquired certain deferred tax attributes and liabilities as a result of ~~its~~a merger ~~with AGFC,~~during 2015, including a net operating loss (“NOL”) carryforward of ~~$287,000~~$287,000 and alternative minimum tax (“AMT”) credit carryforwards of ~~$984,000.~~$984,000. The Company is limited in the amount it may deduct against current taxable income each year. As of December 31, ~~2017~~2023 the NOL carryforward was ~~$201,000~~$28,737 and expires in 2033. The AMT credit carryforward was exhausted in ~~$310,000~~2019. Additionally, the Company acquired certain deferred tax attributes and liabilities as a result of the 2022 TCBI acquisition, including a federal NOL carryforward of $8.8 million and a federal charitable contribution carryforward of $229,000. 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, ~~2017~~2023, the NOL and ~~can~~charitable contribution carryforward was $2.7 million to be carried forward ~~as a credit against the Company’s regular tax liability. The Tax Cuts and Jobs Act enacted~~ ~~December 22, 2017~~ ~~permits existing AMT credit carryforwards to be used to reduce the regular tax obligation in~~ ~~2018,~~~~2019,~~ ~~and~~ ~~2020.~~ ~~Any AMT credit carryforwards that do~~ ~~not~~ ~~reduce regular taxes are eligible for a~~ ~~50%~~ ~~refund in~~ ~~2018,~~~~2019,~~ ~~and~~ ~~2020,~~ ~~and a~~ ~~100%~~ ~~refund in~~ ~~2021.~~indefinitely until utilized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Note 114–3 – 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, ~~2017~~2023 and ~~2016:~~2022:

	2017			2016			2023			2022
	(Dollars in thousands)						(Dollars in thousands)
Unrealized Gains (Losses) on Securities Available for Sale:

Balance at Beginning of Year	$	(2,330	)	$	(789	)

Other Comprehensive Income (Loss)
Before Reclassifications - Net of Tax		937			(1,694	)
Reclassification Adjustment for Gains (Losses)
Realized - Net of Tax		20			153

Other Comprehensive Income (Loss)		957			(1,541	)

Reclassify Stranded Tax Effects		(271	)		-

Balance at End of Year	$	(1,644	)	$	(2,330	)
Unrealized Gains (Losses) on AFS Investment Securities and Equity Method Investments:
Balance at Beginning of Year							$	(74,204	)	$	(1,177	)
Other Comprehensive Income (Loss) on AFS Investment Securities
Before Reclassifications - Net of Tax								10,258			(73,679	)
Other Comprehensive Income (Loss) on Equity Method Investments - Net of Tax								(616	)		690
Reclassification Adjustment for Gains (Losses) on Sale of AFS Investment Securities
Realized - Net of Tax								(2,023	)		(38	)
Other Comprehensive Income (Loss)								7,619			(73,027	)
Balance at End of Year							$	(66,585	)	$	(74,204	)

Note 1154– ~~– S~~Shareholders’~~hare~~~~holders’~~ Equity and Regulatory Matters –

On ~~October 12, 2017,~~ ~~the Company completed a private placement offering of~~ ~~3,299,925~~~~shares of its common stock at a price of~~ ~~$20.00~~ ~~per share. The private placement offering generated net proceeds of~~ ~~$62.5~~ ~~million. Total shareholders’ equity was~~ ~~$179.9~~ ~~million at~~ ~~December 31, 2017,~~ ~~compared to~~ ~~$113.6~~ ~~million at~~ ~~December 31, 2016.~~

S~~hareholders’~~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 ~~$0.23~~$0.50 per share and ~~$0.15~~$0.48 per share for the years ended December 31, ~~2017~~2023 and ~~2016,~~2022, respectively, based upon quarterly financial performance. The Company paid full quarterly preferred stock dividends totaling $75.00 per share for the year ended December 31, 2023 and, $18.75 per share for the year ended December 31, 2022, following issuance of the preferred stock on September 1, 2022.

Common Stock Repurchase Plan

On October 22, 2020, 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, 2021. The stock repurchase program did not obligate the Company to repurchase any shares of its common stock. The Company repurchased $10.9 million and $798,000 of shares for the years ended December 31, 2021 and 2020, respectively.

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 firstfive 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 firstfive years of issuance. The preferred stock is non-convertible and dividends equivalent to $75.00 per share and $18.75 per share were paid during the years ended December 31, 2023 and 2022, respectively.

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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~~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.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

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, ~~2017~~2023 and ~~2016,~~2022, the Bank met all of the capital adequacy requirements to which it is subject.

As of December 31, 2023 ~~201~~7and ~~2016,~~2022, each of the Company and the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. ~~To maintain categorized as well capitalized,~~For the years ended December 31, 2023 and 2022, each of the Company and the Bank ~~will have~~was required to maintain minimum total capital, Tier I1 capital, risk-based common equity Tier I,1, and Tier I1 leverage ratios asat the levels disclosed in the table ~~below.~~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, ~~2017~~2023 and ~~2016.~~2022.

To Be Well

Capitalized Under

For Capital

Prompt Corrective

Business First Bancshares, Inc. (Consolidated)

Actual

Adequacy Purposes

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

December 31, 2017:

Total Capital (to Risk-Weighted Assets)
$ 181,565 15.23 % $ 95,387 8.00 % $ 119,234 10.00 %

Tier I Capital (to Risk-Weighted Assets)
$ 172,800 14.49 % $ 71,541 6.00 % $ 95,387 8.00 %

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
$ 172,800 14.49 % $ 53,655 4.50 % $ 77,502 6.50 %

Tier I Leveraged Capital (to Average Assets)
$ 172,800 13.53 % $ 51,089 4.00 % $ 63,862 5.00 %

December 31, 2016:

Total Capital (to Risk-Weighted Assets)
$ 115,437 11.63 % $ 79,422 8.00 % $ 99,277 10.00 %

Tier I Capital (to Risk-Weighted Assets)
$ 107,275 10.81 % $ 59,566 6.00 % $ 79,422 8.00 %

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
$ 107,275 10.81 % $ 44,675 4.50 % $ 64,530 6.50 %

Tier I Leveraged Capital (to Average Assets)
$ 107,275 9.67 % $ 44,358 4.00 % $ 55,447 5.00 %

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, 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	%

December 31, 2022:
Total Capital (to Risk-Weighted Assets)	$	704,840		12.75	%	$	442,391		8.00	%	$	552,988		10.00	%
Tier 1 Capital (to Risk-Weighted Assets)		557,088		10.07	%		331,793		6.00	%		442,391		8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)		480,158		8.68	%		248,845		4.50	%		359,442		6.50	%
Tier 1 Leveraged Capital (to Average Assets)		557,088		9.49	%		234,859		4.00	%		293,574		5.00	%

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~~(Dollars in thousands)~~

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
b1BANK	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
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	%

December 31, 2022:
Total Capital (to Risk-Weighted Assets)	$	657,588		11.91	%	$	441,833		8.00	%	$	552,292		10.00	%
Tier 1 Capital (to Risk-Weighted Assets)		618,805		11.20	%		331,375		6.00	%		441,833		8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)		618,805		11.20	%		248,531		4.50	%		358,989		6.50	%
Tier 1 Leveraged Capital (to Average Assets)		618,805		10.55	%		234,679		4.00	%		293,348		5.00	%

To Be Well

Capitalized Under

For Capital

Prompt Corrective

Business First Bank

Actual

Adequacy Purposes

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

December 31, 2017:

Total Capital (to Risk-Weighted Assets)
$ 120,806 10.24 % $ 94,377 8.00 % $ 117,971 10.00 %

Tier I Capital (to Risk-Weighted Assets)
$ 112,041 9.50 % $ 70,783 6.00 % $ 94,377 8.00 %

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
$ 112,041 9.50 % $ 53,087 4.50 % $ 76,681 6.50 %

Tier I Leveraged Capital (to Average Assets)
$ 112,041 8.78 % $ 51,040 4.00 % $ 63,800 5.00 %

December 31, 2016:

Total Capital (to Risk-Weighted Assets)
$ 117,909 11.89 % $ 79,324 8.00 % $ 99,155 10.00 %

Tier I Capital (to Risk-Weighted Assets)
$ 109,747 11.07 % $ 59,493 6.00 % $ 79,324 8.00 %

Common Equity Tier 1 Capital (to Risk-Weighted Assets)
$ 109,747 11.07 % $ 44,620 4.50 % $ 64,451 6.50 %

Tier I Leveraged Capital (to Average Assets)
$ 109,747 9.91 % $ 44,311 4.00 % $ 55,389 5.00 %

Note 116–5 – Stock Based Compensation –

Equity Incentive Plan

The Company previously granted options to its employees under its 2006 Stock Option Plan which expired on December 22, 2016. On June 29, 2017, the ~~Company~~’sCompany’s shareholders approved its 2017 Equity Incentive Plan (the “Plan”). The Plan provides 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. ~~The~~During the year ended December 31, 2022, Company shareholders approved an additional 400,000 shares to be reserved for future awards under the Plan. In addition, the number of shares issuable under the Plan were 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. In total, the Plan has reserved ~~500,000~~1,043,908 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~~board of ~~Directors,~~directors, which determines, within the provisions of the Plan, those eligible participants to whom, and the times at which, grants and awards will be made. As of December 31, ~~2017,~~2023, no745,620 awards have been granted under the Plan and ~~500,000~~298,288 shares of common stock remain available for grant.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

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 ~~vesting~~requisite service period.

During the ~~year~~years ended December 31, ~~2017,~~2023, 2022 and 2021,the Company issued shares of restricted stock which vest in three equal installments over ~~a period of~~ ~~two~~ ~~years.~~the requisite service period. For the ~~year ended~~years ended December 31, ~~2017,~~2023, 2022 and 2021, respectively, the Company recognized ~~$129,000~~$4.7 million, $4.3 million and $2.6 million in compensation costs related to restricted stock awards. At December 31, ~~2017,~~2023, 2022 and 2021, respectively, unrecognized share-based compensation associated with these awards totaled $3.4 million, $3.7 million and $2.4 million. The $3.7 million of unrecognized share-based compensation at ~~$92,000.~~December 31, 2023 is expected to be recognized over a weighted average period of 2.0 years.

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The table below summarizes thethe restricted stock award activity for the period presented.

	Year Ended December 31, 2017					Year Ended December 31, 2023					Year Ended December 31, 2022					Year Ended December 31, 2021
				Weighted Average					Weighted Average					Weighted Average					Weighted Average
	Shares			Grant Date Fair Value		Shares			Grant Date Fair Value		Shares			Grant Date Fair Value		Shares			Grant Date Fair Value
Balance, at Beginning of Period		-		$	-
Granted		12,981			17.00
Forfeited		-			-
Earned and Issued		(4,319	)		17.00

Balance, at End of Period		8,662		$	17.00
Balance, at Beginning of Period							131,624		$	24.45		94,245		$	21.60		53,756		$	24.49
Granted							280,101			20.29		141,646			26.34		111,687			20.73
Forfeited							(2,738	)		19.51		(6,709	)		27.13		(989	)		24.11
Earned and Issued							(177,951	)		16.97		(97,558	)		24.20		(70,209	)		22.43
Balance, at End of Period							231,036		$	21.43		131,624		$	24.45		94,245		$	21.60

Stock Grants

During the years ended December 31, 2022 and 2021, the Company issued a total of 11,700 and 7,301 shares of common stock, respectively, to non-employee directors as compensation for their board service. There were 2,442 shares issued during the year ended December 31, ~~2017,~~2023 ~~the Company issued a total of~~ ~~4,410~~ ~~shares of common stock~~ to ~~non-employee directors as inducement to their board service and a total of~~ ~~1,000~~ ~~shares of common stock to an employee as inducement to their employment.~~employees. The shares ~~vested immediately upon issuance.~~ were issued with weighted average grant date fair values of $20.48 per shares for the year ended December 31, 2023, $23.08 per share for the year ended December 31, 2022, and $23.35 per share for the year ended December 31, 2021. The total stock-based compensation expense was determined based upon the market value of the Company’s common stock at the grant date applied to the total number of shares granted. ~~Included~~These grants resulted in ~~directors fees~~an expense ~~and compensation expense was~~ ~~$75,000~~ ~~and~~ ~~$17,000,~~ ~~respectively, during~~of $50,000 for the year ended December 31, ~~2017.~~2023 and director fees expense of $120,000 and $276,000 for the years ended December 31, 2022 and 2021, respectively.

~~Stock Warrants~~

~~In connection with~~ ~~the organization of the Company and the Bank, stock warrants were issued to organizers. The warrants~~ ~~may~~ ~~be exercised by the holders for the purchase of~~ ~~101,000~~ ~~shares of common stock of the Company at the exercise price of~~ ~~$10~~ ~~per share (warrant). The warrants were fully vested on~~ ~~February 1, 2011~~ ~~and were to expire in~~ ~~2016.~~ ~~The warrant agreements were amended effective~~ ~~February 1, 2016~~ ~~to extend the expiration time to~~ ~~February 2, 2019,~~ ~~with~~ ~~$48,000~~ ~~of compensation cost recognized on the effective date.~~

At ~~December 31,~~ ~~201~~7 ~~and~~ ~~2016,~~ ~~warrants for~~ ~~87,625~~ ~~shares at a weighted average exercise price of~~ ~~$10.00~~ ~~were outstanding. At~~ ~~December 31, 2017,~~ ~~all of the~~ ~~87,625~~ ~~outstanding warrants were vested and there was~~ no ~~unrecognized compensation. However, the amendment effective~~ ~~February 1, 2016~~ ~~extended the exercise period and retained the~~ ~~$10~~ ~~per share exercise price. As a result, in compliance~~ ~~with Section~~ ~~409A~~ ~~of the Internal Revenue Code of~~ ~~1986,~~ ~~as amended, the “optionality” of the warrants was eliminated thereby restricting the situations in which the warrants can be exercised to occur upon the earlier of (i) immediately prior to the~~ ~~February 2, 2019~~ expiration date, (ii) a change in control of the Company or the Bank, (iii) the warrant holder’s death, (iv) the warrant holder becoming disabled, and (v) the warrant holder incurring a separation from the Company or the Bank (if the warrant holder is an employee of the Company or the Bank).

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands~~)

~~Using the Black-Scholes pricing model for the~~ 8~~7,625~~ ~~shares (warrants) outstanding, the calculated value of~~ ~~$2.50~~ ~~per share (warrant) was estimated on the date of grant using the following assumptions: expected dividends of~~ ~~1%,~~ ~~expected life or term of~~ ~~6.5~~ ~~years, risk-free interest rate of~~ ~~5.04%,~~ ~~and expected volatility of~~ ~~13.19%.~~ ~~The expected volatility was estimated considering the historical volatility of an appropriate industry sector.~~

Stock Options

In 2006, thethe Company established a stock option plan with 1,500,000 shares available to be granted as options under the plan. Under the provisions of the plan, the option price cannot be less than the fair value of the underlying common stock as of the option grant date, and the maximum option term cannot exceed ten years. The 2006 Stock Option Plan expired on December 22, 2016 and the Company is no longer permitted to issue additional stock options under this plan.

~~During~~ However, the Company did grant 143,908 stock option awards under the 2017 Equity Incentive Plan to former TCBI employees in conjunction with the acquisition during the year ended December 31, 2022.~~201~~6, ~~total options of~~ ~~50,000~~ ~~were granted to officers and other key employees. The stock options granted were issued at an exercise price of~~ ~~$17.65~~ ~~per share for the year ended~~ ~~December 31, 2016,~~ ~~with a vesting period of~~ ~~three~~ ~~years. Compensation expense recognized as a result of vesting was approximately~~ ~~$207,000~~ ~~and~~ ~~$240,000~~ in ~~2017~~ ~~and~~ ~~2016,~~ ~~respectively.~~

The Company ~~uses~~used the Black-Scholes option pricing model to estimate the calculated value of the various share-based awards ~~with the following assumptions~~ for the year ended December 31, ~~2016.~~ 2023.~~There were~~ no ~~share-based awards for the year ended~~ ~~December 31, 2017~~ ~~since the Plan expired~~ ~~December 22, 2016.~~

		~~201~~6
~~Risk-Free Interest Rat~~e		~~1.36%~~
~~Expected Dividend Yiel~~d		~~1.18%~~
~~Expected Volatilit~~y		~~31.68%~~
~~Expected Life in Year~~s		~~5.0~~
~~Weighted Average Calculated Value of Options Grante~~d		~~$4.27~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in~~ ~~thousands)~~

The following is an analysis of the activity related to the stock options:

	Yeas Ended December 31,										Years Ended December 31,
	2017					2016					2023					2022					2021
	Number of			Weighted Average		Number of			Weighted Average		Number of			Weighted Average		Number of			Weighted Average		Number of			Weighted Average
	Options			Exercise Price		Options			Exercise Price		Options			Exercise Price		Options			Exercise Price		Options			Exercise Price
Outstanding Options, at Beginning of Period		998,480		$	12.82		953,280		$	12.59		130,924		$	18.59		113,547		$	17.06		385,300		$	14.67
Granted		-			-		50,000			17.65		-			-		143,908			22.01		-			-
Exercised		-			-		-			-		(7,500	)		17.11		(67,060	)		19.93		(261,753	)		13.62
Forfeited or Expired		(167,400	)		13.25		(4,800	)		17.11		(2,816	)		22.38		(59,471	)		22.45		(10,000	)		15.00

Outstanding Options, at End of Period		831,080		$	12.73		998,480		$	12.82		120,608		$	18.59		130,924		$	18.59		113,547		$	17.06

Exerciseable, at End of Period		784,698		$	12.49		562,548		$	13.79
Exercisable, at End of Period												111,032		$	18.24		118,958		$	18.18		113,547		$	17.06

At December 31, 2023, ~~2017,~~options for ~~784,698~~111,032 shares at a weighted average exercise price of ~~$12.49~~$18.24 were vested and exercisable. The aggregate intrinsic value of both exercisable and ~~there were~~outstanding awards at ~~46,382~~December 31, 2023 and 2022 ~~nonvested options~~is $731,000 and ~~approximately~~ ~~$210,000~~$472,000 with a weighted average remaining contractual life of ~~unrecognized compensation costs related to these options which is expected to be recognized over a period of~~ ~~three~~ ~~years.~~1.9 years and 2.9 years, respectively.

~~December 2017,~~ 117~~the option agreements were amended for~~ ~~105,250~~ ~~options which were fully vested and set to expire in~~ ~~December 2017~~ ~~to extend the expiration date to~~ ~~January 15, 2021.~~ ~~Compensation cost~~

Table of ~~the~~ ~~$63,0~~00 ~~was recognized on the effective date of the amendments. On~~ ~~December 20, 2016~~ ~~the option agreements were amended for~~ ~~330,000~~ ~~options which were fully vested and set to expire~~ ~~December 22, 2016~~ ~~to extend the expiration date to~~ ~~January 15, 2020.~~ ~~Compensation cost of~~ ~~$168,000~~ was recognized on the effective date of the amendments. Since all of these amendments extended the exercise period and retained the original per share exercise price, the “optionality” was eliminated in compliance with Section ~~409A~~ ~~of the Internal Revenue Code of~~ ~~1986,~~ as amended, thereby restricting the situations in which the options can be exercised to occur upon the earlier of (i) immediately prior to the expiration date, (ii) a change in control of the Company or the Bank, (iii) the option holder’s death, (iv) the option holder becoming disabled, and (v) the option holder incurring a separation from the Company or the Bank (if the option holder is an employee of the Company or the Bank).

Contents

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 117–6 – Employee Benefit Plans –

~~Defin~~edDefined 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 ~~limit~~s.limits. The Bank contributes a matching contribution up to 4% of wages which totaled ~~$542,000,~~~~$467,000~~$2.4 million, $2.3 million and ~~$351,000~~$1.8 million and is included in salaries and employee benefits for the years ended December 31, ~~2017,~~2023, ~~2016~~2022 and ~~2015,~~2021, respectively.

Deferred Compensation

TheThe 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, ~~2017~~2023 and ~~2016,~~2022, the Company had recorded accrued liabilities of ~~$2.1~~$3.5 million and ~~$2.0~~$3.0 million, respectively. The expense related to the deferred compensation agreements was ~~$209,000~~$586,000, $507,000 and ~~$336,000~~$408,000 for the years ended December 31, ~~2017~~2023, 2022and ~~2015,~~2021, respectively. ~~For~~

Note 18– Other Income and Expenses –

An analysis of Other Income is as follows for the ~~year~~years ended December 31, 2023, ~~31,~~2022 and ~~2016,~~2021: ~~the Company recognized income~~ of ~~$339,000~~ ~~related to the deferred compensation agreements, as a result of the termination of some members of the select group of management.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

~~Note~~ 17 ~~– Other Expenses –~~

	2023		2022		2021
	(Dollars in thousands)
Debit Card and ATM Fee Income	$	6,590	$	6,407	$	6,199
Cash Value of Life Insurance Income		2,247		1,931		1,396
Fees and Brokerage Commissions		7,247		6,964		5,015
Pass-Through Income from SBIC Partnerships		1,946		1,347		2,615
Gain on Extinguishment of Debt		1,458		-		-
Gain on Sale of Branch		945		-		492
Swap Fee Income		964		-		-
Other		6,134		3,863		2,757
Total Other Income	$	27,531	$	20,512	$	18,474

An analysis of Other Expenses is as follows for thethe years ended December 31, ~~2017,~~2023, ~~2016~~2022 and ~~2015:~~2021:

	2017		2016		2015		2023		2022		2021
	(Dollars in thousands)						(Dollars in thousands)
Business Development	$	1,193	$	1,253	$	805
Communications		830		872		469
Ad Valorem Shares Tax		804		650		669
Data Processing Fees		1,537		1,528		1,141
Directors Fees		400		337		325
Insurance		283		301		284
Legal and Professional Fees		1,159		1,806		1,980
Office Supplies and Printing		421		455		437
Regulatory Assessments		904		847		880
Taxes and Licenses		11		24		10
Nonrecurring Merger and Conversion Costs		129		8		1,149
Other		2,829		2,943		2,274

Total Other Expenses	$	10,500	$	11,024	$	10,423
Advertising and Promotions							$	4,628	$	3,949	$	2,712
Communications								2,290		2,561		1,976
Ad Valorem Shares Tax								3,160		3,400		2,499
Data Processing Fees								9,034		8,358		8,137
Directors' Fees								1,079		972		790
Insurance								2,028		1,655		1,091
Legal and Professional Fees								3,173		2,359		2,679
Office Supplies and Printing								1,215		1,159		1,131
Regulatory Assessments								4,119		3,124		2,440
Taxes and Licenses								299		61		120
Merger and Conversion Costs								236		4,808		515
Other								13,971		12,414		11,396
Total Other Expenses							$	45,232	$	44,820	$	35,486

Note 119–8 – 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The ~~Bank~~’sBank’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 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 ~~$256.9~~ ~~million~~$1.2 billion and standby and commercial letters of credit of approximately ~~$9.5~~$45.2 million at December 31, ~~2017.~~2023.

As discussed in Note 7, we have a reserve for unfunded loan commitments of $3.3 million and $605,000 at December 31, 2023 and 2022, respectively.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

Note 20–19 – Concentrations of Credit –

The majority of the ~~Bank~~’sBank’s business activities are with customers in the Bank’s market area, which consists primarily of ~~East and West Baton Rouge, Bossier, Caddo, St. Tammany, Lafayette, Calcasieu, Terrebonne, Jefferson and adjacent parishes, and~~Louisiana, the Dallas / Fort Worth, Texas ~~area.~~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 6.7. 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~~concentration of credits secured by real estate. The Bank had extended credit secured by non-farm non-residential real estate totaling approximately ~~$337.7~~ ~~million~~$2.0 billion and ~~$298.1~~ ~~million,~~$1.8 billion, which accounted for ~~34.6%~~39.8% and ~~36.8%~~39.7% of total loans held for investment at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. Additionally, the Bank had extended credit secured by construction and land development totaling approximately ~~$143.5~~$669.8 million and ~~$94.4~~$722.1 million, respectively; these loans represented ~~14.7%~~13.4% and ~~11.6%~~15.7% of total loans held for investment at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

The Bank maintains amounts on deposit and federal funds sold with correspondent banks which may periodically exceed the federally insured amount.

Note 2210– Leases – ~~Commitments –~~

~~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 ~~$1.8~~$5.6 million, ~~$1.5~~$4.9 million and ~~$1.4~~$2.8 million for the years ended December 31, ~~2017,~~2023, ~~2016~~2022 and ~~2015,~~2021, respectively. The Company had a weighted average lease term of 6.5 years and 6.0 years and a weighted average discount rate of 3.24% and 2.63% as of December 31, 2023 and 2022, respectively.

Future minimum lease payments under these leases are as follows:

December 31,
	(Dollars in thousands)
2024	$	4,429
2025		3,693
2026		3,473
2027		3,362
2028		3,064
2029 and Thereafter		5,617
Total Future Minimum Lease Payments		23,638
Less Imputed Interest		(2,474	)
Present Value of Lease Liabilities	$	21,164

December 31,

(Dollars in thousands)

2018
$ 2,354
2019
2,091
2020
1,312
2021
1,168
2022 and Thereafter
6,264
Total Future Minimum Lease Payments
$ 13,189

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 22– Commitments –

SBIC Capital Commitment

The SBIC is a program initiated by the U.S. Small Business Administration ~~(SBA)~~("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.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~borrowers.

The Bank has agreed to participate as an investor with McLarty Capital Partners SBIC, L.P. ~~(McLarty)~~(“McLarty”), McLarty Capital Partners SBIC II, L.P. ~~(McLarty II)~~(“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) and~~(“Bluehenge”), Bluehenge Capital Secured Debt SBIC II, L.P. (“Bluehenge II”), New Louisiana Angel Fund 2, LLC ~~(New Louisiana); details~~(“New Louisiana”) and Pharos Capital Partners IV-A, L.P. (“Pharos”). 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”), Valesco Fund III, LP (“Valesco III”), and GP Capital Partners, LP (“GP Capital”). Details of these commitments at December 31, ~~2017~~2023 are below.

McLarty

McLarty II

Bluehenge

New Louisiana

(Dollars in thousands)

Total Capital Commitment
$ 2,000 $ 2,500 $ 1,500 $ 50
Capital Called
$ 1,802 $ 1,604 $ 745 $ 13
Remaining Unfunded Capital Commitment
$ 198 $ 896 $ 755 $ 37

	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		517		1,983
Bluehenge		2,500		2,312		188
Bluehenge II		2,500		1,188		1,312
New Louisiana		50		50		-
Pharos		1,000		495		505
Valesco II		1,000		795		205
Valesco III		2,000		119		1,881
GP Capital		1,000		636		364
	$	19,550	$	12,009	$	7,541

Fintech Fund Commitment

The Company has agreed to invest in certain Fintech funds. As part of the TCBI acquisition, the Company acquired investments in and committed to invest further in any remaining unfunded capital commitments in Work America Capital Fund I, LP and SBRE I, LLC. During the year ended December 31, 2022, SBRE I, LLC was fully redeemed. Details of these commitments at December 31, 2023 are below.

	Total Capital Commitment		Capital Called		Remaining Unfunded Capital Commitment
BankTech Ventures, LP	$	500	$	235	$	265
Jam Fintop BankTech, LP		1,000		508		492
Ledyard Capital Managers, LLC		1,000		1,000		-
Mendon Ventures Banktech Fund I, LP		1,500		1,355		145
Castle Creek Launchpad Fund I, LP		1,500		682		818
Work America Capital Fund I, LP		700		700		-
	$	6,200	$	4,480	$	1,720

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Federal Home Loan Bank Letters of Credit

The Bank had outstanding letters of credit on behalf of o~~thers~~others from the FHLB of ~~$81.0~~$301.7 million and $173.7 million at ~~both~~ December 31, ~~2017~~2023 and ~~2016.~~2022, respectively. The outstanding letters of credit as of December 31, ~~2017~~2023 are as follows:

Twelve letters of credit totaling $93.2 million expire in January 2024.

Four letters of credit totaling $162.7 million expire in February 2024.

One letter of credit of ~~$11.0~~ ~~million~~ $403,000 expires in March ~~2018.~~2024.

Eleven letters of credit totaling $28.9 million expire in April 2024.

Nine letters of credit totaling $7.1 million expire in May 2024.

Two letters of credit totaling $4.6 million expire in June 2024.

Two letters of credit totaling $3.4 million expire in August 2024.

One letter of credit of ~~$5.0~~ ~~million~~$251,000 expires in ~~May 2018.~~September 2024.

Two letters of credit totaling $675,000 expire in November 2024.

One letter of credit of $~~40.0~~ ~~million~~$329,000 expires in December ~~2018.~~2024.

~~One letter of credit~~ of ~~$25.0~~ ~~million expires in~~ ~~December 2018.~~

Note 223–1 – 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 ~~$24.0~~$19.5 million and ~~$15.1~~$66.8 million at December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

~~The activity in loans to directors, officers and their affiliates is as follows:~~

2017

2016

(Dollars in thousands)

Balance - Beginning of Year
$ 15,139 $ 22,004
New Loans
14,283 6,570
Repayments
(5,375 ) (13,435 )

Balance - End of Year
$ 24,047 $ 15,139

Related party deposits totaled ~~$15.9~~$51.2 million and ~~$13.7~~$58.0 million as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

Note 24–22 – Fair Value of Financial Instruments –

Fair Value Disclosures

The Company groups its financial assets and liabilities measured at f~~air~~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.

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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 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.

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The fair values of ~~Contents~~

~~BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~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, ~~2017~~2023 and ~~2016.~~2022. 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, 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


December 31, 2022
Available for Sale:
U.S. Treasury Securities	$	30,115	$	-	$	30,115	$	-
U.S. Government Agency Securities		47,372		-		47,372		-
Corporate Securities		46,004		-		27,004		19,000
Mortgage-Backed Securities		451,725		-		451,725		-
Municipal Securities		315,535		-		280,767		34,768
Loans Held for Sale		304		-		304		-
Total	$	891,055	$	-	$	837,287	$	53,768

Fair Value

Level 1

Level 2

Level 3

(Dollars in thousands)

December 31, 2017

Available for Sale:

U.S. Government Agency Securities
$ 8,953 $ - $ 8,953 $ -
Corporate Securities
13,041 - 13,041 -
Mortgage-Backed Securities
79,941 - 79,941 -
Municipal Securities
76,479 - 67,817 8,662
Other Securities
734 - 734 -
Total
$ 179,148 $ - $ 170,486 $ 8,662

December 31, 2016

Available for Sale:

U.S. Government Agency Securities
$ 7,566 $ - $ 7,566 $ -
Corporate Securities
11,127 - 11,127 -
Mortgage-Backed Securities
99,372 - 99,372 -
Municipal Securities
79,636 - 71,631 8,005
Other Securities
641 - 641 -
Total
$ 198,342 $ - $ 190,337 $ 8,005

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. 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 year ended December 31, 2023.

	Municipal			Corporate
	Securities			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

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, 2023.

	Estimated		Valuation	Unobservable	Range of
	Fair Value		Technique	Inputs	Discounts
	(Dollars in thousands)
December 31, 2023
Municipal Securities	$	20,847	Present Value of Expected Future Cash Flow Model	Liquidity Premium		1%
Corporate Securities		7,968	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~~impaired/individually evaluated loans is measured at the fair value of the collateral for collateral-dependent loans. Impaired loans are Level 23 assets measured using appraisals from ~~external~~external parties of the collateral less any prior ~~liens.~~liens and adjusted for estimated selling costs. Adjustments may be made by management based on a customized internally developed discounting matrix. Repossessed assets are initially recorded at fair value less estimated cost to ~~sell.~~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 2.3.

Fair Value

Level 1

Level 2

Level 3

(Dollars in thousands)

December 31, 2017

Assets:

Impaired Loans
$ 13,576 $ - $ 13,576 $ -
Repossessed Assets
227 - 227 -
Total
$ 13,803 $ - $ 13,803 $ -

December 31, 2016

Assets:

Impaired Loans
$ 12,865 $ - $ 12,865 $ -
Repossessed Assets
1,196 - 1,196 -
Total
$ 14,061 $ - $ 14,061 $ -

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

	Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
December 31, 2023
Assets:
Impaired/Individually Evaluated Loans	$	4,750	$	-	$	-	$	4,750
Other Nonperforming Assets		1,685		-		-		1,685
Total	$	6,435	$	-	$	-	$	6,435

December 31, 2022
Assets:
Impaired Loans	$	16,816	$	-	$	-	$	16,816
Other Nonperforming Assets		1,434		-		-		1,434
Total	$	18,250	$	-	$	-	$	18,250

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 ~~generally accepted accounting principles,~~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 – 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)~~ (“BOLI") – The carrying amount approximates its fair value.

Other Equity Securities – The carrying amount approximates its fair value.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

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.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated approximate fair values of the ~~Bank~~’sBank’s financial instruments as of December 31, ~~2017~~2023 and ~~2016~~2022 are as follows:

	Carrying		Total								Carrying		Total
	Amount		Fair Value		Level 1		Level 2		Level 3		Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)										(Dollars in thousands)
December 31, 2017
December 31, 2023
Financial Assets:
Cash and Short-Term Investments	$	116,411	$	116,411	$	116,411	$	-	$	-	$	377,244	$	377,244	$	377,244	$	-	$	-
Securities		179,148		179,148		-		170,486		8,662		879,571		879,571		-		850,756		28,815
Mortgage Loans Held for Sale		201		201		-		201		-
Loans Held for Sale												835		835		-		835		-
Loans - Net		966,519		952,113		-		-		952,113		4,952,371		4,849,503		-		-		4,849,503
Cash Value of BOLI		23,200		23,200		-		23,200		-		96,478		96,478		-		96,478		-
Other Equity Securities		8,627		8,627		-		-		8,627		33,942		33,942		-		-		33,942
Total	$	1,294,106	$	1,279,700	$	116,411	$	193,887	$	969,402	$	6,340,441	$	6,237,573	$	377,244	$	948,069	$	4,912,260

Financial Liabilities:
Deposits	$	1,055,533	$	1,046,096	$	-	$	-	$	1,046,096	$	5,248,790	$	5,243,326	$	-	$	-	$	5,243,326
Borrowings		80,501		81,059		-		81,059		-		635,073		613,464		-		613,464		-
Total	$	1,136,034	$	1,127,155	$	-	$	81,059	$	1,046,096	$	5,883,863	$	5,856,790	$	-	$	613,464	$	5,243,326


December 31, 2016
December 31, 2022
Financial Assets:
Cash and Short-Term Investments	$	44,729	$	44,729	$	44,729	$	-	$	-	$	168,346	$	168,346	$	168,346	$	-	$	-
Securities		198,342		198,342		-		190,337		8,005		890,751		890,751		-		836,983		53,768
Mortgage Loans Held for Sale		180		180		-		180		-
Loans Held for Sale												304		304		-		304		-
Loans - Net		802,789		796,400		-		-		796,400		4,567,998		4,443,577		-		-		4,443,577
Cash Value of BOLI		22,567		22,567		-		22,567		-		91,958		91,958		-		91,958		-
Other Equity Securities		6,120		6,120		-		-		6,120		37,467		37,467		-		-		37,467
Total	$	1,074,727	$	1,068,338	$	44,729	$	213,084	$	810,525	$	5,756,824	$	5,632,403	$	168,346	$	929,245	$	4,534,812

Financial Liabilities:
Deposits	$	932,795	$	912,702	$	-	$	-	$	912,702	$	4,820,345	$	4,810,263	$	-	$	-	$	4,810,263
Borrowings		53,646		53,706		-		53,706		-		560,114		544,564		-		544,564		-
Total	$	986,441	$	966,408	$	-	$	53,706	$	912,702	$	5,380,459	$	5,354,827	$	-	$	544,564	$	4,810,263

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~~BUSINESS FIRST~~ ~~BANCSHARES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands)~~

Note 225–3 – 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 226–4 – Subsequent Events –

On ~~January 1, 2018,~~ the Company completed the acquisition of Minden Bancorp, Inc. (MBI), and its wholly-owned subsidiary, MBL Bank, located in Minden, Louisiana, further increasing its presence in the Northwest Louisiana region. The Company paid an aggre~~gate cash consideration equal to~~ ~~$56.2~~ ~~million, or approximately~~ ~~$23.20~~ ~~in exchange for each share of MBI common stock outstanding immediately prior to the effective time of the acquisition. At~~ ~~December 31, 2017,~~ ~~MBI had approximately~~ ~~$315.4~~ ~~million in total assets,~~ ~~$193.3~~ ~~million in net loans,~~ ~~$264.0~~ ~~million in total deposits, and~~ ~~$28.5~~ ~~million in total shareholders’ equity, and was the leading financial institution in Webster Parish, part of the Shreveport-Bossier City MSA, through its~~ ~~two~~ ~~banking center locations.~~

In ~~December 2017,~~ ~~the Company~~’s wholly-owned subsidiary, Business First Bank, notified its primary regulators, the Louisiana Office of Financial Institutions and the Federal Deposit Insurance Corporation, and the impacted customers and employees of its intention to close the Erwinville and Zachary banking center locations. The closures are expected to occur in ~~March 2018,~~ subject to applicable regulatory requirements. The affected banking centers are low traffic facilities, and Business First Bank expects to fully serve the affected customers through its remaining banking centers and electronic services. There were no ~~employee job losses or significant impairment of Bank premises as a result of the closures.~~

The Company ~~evaluated subsequent events~~acquired Waterstone LSP, LLC ("Waterstone") on January 31, 2024. Waterstone works with community banks and ~~transactions for potential recognition or disclosure in~~small business owners to implement and manage the ~~financial statements through the date which the financial statements were available to be issued. This evaluation did~~ ~~not~~ ~~result in additional subsequent events that required disclosures and /or adjustments under general accounting standards.~~SBA's loan programs.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

Note 227–5 – 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, 2023 ~~201~~7AND ~~2016~~2022

(Dollars in thousands)

	2017		2016		2023			2022
Assets:
Cash	$	62,727	$	54	$	12,382		$	35,684
Investment in Subsidiaries		119,176		116,031		714,971			641,491
Fintech Funds						3,924			3,080
Goodwill						5,704			5,704
Income Taxes Receivable						10,840			8,739
Other Assets		2,121		2,354		1,610			1,794
Total Assets	$	184,024	$	118,439	$	749,431		$	696,492

Liabilities:
Short Term Borrowings	$	862	$	862
Accrued Interest Payable		7		6	$	-		$	80
Long Term Borrowings		2,700		3,000
Subordinated Debt						99,990			110,749
Subordinated Debt - Trust Preferred Securities						5,155			5,155
Other Liabilities		520		1,012		27			27
Total Liabilities		4,089		4,880		105,172			116,011

Shareholders' Equity:
Preferred Stock						71,930			71,930
Common Stock		10,232		6,917		25,352			25,110
Additional Paid-in Capital		144,172		85,133		397,447			393,690
Retained Earnings		25,531		21,509		216,115			163,955
Accumulated Other Comprehensive Income (Loss)						(66,585	)		(74,204	)
Total Shareholders' Equity		179,935		113,559		644,259			580,481
Total Liabilities and Shareholders' Equity	$	184,024	$	118,439	$	749,431		$	696,492

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(Dollars in thousands)~~

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2023, ~~201~~7,~~2016~~2022 AND ~~2015~~2021

(Dollars in thousands)

	2017			2016			2015			2023			2022			2021
Income:
Interest	$	-		$	-		$	1
Expenses:
Other Operating Expenses		699			1,464			1,437
Income (Loss) before Income Taxes and Equity in Undistributed Net Income of Subsidiaries		(699	)		(1,464	)		(1,436	)
Income Tax Expense (Benefit)		233			(498	)		(474	)
Income (Loss) before Equity in Undistributed Net Income of Subsidiaries		(932	)		(966	)		(962	)
Equity in Undistributed Net Income of Subsidiaries		5,780			6,077			5,058
Net Income	$	4,848		$	5,111		$	4,096
Income:
Dividend Income From Subsidiaries										$	13,000		$	10,000		$	13,000
Interest Income											19			13			5
Other Income											1,147			43			-
Expenses:
Interest Expense											5,753			5,477			3,793
Other Operating Expenses											6,102			6,097			4,374
Income (Loss) Before Income Taxes and Equity in Undistributed
Net Income of Subsidiaries											2,311			(1,518	)		4,838
Income Tax Benefit											(2,059	)		(2,400	)		(1,916	)
Income Before Equity in Undistributed Net Income of Subsidiaries											4,370			882			6,754
Equity in Undistributed Net Income of Subsidiaries											66,673			53,373			45,382
Net Income											71,043			54,255			52,136
Preferred Stock Dividends											5,401			1,350			-
Net Income Available to Common Shareholders										$	65,642		$	52,905		$	52,136

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I~~TEM~~ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial ~~Disclosures.~~Disclosure.

Not applicable.

ITEM 9A. Controls and Procedures.

Disclosure C~~ontrols~~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, ~~2017.~~2023. 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. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, ~~2017.~~2023. The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. As a result, we cannot assure you that our disclosure controls and procedures will detect all errors or fraud.

Management’s’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 the accounting principles generally accepted in the United States of America. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

~~Our~~The Company’s internal control ~~systems are~~over financial reporting is a process designed to ~~ensure~~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. 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 ~~properly authorized~~recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and ~~recorded~~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 ~~records~~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 ~~safeguard assets from material loss or misuse. Such assurance cannot be absolute~~future periods are subject to the risk that controls may become inadequate because of ~~inherent limitations~~changes in ~~any internal control system.~~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, ~~201~~72023, 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. Based on the assessment, management determined that we maintained effective internal control over financial reporting as of December 31, ~~2017. Our independent registered public accountants have issued an audit report on~~2023. The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by FORVIS, LLP, an independent registered public accounting firm, as stated in their report which ~~appears elsewhere in this Report.~~is included herein.

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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, ~~2017,~~2022, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

ITEM9B. Other Information.

(a)

Not applicable

(b)

During the three months ended December 31, 2023, 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.

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

ITEM 10. Directors, Executive Officers and Corporate Governance.

~~General~~

~~Our board~~The information called for by this item is incorporated herein by reference from our Definitive Proxy Statement for our Annual Meeting of ~~directors and the board of directors of Business First Bank are~~ ~~each made up of the same 17 individuals. Our directors are elected by shareholders at our annual shareholders’ meeting. The elected directors hold office until the next annual meeting,~~Shareholders tentatively being held on May 23, 2024, or ~~until their successors are duly elected and qualified. Our executive officers are appointed by and serve at the discretion of our board of directors.~~

The directors of Business First Bank are elected by us, as the sole shareholder of Business First Bank, each year and they hold office for a term of one year or until their successors are chosen and qualified. The executive officers of Business First Bank are appointed by and serve at the ~~discretion of its board of directors. The following table sets forth the current directors and executive officers of Business First and Business First Bank:~~

~~Directors~~
~~Name (Age)~~	~~Title/Position with~~ ~~Business First~~	~~Position~~ ~~Since~~	~~Title/Position with~~ ~~Business First Bank~~	~~Position~~ ~~Since~~
~~Lloyd Benny Alford (7~~2)	~~Director~~	~~May~~ ~~2012~~	~~Director~~	~~February 2006~~
~~Jack E. Byrd, Jr. (71)~~	~~Director~~	~~February~~ ~~2018~~	~~Director, Chairman of~~ ~~Northwest Louisiana~~ ~~Region~~	~~January 2018~~
~~John Graves (7~~6)	~~Director~~	~~May~~ ~~2012~~	~~Director~~	~~July 2006~~
~~Robert S. Greer, Jr. (70)~~	~~Chairman~~ ~~of the Board~~	~~June 2011~~	~~Chairman~~ ~~of the Board~~	~~June 2011~~
~~David L. Laxton, III (68)~~	~~Director~~	~~June 2015~~	~~Director~~	~~June 2015~~
~~Rolfe Hood McCollister, Jr. (62)~~	~~Director~~	~~August~~ ~~2005~~	~~Director~~	~~August 2005~~
~~Andrew D. McLindon (5~~6)	~~Director~~	~~May 2012~~	~~Director~~	~~April 2006~~
~~David R. (“Jude”) Melville, III (43)~~	~~President and Chief~~ ~~Executive Officer~~, ~~Director~~	~~March~~ ~~2011~~⁽¹⁾	~~President and Chief~~ ~~Executive Officer~~, ~~Director~~	~~March~~ ~~2011~~⁽¹⁾
~~Patrick E. Mockler (4~~9)	~~Director~~	~~May 2012~~	~~Director~~	~~March 2006~~
~~David A. Montgomery, Jr. (57)~~	~~Director~~	~~May 2012~~	~~Director~~	~~December 2007~~
~~Arthur Price (5~~2)	~~Director~~	~~May 2012~~	~~Director~~	~~December~~ ~~2008~~
~~Fayez K. Shamieh (7~~2)	~~Director~~	~~May 2012~~	~~Director~~	~~January 2010~~
~~C. Stewart Slack (62)~~	~~Director~~	~~May 2012~~	~~Director~~	~~December 2007~~
~~Kenneth Smith (5~~5)	~~Director~~	~~May 2012~~	~~Director~~	~~December 2011~~
~~Thomas Everett Stewart, Jr. (63)~~	~~Director~~	~~August 2005~~	~~Director~~	~~August 2005~~
~~Steve White (5~~8)	~~Director~~	~~May 2012~~	~~Director~~	~~April 2010~~
~~Robert Yarborough (6~~4)	~~Director~~	~~May 2012~~	~~Director~~	~~August 2006~~

~~Non-Director Executive Officers~~
~~Name (Age)~~	~~Title/Position with~~ ~~Business First~~	~~Position~~ ~~Since~~	~~Title/Position with~~ ~~Business First Bank~~	~~Position~~ ~~Since~~
~~Donald A. Hingle, II (57)~~	~~---~~	~~---~~	~~Executive Vice President,~~ ~~Chief Credit Executive~~	~~January 2017~~⁽²⁾
~~Philip Jordan (4~~5)	~~---~~	~~---~~	~~Executive Vice President,~~ ~~Chief Commercial Officer~~	~~January 2017~~⁽³⁾
~~Keith Mansfield (41)~~	~~---~~	~~---~~	~~Executive Vice President,~~ ~~Chief Operations Officer~~	~~January 2017~~⁽⁴⁾
~~Alicia Robertson (49)~~	~~---~~	~~---~~	~~Executive Vice President,~~ ~~Chief Retail Officer~~	~~January 2017~~⁽⁵⁾
~~Gregory Robertson (4~~6)	~~Chief Financial Officer and Treasurer~~	~~January 2017~~⁽⁶⁾	~~Executive Vice President,~~ ~~Chief Financial Officer~~	~~January 2017~~⁽⁶⁾

~~(1)~~	~~Mr.~~ ~~Melville has been with the bank since its inception in February 2006, previously serving as its Chief Administrative Officer. He was promoted to the position of Chief Executive Officer in March 2011.~~
~~(2)~~	~~Mr.~~ ~~Hingle has been with the bank since July 2009, previously serving as its Southeastern Region Chief Executive Officer.~~
~~(3)~~	~~Mr.~~ ~~Jordan has been with the bank since August 2008, previously serving as its Western Region Chief Executive Officer.~~
~~(4)~~	~~Mr.~~ ~~Mansfield has been with the bank since April 2016, previously serving as its Chief Information Officer.~~
~~(5)~~	M~~s. Robertson has been with the bank since September 2011, previously serving as its Senior Vice President – Director of Deposit Services, Business Development and Treasury.~~
~~(6)~~	~~Mr.~~ ~~Robertson has been with the bank since August 2011, previously serving as its Chief Banking Officer.~~

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~~Board of Directors~~

~~A brief description of the background of each of our directors and executive officers is set forth below.~~ There are no arrangements between us and any person pursuant to which such person has been elected as a director. No director or executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or executive officer or director. Since the filing of our Special Financialan Amended Annual Report on Form ~~10-K for~~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, ~~2014, there have been no material changes to the procedures by which our shareholders may recommend nominees to our board of directors.~~2023.

~~Lloyd Benny Alford.~~ Benny Alford serves as a director for Business First and Business First Bank. Mr. Alford owns and operates Benny’s Car Wash & Oil Change, headquartered in Baton Rouge, Louisiana. He was first employed by the car wash in 1964, and took over the operation from his father in 1970. He has since expanded services to include convenience stores, five oil changes, and seven car washes with more expansion planned for the future. Mr. Alford is past president of the International Car Wash Association and is in the Car Washing Hall of Fame. Mr. Alford brings to our board of directors valuable knowledge and experience relating to the ownership and management of small businesses.

~~Jack E. Byrd, Jr.~~ Jack Byrd serves as a director for Business First and Business First Bank, and also as Chairman of the Northwest Louisiana Region for Business First Bank. Mr. Byrd’s career began with over 20 years as a practicing certified public accountant, and his banking career began in 1987 when he was named President of Minden Building & Loan Association. In 1989, Mr. Byrd was named President of Minden Bank and Trust and served in that capacity until 1999, when it was merged with Regions Bank. Mr. Byrd served as President of North Louisiana for Regions Bank from 1999 to 2007, where he oversaw 30 branch offices. After his time with Regions Bank, Mr. Byrd returned to what was now MBL Bank as Chairman of the Board, President and CEO until its acquisition by Business First in 2018. Mr. Byrd’s extensive banking experience throughout North Louisiana, including in executive leadership positions, and understanding of financial accounting provides our board with valuable insight and knowledge.

~~John Graves.~~ John Graves serves as a director for Business First and Business First Bank. Mr. Graves is President of Evans-Graves Engineers, Inc., in Baton Rouge, Louisiana, and has served as the firm’s President since 1986. Mr. Graves holds a bachelor’s degree in civil engineering from Louisiana State University. He previously represented East Baton Rouge Parish on the Regional Planning Commission for 26 years, and he presently serves as Chairman of the Civil and Environmental Engineering External Advisory Board at LSU. He also currently serves on the board of directors for Pennington Biomedical Research Foundation. Mr. Graves brings entrepreneurial and business building skills and experience to our board of directors. He also provides valuable insight and experience as a result of his service on the boards of directors for other companies and institutions.

~~Robert S. Greer, Jr.~~ Bob Greer serves as Chairman of the board of Business First and Business First Bank. Mr. Greer previously served as President of multiple insurance companies during his career. He retired in 2013 from his position as President and Chief Executive Officer of LEMIC Insurance Company, a workers’ compensation insurer in Baton Rouge, Louisiana. Prior to his retirement, Mr. Greer served as the President and Chief Executive Officer of LEMIC Insurance Company since 2001. Mr. Greer holds a bachelor’s degree in insurance from Louisiana State University. Mr. Greer also previously served as a director of Starmount Life Insurance and as a director of Woman’s Hospital. Mr. Greer benefits our board of directors through his extensive business knowledge and experience in the insurance industry as well as with valuable insight gained through his service on other boards of directors. His commitment to our success is also demonstrated by his service as its Chairman of the board.

~~David L. Laxton~~~~, III~~.David Laxton serves as a director for Business First and Business First Bank. Mr. Laxton has over 35 years of experience in the energy and distribution industries. He was one of the founders of Edgen Group Inc., a global supplier of specialty pipe, fittings, plates, valves and structural steels to the energy industry. He served from its founding in 1996 as Executive Vice President and Chief Financial Officer until his retirement in 2014. During his tenure, he supervised the acquisition of more than a dozen companies located in the United States, Canada, the United Kingdom, Dubai and Singapore. He also co-led Edgen’s initial public offering and listing on the New York Stock Exchange, and managed over $2.0 billion in company, bank and public market debt offerings. In addition to his experience in the energy industry, Mr. Laxton served on the board of directors of American Gateway Bank from 1996 until its 2015 merger with Business First Bank. While on that board, he served as Chairman for five years and also as Chairman of the Audit Committee. Our board of directors believes that it will benefit from Mr. Laxton’s valuable corporate and banking experience, as well as from his specific knowledge regarding the markets and our customers.

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~~Rolfe Hood McCollister, Jr.~~ ~~Rolfe McCollister serves as a director for Business First and Business First Bank. Mr. McCollister is the founder of Louisiana Business, Inc., which publishes~~ ~~Greater Baton Rouge Business Report (~~~~started in 1982),~~ ~~225~~ ~~magazine~~~~, inRegister~~ ~~magazine, Daily Report online news,~~ ~~Louisiana NEXT, Welcome~~ ~~magazine,~~ ~~10/12 Industry~~ Re~~port~~ and other specialty publications. Louisiana Business, Inc. also produces the Baton Rouge Business Awards and Hall of Fame, Influential Women in Business, the Louisiana Business Symposium, Forty Under 40 and several other annual events. Mr. McCollister is a graduate of Louisiana State University and currently serves as a board member of the LSU System Board of Supervisors. His business management experience, previous service on the board of directors of three banks, and many community contacts enable him to make valuable contributions to our board of directors.

~~Andrew D. McLindon.~~ Andrew McLindon serves as a director for Business First and Business First Bank. Mr. McLindon has served since 1989 as President and Chief Executive Officer of Mainspring Companies, LLC, a management firm that oversees operations for the following companies: MBD Construction, a commercial construction firm; MBD Maintenance, a commercial building maintenance company; MBD Automation, an automated equipment installation provider; Genlease, a provider of emergency power solutions; McLindon Development, a real estate development company; 4 Real Estate Services, a property management company; and Modus, LLD, a national facility services company.Mr. McLindon earned a bachelor’s degree in construction management from Louisiana State University. Mr. McLindon brings executive decision-making, leadership and risk assessment skills to our board of directors as a result of his experience in the construction industry. His experience in real estate development and construction also benefit our board of directors.

~~David R. Melville~~, ~~III.~~ ~~David “Jude” Melville serves as President and Chief Executive Officer and a director of Business First and Business First Bank . He has served in these capacities since 2011 and has~~held various management roles since the Bank’s chartering in 2006. Prior to becoming a community banker, Mr. Melville served as a captain in the U. S. Air Force. He earned a bachelor’s degree in social studies from Harvard College and a Master’s of Science in Management from the London School of Economics. Mr. Melville is also a 2007 graduate of the Graduate School of Banking at Louisiana State University. He serves on the executive board of the Louisiana Association of Business and Industry and as a member of Louisiana’s Committee of 100, a board member of the Louisiana Bankers Association and a member of the Federal Reserve Sixth District’s Depository Institutions Advisory Council, among other affiliations.

~~Patrick E. Mockler.~~ Patrick Mockler serves as a director for Business First and Business First Bank. Mr. Mockler has served as President of Mockler Beverage Company, ALP since 2007, and has been a partner of Mockler Beverage Company, ALP since 1995. Mr. Mockler holds a bachelor’s degree in international trade and finance from Louisiana State University. He has also served as a partner of New Orleans Eagle Investments, LLC since 2009. Mr. Mockler is an active participant in his community, having served in various capacities on over a dozen non-profit boards. Currently Mr. Mockler serves on the Louisiana Workers Compensation Corporation board and serves on the Sports BR Board. Mr. Mockler brings valuable business management skills and key relationships to our board of directors.

~~David A. Montgomery~~~~, Jr~~. David Montgomery serves as a director for Business First and Business First Bank. Mr. Montgomery has served as Vice President of Montgomery Agency, Inc., an independent insurance agency, since 1990. Mr. Montgomery is a Certified Public Accountant and he is currently a councilman at large with Bossier City, Louisiana. He also served for 14 years as the Chairman of the Budget Committee for the Bossier City Council. Since 1996, Mr. Montgomery has served on the Finance Committee for North Louisiana Volunteers of America. Mr. Montgomery holds a bachelor’s degree in accounting from Louisiana State University. Mr. Montgomery brings extensive knowledge of the insurance and accounting industries to our board of directors. He also provides valuable knowledge and insight derived from his service for civic and governmental organizations.

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~~Arthur Price.~~ Arthur Price serves as a director for Business First and Business First Bank. Mr. Price has served as Vice President, Finance / CFO for Badger Oil Corporation for over twenty years and was named President / CFO in 2017. Badger Oil and its affiliates participate in the exploration, drilling and production of crude oil and natural gas, with primary operations in the Louisiana Gulf Coast region and the Outer Continental Shelf of the Gulf of Mexico. Prior to joining Badger Oil, Mr. Price worked as an oil and gas accountant with a specialized firm located in Lafayette, Louisiana. As a senior member of the oil and gas community, Mr. Price is an active board member of the Louisiana Oil and Gas Association and the Louisiana Association of Business and Industry. Mr. Price is also a former member of the board of The Lafayette Petroleum Club, having served as Treasurer and President. Mr. Price received a Bachelor of Science degree in Business Administration from the University of Southwestern Louisiana (now The University of Louisiana, Lafayette) in 1989 and is a Certified Public Accountant.

~~Fayez K. Shamieh, M.D.~~ Dr. Fayez Shamieh serves as a director for Business First and Business First Bank. Dr. Shamieh is a physician specializing in neurology. In 1979, Dr. Shamieh founded Neuro Associates in Lake Charles, Louisiana, and has been a senior member at the clinic since that time. Dr. Shamieh earned a degree in medicine from Ain Shams University in Cairo, Egypt. He completed his Neurology Residency and a fellowship in Neurophysiology at Baylor College of Medicine in Houston, Texas. Dr. Shamieh has been a member of a nonprofit organization called Physicians for Peace, headquartered in Norfolk, Virginia, where for the past 23 years the volunteer members from all over the United States provide and enhance the up to date advances and the teaching to the medical communities of the needy countries all over the world. In addition to treating the most difficult and complicated cases, these volunteers carry with them donated equipment and huge amounts of medicine. Dr. Shamieh concentrated and led the medical missions to the Palestinian West Bank and the area of the Holy Land at least once or twice a year. He currently serves as a counselor for Southern Medical Associates and has previously served on the board of directors for the Louisiana State Medical Society. Dr. Shamieh brings entrepreneurial and business building skills and experience to our board of directors, having successfully managed his own medical clinic for over thirty years. He also has valuable connections within the business and medical communities we serve.

~~C. S~~~~tewart Slack.~~ ~~Stewart Slack serves as a director for Business First and Business First Bank. Mr. Slack is a commercial real estate executive currently serving as principal and founder~~ of JSW|Group, a development services consulting group in Dallas, Texas. Mr. Slack previously served as Vice President of KDC Real Estate Development & Investments, a national real estate development company headquartered in Dallas. From 1998 to 2013 Mr. Slack was managing partner in Slack-Alost Development, a regional real estate development company. Mr. Slack also served as founder and President of Slack Alost Architecture from 1985 to 2013. Mr. Slack~~served as a director for~~Premier Bank, later Bank One, from 1989 to 2000. Mr. Slack serves and has served on a number of community and non-profit boards including The Strand Theater Corporation, Shreveport Chamber of Commerce, Committee of 100, LSU Health Sciences Center Foundation Board, National Institutes of Health Grant Awards and many others. Mr. Slack is an active member of several commercial real estate industry organizations. In 2000, Mr. Slack was appointed by Governor Mike Foster to a six year term on the LSU Board of Supervisors serving as Chairman in 2004. Mr. Slack holds a degree in Architecture from Louisiana State University, a Certificate in Executive Leadership from the Cox School of Business at SMU and recently achieved CCIM designation, commercial real estates most prestigious certification. His specialized business knowledge in commercial real estate development, CRE finance, investments, architecture and construction, combined with 20 years of bank board experience adds value to the company and shareholders.

~~Kenneth Smith~~~~, PE, PLS~~. Kenneth Smith serves as a director for Business First and Business First Bank. Mr. Smith, a Professional Engineer and Land Surveyor, is President and Chief Executive Officer of T. Baker Smith, LLC, a professional services firm that provides planning, environmental, surveying, engineering, and construction management services. Mr. Smith has been with T. Baker Smith, LLC since 1980. He also serves as Managing Partner for the following companies: TBS Mexico, TBS~~Holding, LLC, a real-estate holding company; Four C’s of Houma, LLC, a personal investment company; and~~Mega Beast Commercial Realty, a commercial real estate company. Mr. Smith serves as a Partner at JPS Equipment Rentals, LLC. Mr. Smith served as the President for the Houma Terrebonne Chamber of Commerce, South Central Industrial Association, South Louisiana Economic Council, and the Louisiana Pipeliners Association, and he currently serves as a member of the Louisiana Oil & Gas Association and Louisiana Association of Business & Industry. Mr. Smith earned a degree in civil engineering from Louisiana Tech University. He brings extensive business skills and experience to our board of directors, having successfully managed his own business for many years. Mr. Smith is also an active leader in his community and serves on the boards of many civic organizations. His many professional and community contacts benefit our board of directors.

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~~Thomas Everett Stewart, Jr.~~ Everett Stewart serves as a director for Business First and Business First Bank. Mr. Stewart has been retired since 2009. From 1988 to 2009, he served as President of Interstate Logos, LLC, a wholly-owned subsidiary of Lamar Advertising Company. Mr. Stewart also served as a board member of Lamar Advertising Company for several years, and he served on the board of The Business Bank of Baton Rouge for two years. Mr. Stewart earned a Bachelor of Science degree in business administration from Auburn University. He has extensive business knowledge and brings years of experience managing a subsidiary of a publicly-traded company to our board of directors.

~~Steve White.~~Steve White serves as a director for Business First and Business First Bank. Mr. White has served as the Business Manager for the William A. Robinson Trust since January of 2009. He also serves as a member of the board of directors of Bear Creek Services, an oil and gas venture with development and production in an approximate four-state area. Mr. White’s previous work experiences include serving in roles as President, Senior Vice President, and other executive roles in U.S. and international logistic businesses. He also served as a Chief Operations Officer in the home health and hospice industry. Mr. White graduated from Louisiana Tech University with a Bachelor of Science degree in petroleum engineering in 1985. Mr. White’s experience in asset management and his knowledge of the oil and gas industry are valuable to our board of directors.

~~Robert Yarboroug~~h. Bobby Yarborough serves as a director for Business First and Business First Bank. Mr. Yarborough is the Chief Executive Officer and co-owner of Manda Fine Meats, a meat processing company headquartered in Baton Rouge, Louisiana. Mr. Yarborough has been with Manda Fine Meats since 1976. He earned a bachelor’s degree in marketing from Southeastern Louisiana University. Mr. Yarborough has served as a director for a number of non-profits and business associations, and currently serves as a board member of theLSU System Board of Supervisors. Mr. Yarborough brings leadership, business knowledge and valuable community contacts to our board of directors through his long experience in managing a business and through his service on various other boards.

~~Non-Director Executive Officers~~

A brief description of the background of each of the executive officers of the Company and Bank who are not also directors of the Company is set forth below. No executive officer has any family relationship, as defined in Item ~~401 of Regulation S-K, with any other executive officer or director.~~

~~Don~~~~ald A.~~ ~~Hingle~~~~, II~~. Don Hingle has been with Business First Bank since July 2009 and currently serves as the Executive Vice President, Chief Credit Executive. Prior to January 2017, Mr. Hingle served as the Executive Vice President of the Southeastern Region, which includes the Houma, Covington and New Orleans markets. Prior to his promotion to Executive Vice President in February of 2014, Mr. Hingle served as the Regional President of Business First Bank’s Bayou Region (Houma Market). Mr. Hingle manages all aspects of the credit function of the Bank including credit analysis, credit reporting, asset-based lending services, SBA lending, loan documentation and loan services and the appraisal department. He has 35 years of banking experience. Mr. Hingle has a Bachelor’s Degree in Finance and a Master’s of Business Administration from the University of New Orleans.

~~Philip Jordan~~. Philip Jordan has been with Business First Bank since August 2008 and currently serves as the Chief Commercial Officer, leading the unified commercial banking team that includes each of the Bank’s markets as well as the correspondent banking division. Prior to January 2017, Mr. Jordan was the Western Region Chief Executive Officer which included the southwest, northwest and Lafayette areas of Louisiana. Prior to his promotion to Executive Vice President in July 2015, Mr. Jordan served as Regional President of Business First Bank’s Northwest Louisiana division. Mr. Jordan holds a Finance degree from Louisiana Tech University.

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~~Keith Mansfield~~Keith Mansfield serves as Executive Vice President and Chief Operations Officer for Business First Bank and has nearly 20 years of banking experience. In his role as Chief Operations Officer, Mr. Mansfield is responsible for all aspects of the Bank's operations, which include information technology, electronic banking, deposit operations, branch and treasury operations, business intelligence, marketing, facilities, security, and vendor management. Mr. Mansfield served most recently as the Bank's Chief Information Officer. Before joining Business First Bank, Mr. Mansfield served as the Chief Technology Officer for a regional financial institution in the Southeast. He was responsible for directing the planning and implementation of enterprise IT systems in support of business operations and was responsible for managing the Information Technology Group. In addition, he had responsibility for business continuity, information security, and trust operations. Mr. Mansfield began his career in 1998 as a Management Trainee and has served in many roles including manager of the Electronic Banking, Internet Banking, and Wire Transfer departments. Mr. Mansfield received a Bachelor of Business Administration in Accounting from the University of Tennessee at Martin, graduating with high honors and being named the Outstanding Student in Accounting and Administrative Services.

~~Alicia Robertson~~. ~~Alicia Robertson~~ serves as Executive Vice President and Chief Retail Officer for Business First Bank and has more than 30 years of banking experience. In her role as Chief Retail Officer, Ms. Robertson is responsible for retail network production, wealth solutions, private banking and treasury management. During her tenure with Business First Bank, Ms. Robertson also managed electronic banking, deposit operations, branch and treasury operations. Prior to Business First Bank, Ms. Robertson served as a private banker and treasury management sales officer with a focus on commercial banking.

~~Gregory Robertson~~~~. G~~reg Robertson has served as the Executive Vice President and Chief Financial Officer of Business First Bank since January 2017 and has been with Business First since 2011. He previously served as our Chief Banking Officer. He has been in the banking business since 1996. Mr. Robertson worked at City Savings Bank and Trust Co. from 1996 to 2011, where he served in many capacities, including branch manager, commercial lender, program manager for City Savings Financial Services, and Senior Vice President. As Chief Financial Officer for Business First Bank, he leads the finance and risk areas of the Bank including accounting, treasury and investments, credit, special assets, Bank Secrecy Act, compliance, internal audit, enterprise risk management, risk analytics, and project management. Mr. Robertson graduated from Northwestern State University in 1993 with a Bachelor of Science degree.

~~Corporate~~ ~~Governance Principles and Code of Ethics~~

We are committed to having sound corporate governance principles, both at the holding company level and at Business First Bank. Such principles are essential to running our business efficiently and to maintaining our integrity in the marketplace. We have adopted a Code of Business Conduct and Ethics that applies to all officers, directors, and employees, in accordance with applicable SEC rules. Our Code of Business Conduct and Ethics is posted on our Internet website (www.b1bank.com) under the Shareholder Information page.

~~Director Independence~~

~~Our board of directors has evaluated the independence of its members based upon the rules of the Nasdaq Stock Market and the SEC.~~ Although we are not currently listed on the NASDAQ Global Select Market at this time, we anticipate being listed in the late first quarter or early second quarter of 2018. Under the listing rules of the Nasdaq Stock Market, independent directors must comprise a majority of our board of directors at the time of our listing. The rules of the Nasdaq Stock Market, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors

~~Applying these standards, our board of directors has affirmatively determined that all of our directors, except for Mr. Melville~~ and Mr. Byrd, are “independent directors” under the applicable rules. We have determined that Mr. Melville and Mr. Byrd are not “independent directors” under the applicable rules since each is an employee of the Bank and Mr. Melville is also an employee of the Company.

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~~Audit C~~~~ommittee~~

Our board of directors has established an Audit Committee to assist it in fulfilling its responsibilities for general oversight of the integrity of our consolidated financial statements, compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence, the performance of independent auditors and our internal audit function, and risk assessment and risk management. Our board of directors has determined that each of the members of the Audit Committee satisfies the independence and other composition requirements of the SEC. Members of our Audit Committee include:

●

~~Patrick E. Mockler~~

●

~~David A. Montgomery, Jr.~~

●

~~Thomas Everett Stewart, Jr.~~

●

~~Steve White~~

●

~~Robert Yarborough~~

~~Our board of directors has determined that~~ David A. Montgomery, Jr. qualifies as an “audit committee financial expert” under Item 407(d)(5) of Regulation S-K under the Securities Act, and has the requisite accounting or related financial expertise required by applicable SEC rules.

ITEM 11. Executive Compensation.

~~Business First’s named executive officers~~The information called for ~~2017,~~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 23, 2024, or an Amended Annual Report on Form 10-K/A containing such information, a copy of which ~~consist of its principal executive officer and the two other most highly compensated executive officers, are:~~

	•	~~David R. (“Jude”) Melville, III, Business First’s and Business First Bank’s President and Chief Executive Officer;~~
	•	~~Gregory Robertson, Business First’s Chief Financial Officer and Treasurer and Business First Bank’s Executive Vice President and Chief Financial Officer; and~~
	•	~~Philip Jordan, Business First Bank’s Executive Vice President and Chief Commercial Officer.~~

~~Summary~~ C~~ompensation~~ T~~able~~

~~The following table provides information regarding~~ ~~the compensation of our named executive officers for the fiscal years ended December 31, 2017 and 2016. The compensation shown on the table below is paid to such employees by Business First Bank.~~

Name and Principal Position with Business First Bank

Year
($)

Salary
($)

Stock
Awards⁽¹⁾
($)

Non-Equity Incentive
Plan Compensation
($)

All Other
Comp.⁽²⁾
($)

Total
($)

David R. (“Jude”) Melville, III

2017
$ 415,833 $ 79,798⁽³⁾ $ 264,000⁽⁴⁾ $ 42,785 $ 802,416
President and Chief Executive Officer 2016 $ 350,000 $ — $ 210,000⁽⁵⁾ $ 44,034 $ 604,034

Gregory Robertson

2017
$ 253,750 $ 25,755⁽³⁾ $ 90,125⁽⁴⁾ $ 35,751 $ 405,381
Executive Vice President and Chief Financial Officer 2016 $ 241,667 $ — $ 80,000⁽⁵⁾ $ 36,295 $ 357,962

Philip Jordan

2017
$ 244,958 $ 21,012⁽³⁾ $ 90,125⁽⁴⁾ $ 35,711 $ 391,806
Executive Vice President and Chief Commercial Officer 2016 $ 202,333 $ — $ 67,500⁽⁵⁾ $ 34,134 $ 303,967

~~_______________________~~

The dollar amount of our time-based stock awards reflects the aggregate fair value determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, ~~Stock Compensation~~~~. The market value at the grant date of $17.00 per share was based upon the September 30, 2017 third-party valuation of our common stock.~~

2.	~~All Other Compensation for the named executive officers includes the total of the benefits and perquisites in the table below.~~

3.	~~Restricted stock awards were granted on March 31, 2017 and vest in three equal installments over a period of two years.~~

4.	~~Paid in 2018 for service in 2017.~~

5.	~~Paid in 2017 for service in 2016.~~

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Named Executive Officer

Year
($)

Car Allowance

Health &
Welfare
Plan
Premiums

Club Dues

Total

David R. (“Jude”) Melville, III

2017
$ 10,728 $ 19,632 $ 12,425 $ 42,785
2016 $ 10,728 $ 20,233 $ 13,073 $ 44,034

Gregory Robertson

2017
$ 10,728 $ 19,632 $ 5,391 $ 35,751
2016 $ 10,728 $ 20,233 $ 5,334 $ 36,295

Philip Jordan

2017
$ 10,296 $ 18,881 $ 6,534 $ 35,711
2016 $ 9,000 $ 19,304 $ 5,830 $ 34,134

Grants of Plan-Based Awards

Estimated Future
Payouts Under Non-
Equity Incentive Plan
Awards

Estimated Future
Payouts Under Equity
Incentive Plan Awards

All
Other

Named Executive Officer
Grant Date

Thres-
hold
($)

Tar-
get
($)

Maxi-
mum
($)

Thres-
hold
(#)

Tar-
get
(#)

Maxi-
mum
(#)

All
Other
Stock Awards: Number
of
Shares of Stock or Units
(#)

Option Awards: Number
of
Secur-
ities
Under-
lying Options
(#)

Exercise
of Base
Price of Option Awards ($/Sh)

Grant
Date Fair Value of
Stock
Option Awards

David R. (“Jude”) Melville, III
March 31, 2017
— — — — — — 4,694⁽¹⁾ — N/A $ 17.00

Gregory Robertson
March 31, 2017
— — — — — — 1,515⁽¹⁾ — N/A $ 17.00

Philip Jordan
March 31, 2017
— — — — — — 1,236⁽¹⁾ — N/A $ 17.00

~~_____________________~~

~~Restricted stock awards were granted on March 31, 2017 and vest in three equal installments over a period of two years.~~

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~~Outstanding equity awards at 201~~7 ~~fiscal year-end~~

~~The~~ ~~following table provides information regarding outstanding equity awards held by each of our named executive officers on December 31, 2017.~~

Options Awards

Name

Grant Date

Number of Securities Underlying Unexercised Options
Exercisable
(#)

Number of Securities Underlying Unexercised Options
Unexercisable
(#)

Equity
Incentive Plan Awards:
Number of Securities Underlying Unexercised Unearned
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

David R. (“Jude”) Melville, III

05/17/2011
100,000 — 100,000⁽¹⁾ $ 15.00
05/17/2021

12/22/2006
— 92,400 92,400⁽²⁾ $ 10.00
01/15/2020

Gregory Robertson

07/31/2014
15,000 — 15,000⁽³⁾ $ 17.11
07/31/2024

09/26/2011
10,000 — 10,000⁽³⁾ $ 15.00
09/26/2021

Philip Jordan

07/31/2014
7,500 — 7,500⁽³⁾ $ 17.11
07/31/2024

11/29/2012
10,000 — 10,000⁽³⁾ $ 15.00
11/29/2022

10/20/2008
13,750 1,250 15,000⁽⁴⁾ $ 12.00
10/20/2018

~~_____________________________~~

~~(1)~~

~~Options vest over a period of 4 years following the date of grant.~~

~~(2)~~

Options vested over a period of ten years following the date of grant. Options were extended December 20, 2016 to expire on January 15, 2020. Amendment retains $10 exercise price but restricts the situations in which the options may be exercised to occur upon the earlier of (i) immediately prior to the January 15, 2020 expiration date, (ii) a change in control of Business First or the Bank, (iii) the option holder’s death, (iv) the option holder becoming disabled, and (v) the option holder incurring a separation from Business First and the Bank.

~~(3)~~

~~Options vest over a period of 3 years following the date of grant.~~

~~(4)~~

~~Options vest over a period of 10 years following the date of grant.~~

Outstanding Stock Awards

Name

Number of
Shares or
Unites of
Stock That
have Not
Vested
(#)

Market Value
of Shares or
Units of Stock
That Have Not Vested
($)

Equity
Incentive
Plan Awards: Number of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)

Equity
Incentive Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)

David R. (“Jude”) Melville, III
3,130 $ 53,210 — —

Gregory Robertson
1,010 $ 17,170 — —

Philip Jordan
824 $ 14,008 — —

~~Employment Agreements~~

~~Business First Bank is a party to employment agreements with certain of its named executive officers~~. With respect to its named executive officer, Business First Bank has entered into an employment agreement with David (“Jude”) Melville, III. A summary description of the employment agreement is set forth below.

~~David Melville, III.~~ Business First Bank has entered into an employment agreement with David (“Jude”) Melville, III regarding his service as its Chief Executive Officer. The employment agreement with Mr. Melville provides for an automatically renewing one-year term unless Business First Bank gives notice to Mr. Melville atleast 90 days prior to the end of the term that the term will not be extended. The agreement, as amended, provides for Mr. Melville to receive a base salary of not less than $274,500 annually, as well as for Mr. Melville’s participation in benefit plans and incentive bonus plans offered by Business First Bank. Mr. Melville is also entitled to paid vacation, a vehicle allowance, a country club membership and health insurance.

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~~If Mr.~~ Melville’s employment is terminated by Business First Bank without cause (as defined in the agreement) during the term of the agreement or if Mr. Melville terminates his employment for good reason (as defined in the agreement), he will be ~~entitled to payment of an amount equal to two times his then current annual base salary, plus certain continued benefits to which he would otherwise be entitled in accordance~~filed with the terms and provisions of any such plans or programs. In addition, if, following a change-in-control (as defined in the agreement) of Business First or Business First Bank, Mr. Melville remains employed for a 12 month period, he will be permitted to terminate his employment for any reasonSEC within 90120 days of the end of ~~such 12 month period and receive compensation as if he had terminated his employment for good reason. Mr. Melville would also be provided with a tax “gross-up” payment if any of~~ the ~~payments above subject him to certain excise taxes.~~

O~~ther Employment Arrangements.~~ In addition to the employment agreements described above, Business First Bank has entered into employment and/or compensation arrangements with certain of its officers with varying terms taking into consideration the nature of the position and the particular individual’s skills and experience. Our overall executive compensation program is designed to attract, motivate, reward and retain key members of our management. A major goal of our compensation program is to align the compensation structure for our executives with shareholders’ interests and current market practices.

~~All of our officers serve at the pleasure of~~ ~~our board of directors. If any of these individuals leaves his or her respective position, our business, financial condition, results of operations may suffer.~~

E~~quity Incentive P~~~~lans~~

~~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 1,500,000 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. 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, 2017, we had 831,080 outstanding and unexercised stock options, of which 784,698 were vested, 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 exercise or forfeited. At December 31, 2017, the weighted average exercise price of the stock options issued under our 2006 Stock Option Plan was $12.73.

On June 29, 2017, our shareholders approved our 2017 Equity Incentive Plan (the “Plan”). The Plan provides 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 our employees, directors and consultants. The Plan has reserved 500,000 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 Plan, those eligible participants to whom, and the times at which, grants and awards will be made.~~

~~Our~~ Plan is intended to provide certain of our officers, directors and employees the opportunity to acquire a proprietary interest in our success by granting various types of equity grants and awards to such individuals. Specifically, the plans are intended to advance our interests by (1) enabling us to attract and retain the best available individuals for positions of substantial responsibility; (2) providing additional incentive to such persons by affording them an opportunity for equity participation in our business; and (3) rewarding officers, directors and employees for their contributions.

~~Our Plan is administered by our board of directors. Our board of directors has authority with respect to the plan to:~~

~~modify the requirements of the plan to conform with the law or to meet special circumstances not anticipated or covered in the plan;~~

~~establish policies; and~~

~~adopt rules and regulations and prescribe forms for carrying out the purposes and provisions of the plan.~~

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Under the plan, the aggregate fair market value (determined as of the date an option is granted) of the shares with respect to which Incentive Stock Options are exercisable for the first time by any optionee during any calendar year may not exceed $100,000. The option price to be paid upon exercise of an Incentive Stock Option or a Non-Qualified Option is determined by our board of directors, but in no event may such price be less than the fair market value per share of our common stock on the date of the grant.

Our board of directors has the discretion to fix the period during which any option (including Incentive Stock Options and Non-Qualified Options) may be exercised, provided that no options may be exercised more than 10 years after the date of grant. However, expiring options may be amended and extended at the discretion of our board of directors. Each option may be exercised upon such terms and conditions as our board of directors determines. In making any determination as to whom options shall be granted, and as to the number of shares to be covered by such options, our board of directors considers the duties of the respective officers, directors and employees, their present and potential contributions to our success, profitability and growth, and such other factors as the board deems relevant in connection with accomplishing the purposes of the Stock Option Plan.

~~Supplemental Executive Retirement Plan~~

Business First Bank maintains a Supplemental Executive Retirement Plan (“SERP”) which provides a select group of management with salary continuation benefits upon their retirement, or death benefits to their named beneficiary in the event of their death. The SERP, which was established August 1, 2009, is an unfunded nonqualified deferred compensation plan where certain executives of Business First Bank are selected to participate in the plan at the discretion of the board of directors. SERP benefits are based upon the position and salary of the executive officer at retirement, disability or death. Normal retirement benefits under the plan for Tier I executive officers are equal to 50% of the participant’s average compensation, payable over the longer of 180 months or the participant’s life. Normal retirement benefits under the plan for Tier II executives are equal to 25% of the participant’s average compensation, payable over 180 months. The SERP is administered by The Pangburn Group, who also provide guidance to Business First Bank relating to the valuation method and assumptions.

Benefits are also available in the event of death, disability or early retirement. Under the early retirement provisions for certain executives, if separation from service occurs after reaching early retirement age and prior to normal retirement age, Business First Bank will pay the executive a reduced benefit equal to the vested accrued benefit calculated as of the early retirement date, payable in 180 equal monthly installments beginning on the normal retirement date. For other executives, instead of an early retirement benefit, the separation from service benefit prior to normal retirement age provides the executive with a separation from service benefit equal to the participant’s vested accrued benefit payable in 180 equal monthly installments commencing within 30 days of the date of separation. The early retirement age means the date the executive attained age fifty-five and completed 10 years of service. The normal retirement age is the date the executive attained age sixty-five.

In the event the participant dies prior to the commencement of benefits under the plan, the executive’s beneficiary will be entitled to a survivor’s benefit which equals the amount of the vested accrued benefit, calculated as of the date of death, and payable in a single lump sum within 90 days following the date of death. If the executive dies after the commencement of benefits but prior to receiving all such payments due and owing under the plan, the unpaid balance of the payments will continue to be paid to the executive’s beneficiary for the remainder of the payout period.

~~If the participant becomes disabled prior to commencement of benefits under the plan, a disability benefit equal to the executive’s vested accrued benefit calculated as of the disability date shall be payable in 180 equal monthly installments commencing within 30 days of the disability determination date.~~

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Upon a change of control prior to separation from service, the participant shall become 100% vested in his or her accrued benefit, calculated as of the effective date of the change of control. Business First Bank will pay the executive the change of control benefit in a single lump sum amount within 30 days following that date.

For purposes of calculating the participant’s vested accrued benefit, the executive shall become 100% vested upon completion of ten years of service and the attainment of age fifty-five. Prior to the completion of ten years of service and the attainment of age fifty-five, the participant shall be zero percent vested. However, in the event of a participant’s death or disability, or a change in control, the executive shall become one hundred percent vested.

The benefits under the SERP will be paid out of the general unrestricted assets of Business First Bank. The Bank has elected to purchase life insurance contracts, more specifically Bank Owned Life Insurance (“BOLI”), each of which may be used as a source of liquidity to fund these future benefits. Business First Bank is the owner and beneficiary of these life insurance policies, which are general assets of the Bank.

~~Split-Dollar Agreement~~

Business First Bank owns two split-dollar endorsement policies covering the life of the Chairman Emeritus. Under the terms of the August 1, 2009 agreement, the Bank will be entitled to a share of the policy proceeds equal to the dollar amount of cumulative premiums paid for the policies. The remainder of the policy proceeds will be paid to the Chairman Emeritus’ beneficiaries.

~~Director C~~~~ompensation~~

~~Each of our directors who is not also an executive officer of Business First Bank receives compensation for attending various board of directors and committee~~ meetings. Our directors who are not executive officers of Business First Bank or Chairman of the board receive $500.00 for their attendance at each board meeting. Our directors who are not executive officers also receive a monthly retainer. Our Chairman of the board receives a monthly retainer of $11,333.34 and a monthly auto allowance of $894.00. Each director receives a monthly retainer of $416.67, and each Committee Chairperson receives an additional monthly retainer of $333.33, except if the Chairman of the board is a Committee Chairperson, no additional monthly retainer is paid. If any committee meets on a non-board meeting day, each member, including the Chairperson, receives $250.00 for each meeting attended on a non-board meeting day.

The following table sets forth compensation paid, earned or awarded during 2017 to each of our directors and the directors of Business First Bank, other than directors who are also named executive officers, whose compensation is described in the”~~Summary Compensation Table~~” ~~above, and Jack Byrd, who was appointed as a director of the Company and the Bank after the~~fiscal year ended December 31, ~~2017.~~2023.

Name
Fees Earned or
Paid in Cash
($)

Stock Awards⁽¹⁾
($)

Total
($)

Lloyd Benny Alford
$ 13,750 $ 4,998 $ 18,748
John Graves
$ 14,250 $ 4,998 $ 19,248
Robert S. Greer, Jr.
$ 150,478 $ 4,998 $ 155,476
David L. Laxton, III
$ 14,500 $ 4,998 $ 19,498
Rolfe Hood McCollister, Jr.
$ 10,500 $ 4,998 $ 15,498
Andrew D. McLindon
$ 14,250 $ 4,998 $ 19,248
Patrick E. Mockler
$ 10,500 $ 4,998 $ 15,498
David A. Montgomery, Jr.
$ 14,500 $ 4,998 $ 19,498
Arthur Price
$ 14,500 $ 4,998 $ 19,498
Fayez K. Shamieh
$ 10,500 $ 4,998 $ 15,498
C. Stewart Slack
$ 18,000 $ 4,998 $ 22,998
Kenneth Smith
$ 14,000 $ 4,998 $ 18,998
Thomas Everett Stewart, Jr.
$ 10,500 $ 4,998 $ 15,498
Steve White
$ 10,500 $ 4,998 $ 15,498
Robert Yarborough
$ 14,500 $ 4,998 $ 19,498

(1)

The dollar amount of our stock awards reflects the aggregate fair value determined as of the award date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, ~~Stock Compensation.~~ ~~The market value at the award date of $17.00 per share was based upon the September 30, 2017 third-party valuation of our common stock.~~

Directors have been and will continue to be reimbursed for travel, food, lodging and other expenses directly related to their activities as directors. Directors are also entitled to the protection provided by the indemnification provisions ~~in our current articles of incorporation and bylaws.~~

~~Risk~~ ~~Assessment of Compensation Policies and Practices~~

In connection with its evaluation and review of our policies and practices of compensating employees, including executives and nonexecutive employees, as such policies and practices relate to risk management practices and risk-taking, the Compensation Committee of our board of directors has determined that our compensation plans and practices are not likely to have a material adverse effect on Business First.

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ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

The ~~following table sets forth certain~~ information ~~regarding~~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 23, 2024, or an Amended Annual Report on Form 10-K/A containing such information, a copy of which will be filed with the ~~beneficial ownership of our common stock as of March~~ ~~9, 2018, by (1) our directors and executive officers, (2) each person who is known by us to own beneficially 5% or more~~SEC within 120 days of the our common stock and (3) all directors and executive officers as a group. Unless otherwise indicated, based on information furnished by such shareholders, our management believes that each person has sole voting and dispositive power over the shares indicated as owned by such person. Unless otherwise indicated below, the address for eachend of the ~~listed beneficial owners is 500 Laurel Street, Suite 101, Baton Rouge, Louisiana 70801.~~fiscal year ended December 31, 2023.

Security Ownership of Management

Name of Beneficial Owner

Number of Shares Beneficially Owned

Percentage
Beneficially Owned⁽¹⁾

Directors and Executive Officers

Lloyd Benny Alford
33,647 ⁽²⁾ *
Jack E. Byrd, Jr.
20,000 *
John Graves
38,669 *
Robert S. Greer, Jr.
11,294 *
David L. Laxton, III
30,622 *
Rolfe Hood McCollister, Jr.
83,294 ⁽³⁾ *
Andrew D. McLindon
22,794 *
David R. Melville, III
202,694 ⁽⁴⁾ 1.9 %
Patrick E. Mockler
8,927 *
David A. Montgomery, Jr.
6,294 *
Arthur Price
11,294 ⁽⁵⁾ *
Fayez K. Shamieh
33,512 *
C. Stewart Slack
11,794 *
Kenneth Smith
42,294 *
Thomas Everett Stewart, Jr.
129,044 ⁽⁶⁾ 1.3 %
Steve White
2,794 *
Robert Yarborough
32,794 ⁽⁷⁾ *
Donald A. Hingle, II
32,875 ⁽⁸⁾ *
Philip Jordan
36,486 ⁽⁹⁾ *
Keith Mansfield
25,697 ⁽¹⁰⁾ *
Alicia Robertson
12,278 ⁽¹¹⁾ *
Gregory Robertson
31,515 ⁽¹²⁾ *
Directors and Executive Officers as a group (22 persons)
860,612 8.1% ⁽¹³⁾

	*	~~Indicates ownership which does not exceed 1.0%.~~
	~~(1)~~	~~The percentage beneficially owned was calculated based on 10,232,495 shares of our common stock issued and outstanding as of March 9, 2018 (rounded to the nearest tenth of a percent).~~
	~~(2)~~	~~Includes (i) 32,794 shares held directly by Mr. Alford, and (ii) 853 shares held by Mr. Alford’s spouse.~~
	~~(3)~~	~~Includes (i) 54,544 shares held directly by Mr. McCollister, (ii) 5,000 shares held by Mr. McCollister’s spouse, and (iii) warrants to purchase 23,750 shares of common stock.~~
	~~(4)~~	~~Includes (i) 7,164 shares held directly by Mr. Melville, (ii) vested options to purchase 192,400 shares of common stock, and (iii) 3,130 shares of unvested restricted stock.~~
	~~(5)~~	~~Includes 11,000 shares held by PEMP Investments, LLC, a company controlled by Mr. Price.~~
	~~(6)~~	~~Includes (i) 105,294 shares held jointly by Mr. Stewart and his spouse, and (ii) warrants to purchase 23,750 shares of common stock.~~
	~~(7)~~	~~Includes (i) 20,294 shares held directly by Mr. Yarborough, and (ii) 10,000 shares held jointly by Mr. Yarborough and his spouse.~~
	~~(8)~~	~~Includes (i) 2,625 shares held directly by Mr. Hingle, (ii) 250 shares of unvested restricted stock, and (iii) vested options to purchase 30,000 shares of common stock.~~
	~~(9)~~	~~Includes (i) 4,412 shares held directly by Mr. Jordan, (ii) 824 shares of unvested restricted stock, and (iii) vested options to purchase 31,250 shares of common stock.~~
	~~(10)~~	~~Includes (i) 5,232 shares held directly by Mr. Mansfield, (ii) 465 shares of unvested restricted stock, and (iii) vested options to purchase 20,000 shares of common stock.~~
	~~(11)~~	~~Includes (i) 92 shares held directly by Ms. Robertson, (ii) 186 shares of unvested restricted stock, and (iii) vested options to purchase 12,000 shares of common stock.~~
	~~(12)~~	~~Includes (i) 5,505 shares held directly by Mr. Robertson, (ii) 1,010 shares of unvested restricted stock, and (iii) vested options to purchase 25,000 shares of common stock.~~
	~~(13)~~	~~Calculation of percentage ownership is based upon 10,590,645 shares of our common stock outstanding, which assumes the exercise of all options and warrants held by the above-listed individuals.~~

Security Ownership of Certain Beneficial Owners

Name of Beneficial Owner

Number of Shares Beneficially Owned

Percentage
Beneficially Owned⁽¹⁾

Shareholders with 5% interest

EJF Sidecar Fund Series, LLC – Small Financial Equities Series
2107 Wilson Blvd Suite 410
Arlington, VA 22201
565,000 5.5 %

~~(1)~~

~~The percentage beneficially owned was calculated based on 10,232,495 shares of our common stock issued and outstanding as of March 9, 2018 (rounded to the nearest tenth of a percent).~~

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~~Table of Contents~~

I~~TEM~~ITEM 13. Certain Relationships and Related Transactions, and Director Independence.

~~In addition to~~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 23, 2024, or an Amended Annual Report on Form 10-K/A containing such information, a copy of which will be filed with the ~~compensation arrangements with directors and executive officers described in~~SEC within 120 days of the “~~Executive Compensation~~” ~~section above,~~ end of the ~~following is a description of each transaction since January 1, 2017, and each proposed transaction in which:~~fiscal year ended December 31, 2023.

●

~~we have been or are to be a participant;~~

●

~~the amount involved exceeds or will exceed $120,000; and~~

●

any of our directors, executive officers, or beneficial holders of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest.

~~Ordinary~~ ITEM 14. Principal Accountant Fees and Services.~~Banking Relationships~~

~~Certain~~The information called for by this item is incorporated herein by reference from our Definitive Proxy Statement for our Annual Meeting of ~~our officers, directors and principal shareholders, as well as their immediate family members and affiliates, are customers~~Shareholders tentatively being held on May 23, 2024, or an Amended Annual Report on Form 10-K/A containing such information, a copy of ~~or have participated in transactions~~which will be filed with ~~Business First Bank or us in~~ the ordinary course of business. These transactions include deposits, loans and other financial services related transactions. Such related party transactions are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral (where applicable), as those prevailing at the time for comparable transactions with persons not related to us, and do not involve more than normal risk of collectability or present other features unfavorable to us. AsSEC within 120 days of the ~~date~~end of ~~this Report, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans. We expect to continue to enter into transactions~~the fiscal year ended December 31, 2023. The Independent Registered Accounting Firm is FORVIS, LLP (PCAOB Firm ID No. 686) located in ~~the ordinary course of business on similar terms with our officers, directors and principal shareholders, as well as their immediate family members and affiliates.~~Fort Worth, TX.

~~148~~130

Table of Contents

~~ITEM~~ ~~14. Principal Accounting Fees and Services.~~

~~Fees~~ ~~to Hannis T. Bourgeois, LLP~~

~~The following table presents fees for professional services rendered by Hannis~~ ~~T. Bourgeois, LLP for 2017 and 2016:~~

2017

2016

Audit fees
$ 177,700 $ 166,150
Audit-related fees
1,695 10,800
Tax fees
9,040 10,550
All other fees
17,265 15,900
Total
$ 205,700 $ 203,400

~~As defined by the~~ SEC, (i) “audit fees” are fees for professional services rendered by the independent registered public accounting firm for the audit of our annual financial statements and review of financial statements included in our Form 10-Q, or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) “audit-related fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees;” such services include an audit of our 401(k) plan; (iii) “tax fees” are fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning; and (iv) “all other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related fees,” and “tax fees.”

~~The Audit Committee of our board of directors pre-approves all audit and non-audit services performed by our independent registered public accounting firm to assure that the provision of such services does not impair their independence.~~

~~149~~

~~Table of Contents~~

PART IV

~~Item~~ITEM 15. Exhibits and Financial Statement Schedules.

~~(a)~~

(a) List of documents filed as part of this Report

~~(1)~~

(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)~~

(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

~~(3)~~Number

~~Exhibits~~

~~NUMBER~~		~~DESCRIPTION~~Description

2.1		~~Agreement and Plan of Reorganization, dated as of July 23, 2014, by and among, Business First Bancshares, Inc., A~~merican Gateway Financial Corporation and B1B Interim Corporation (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-4 filed by Business First Bancshares, Inc. on November 12, 2014 (File No. 333-200112)).

~~2.2~~		~~First Amendment, dated November 10, 2014, to the Agreement and Plan of Reorganization, dated as of July 23, 2014, by and among, Business First Bancshares, Inc., A~~merican Gateway Financial Corporation and B1B Interim Corporation (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-4 filed by Business First Bancshares, Inc. on November 12, 2014 (File No. 333-200112)).

~~2.3~~		Agreement and Plan of Reorganization, dated October ~~5, 2017,~~20, 2021, by and ~~among~~between Business First Bancshares, Inc., ~~Minden~~and Texas Citizens Bancorp, Inc. ~~and BFB Acquisition Company~~ (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Business First Bancshares, Inc. on October ~~12, 2017 (File No. 333-200112))~~21, 2021).

3.1		~~Amended and~~ Restated Articles of Incorporation of Business First Bancshares, Inc., adopted ~~September 28, 2017~~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 ~~October 2, 2017 (File No. 333-200112))~~April 28, 2020).

~~3.2~~		Amended and Restated Bylaws of Business First Bancshares, Inc., adopted August 23, 2017 (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the Quarterly Period Ended September 30, 2017 filed by Business First Bancshares, Inc. on November 9, 2017 (File No. 333-200112)).

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 (File No. 333-200112))~~2014).

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~~Table of Contents~~


4.2		Form of ~~Registration Rights Agreement~~Series A Preferred Stock (incorporated by reference to Exhibit ~~4.1~~A to Exhibit 10.1 to the Current Report on Form 8-K filed by Business First Bancshares, Inc. on ~~October 12, 2017 (File No. 333-200112))~~September 1, 2022).

~~10.1~~	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.

10.1 +	Amended and Restated Executive Employment Agreement by and between Business First Bank and David R. Melville, III, dated ~~August~~November 6, ~~2009~~2019 (incorporated by reference to Exhibit 10.1 toof the ~~Registration Statement~~Quarterly Report on Form ~~S-4~~10-Q for the quarter ended September 30, 2019, filed by Business First Bancshares, Inc. on November ~~12, 2014 (File No. 333-200112))~~7, 2019).

10.3 +	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).

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Table of Contents

10.4 +	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).

~~10.2~~		Amendment to Executive Employment Agreement by and between Business First Bank and David R. Melville, III, dated April 1, 2011 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-4 filed by Business First Bancshares, Inc. on November 12, 2014 (File No. 333-200112)).

~~10.3~~	10.7 +	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 (File No. 333-200112))~~2014).

~~10.~~4	10.8 +	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 (File No. 333-200112))~~2014).

~~10.~~5	10.9 +	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 (File No. 333-200112))~~2014).

~~10.~~6	10.10 +	Form of Warrant Agreement (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-4 filed by Business First Bancshares, Inc. on November 12, ~~2014 (File No. 333-200112))~~2014).

~~10.~~7	10.11 +	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 (File No. 333-200112))~~2015).

~~10.~~810.12 +		Business First, Amendment No. 2 to Warrant Agreement, dated February 1, 2016 (incorporated by reference to Exhibit 10.10 included in the Company’s Annual Report on Form 10-K, dated as of December 31, 2015 and filed March 21, ~~2016 (File No. 333-200112))~~2016).

~~10.~~910.13 +		Business First Bancshares, Inc., 2017 Equity Incentive Plan.*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).

10.14 +	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).

10.15 +	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).

10.16 +	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).

10.17 +	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).

10.18	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).

10.19 +	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).

10.20 +	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).

10.21 +	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).

10.22 +	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).

21.1		List of subsidiaries of Business First Bancshares, Inc.*

~~24.1~~23.1	Consent of FORVIS, LLP*

24.1	Power of Attorney (contained on the signature page hereto).*

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Table of Contents

31.1		Certification of ~~Chief~~Principal Executive Officer ~~Pursuant~~pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification of ~~Chief~~Principal Financial Officer ~~Pursuant~~pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		~~Certification~~Certifications of ~~the~~ ~~Chief~~Principal Executive Officer and ~~Chief~~Principal Financial Officer ~~provided pursuant~~Pursuant to 18 U.S.C. Section 1350, as ~~adopted pursuant~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

97.1	Clawback Policy.*

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*

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 h~~erewith.~~herewith.
**	F~~urnished~~Furnished herewith, and shall not be deemed ~~“filed”~~"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.

~~151~~133

Table of Contents

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 ~~21, 2018~~1, 2024	By:	/s/ David R. Melville, III
		David R. Melville, III
		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 resubstitution, 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, ~~2017,~~2023, 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 ~~21st~~1st day of March, ~~2018.~~2024.

Signature		~~Title~~	Title	Date

By:	/s/ David R. Melville, III	President, Chief Executive Officer and Director	March ~~21, 2018~~1, 2024
	David R. Melville, III	(Principal Executive Officer)


By:	/s/ Gregory Robertson	Chief Financial Officer	March ~~21, 2018~~1, 2024
	Gregory Robertson	(Principal Financial Officer)


By	/s/ ~~Lloyd Benny Alford~~James J. Buquet, III	Director	March ~~21, 2018~~1, 2024
	~~Lloyd Benny Alford~~James J. Buquet, III

By:	/s/ Carol M. Calkins	Director	March 1, 2024
	Carol M. Calkins

ByBy:	/s/ ~~Jack E. Byrd, Jr.~~Ricky D. Day	Director	March ~~21, 2018~~1, 2024
	~~Jack E. Byrd, Jr.~~Ricky D. Day


By:	/s/ John ~~Graves~~Ducrest	Director	March ~~21, 2018~~1, 2024
	John ~~Graves~~Ducrest


By:	/s/ ~~Robert S. Greer, Jr.~~	~~Chairman of the Board and Director~~	~~March 21, 2018~~
	~~Robert S. Greer, Jr.~~

~~152~~

~~Table of Contents~~

By	~~/s/ David L. Laxton, III~~Mark P. Folse	Director	March ~~21, 2018~~1, 2024
	~~David L. Laxton, III~~Mark P. Folse

134

Table of Contents




ByBy:	/s/ J. Vernon Johnson	Director	March 1, 2024
	J. Vernon Johnson

By:	/s/ Rolfe ~~Hood~~H. McCollister, Jr.	Director	March 1, 2024
	Rolfe ~~Hood~~H. McCollister, Jr.		~~March 21, 2018~~


By:	/s/ Andrew D. McLindon	Director	March 1, 2024
	Andrew D. McLindon		~~March 21, 2018~~


By:	/s/ Patrick E. Mockler	Director	March 1, 2024
	Patrick E. Mockler		~~March 21, 2018~~


By:	/s/ David A. Montgomery, Jr.	Director	March 1, 2024
	David A. Montgomery, Jr.		~~March 21, 2018~~


By:	/s/ Arthur J. Price	Director	March 1, 2024
	Arthur J. Price		~~March 21, 2018~~


By:	/s/ ~~Fayez K. Shamieh~~Aimee Quirk	Director	March 1, 2024
	~~Fayez K. Shamieh~~Aimee Quirk		~~March 21, 2018~~


~~By:~~	~~/s/ C. Stewart Slack~~	~~Director~~
	~~C. Stewart Slack~~		~~March 21, 2018~~


By:	/s/ Kenneth Smith	Director	March 1, 2024
	Kenneth Smith		~~March 21, 2018~~


By:	/s/ ~~Thomas Everett Stewart, Jr.~~Keith A. Tillage	Director	March 1, 2024
	~~Thomas Everett Stewart, Jr.~~Keith A. Tillage		~~March 21, 2018~~


By:	/s/ ~~Steve~~Steven G. White	Director	March 1, 2024
	~~Steve~~Steven G. White		~~March 21, 2018~~


~~By:~~	~~/s/ Robert Yarborough~~	~~Director~~
	~~Robert Yarborough~~		~~March 21, 2018~~

135

Louisiana	20-5340628
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

500Laurel Street,, Suite 101 Baton Rouge, Louisiana	~~7080~~170801
(Address of principal executive offices)	(Zip code)

~~(225) 248-7600~~ (~~Registrant~~’~~s teleph~~~~one number, including area code)~~

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes ☐ No ☒

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 ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Date File required to be submitted ~~and posted~~ 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 ~~and post~~ such files).	Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K.		☒

Large accelerated filer	☐	Accelerated filer	☐☒

Non-accelerated filer	☐	~~(Do not check if a smaller~~Smaller reporting ~~company)~~company

		~~Smaller~~ ~~reporting company~~	☒☐

		Emerging growth company	☒☐

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.	☐

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.	☒

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.	☐

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).	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).	Yes ☐ No ☒

PART I

ITEM 1.	Business	35
ITEM 1A.	Risk Factors	22
ITEM 1B.	Unresolved Staff Comments	40
45ITEM 1C.	Cybersecurity	40
ITEM 2.	Properties	45 41
ITEM 3.	Legal Proceedings	47 41
ITEM 4.	Mine Safety Disclosures	47 41

PART II

ITEM 5.	Market for ~~Registrant~~’sRegistrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	48 42
ITEM 6.	Selected Financial Data	49 44
ITEM 7.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations	50 44
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	80 76
ITEM 8.	Financial Statements and Supplementary Data	81 76
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial ~~Disclosures~~Disclosure	~~134~~ 128
ITEM 9A.	Controls and Procedures	~~134~~ 128
ITEM 9B.	Other Information	129
~~134~~ITEM 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	129

PART III

ITEM 10.	Directors, Executive Officers and Corporate Governance	~~135~~ 130
ITEM 11.	Executive Compensation	~~141~~ 130
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	~~147~~ 130
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	~~148~~ 130
ITEM 14.	Principal ~~Accounting~~Accountant Fees and Services	~~149~~ 130

PART IV

ITEM 15.	Exhibits and Financial Statement Schedules	131
~~150~~ITEM 16.	Form 10-K Summary	133

Signatures		134

	Female	Minority (3)
Employees	520 total (67.5%)	166 total (21.6%)
Officials and Managers⁽¹⁾	113 total (58.3%)	33 total (17.0%)
Executive Officers⁽²⁾	3 total (21.4%)	1 total (7.1%)

~~Location~~	~~Date Opened~~	~~Own/ Lease~~	~~Square Footage~~
~~Principal Executive Office:~~
~~500 Laurel Street~~ ~~Baton Rouge, Louisiana~~	~~7/11/2016~~	~~Lease~~	~~24,347~~

~~Banking Centers:~~
~~Northwest Louisiana Banking Center~~ ~~800 Spring Street, Suite 120~~ ~~Shreveport, Louisiana~~	~~8/28/2006~~	~~Lease~~	~~8,267~~

~~Northshore Banking Center~~ ~~1675 N. Highway 190~~ ~~Covington, Louisiana~~	~~10/18/2007~~	~~Lease~~	~~4,909~~

~~Lafayette Banking Center~~ ~~CDT Plaza~~ ~~900 East St. Mary Boulevard, Suite 100~~ ~~Lafayette, Louisiana~~	~~5/22/2008~~	~~Lease~~	~~4,723~~

~~Southwest Louisiana Banking Center~~ ~~728 Ryan Street~~ ~~Lake Charles, Louisiana~~	~~3/9/2009~~	~~Lease~~	~~6,065~~

~~Bayou Region Banking Center~~ ~~435 Corporate Drive, Suite 102~~ ~~Houma, Louisiana~~	~~11/17/2010~~	~~Lease~~	~~2,800~~

By Quarter 2016	High		Low		Cash Dividend Per Share
First	$	15.00	$	10.00	$	—
Second	$	16.00	$	16.00	$	0.05
Third	$	16.00	$	9.00	$	0.05
Fourth	$	16.00	$	13.75	$	0.05

By Quarter 2017	High		Low		Cash Dividend Per Share
First	$	16.50	$	13.50	$	0.05
Second	$	14.00	$	14.00	$	0.06
Third	$	15.46	$	15.00	$	0.06
Fourth	$	20.00	$	20.00	$	0.06

	Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans		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		831,080	$	12.73		500,000		120,608	$	18.59		298,288
Equity compensation plans not approved by security holders		87,625		10.00		—		—		—		—
Total equity compensation plans		918,705	$	12.47		500,000		120,608	$	18.59		298,288

Date	BFST		S&P 500		KRX
12/31/2018	$	100.00	$	100.00	$	100.00
3/31/2019		101.61		113.65		109.35
6/30/2019		105.79		118.54		113.62
9/30/2019		101.84		120.55		112.87
12/31/2019		104.47		131.49		123.81
3/31/2020		56.99		105.72		73.82
6/30/2020		65.22		127.44		84.57
9/30/2020		64.16		138.81		75.90
12/31/2020		87.52		155.68		113.03
3/31/2021		103.29		165.29		146.61
6/30/2021		99.58		179.42		144.53
9/30/2021		102.01		180.47		149.17
12/31/2021		123.99		200.37		154.45
3/31/2022		107.09		191.15		151.08
6/30/2022		94.32		160.37		132.98
9/30/2022		95.83		152.54		138.21
12/31/2022		99.08		164.08		143.75
3/31/2023		77.19		176.38		117.94
6/30/2023		68.45		191.80		111.16
9/30/2023		85.76		185.52		113.81
12/31/2023		113.32		207.21		143.17

	For the Years Ended December 31,																For the Years Ended December 31,
	2017								2016								2023								2022								2021
	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			Average Outstanding Balance			Interest Earned/Interest Paid		Average Yield/Rate			Average Outstanding Balance			Interest Earned/Interest Paid		Average Yield/Rate
	(Dollars in thousands)																(Dollars in thousands)
Assets
Interest-earning assets:
Total loans	$	890,683		$	47,516		5.33	%	$	795,625		$	39,468		4.96	%	$	4,859,637		$	323,327		6.65	%	$	4,020,436		$	218,032		5.42	%	$	3,037,020		$	156,791		5.16	%
Securities available for sale		195,211			3,829		1.96	%		211,351			3,781		1.79	%
Securities																		898,771			20,125		2.24			956,232			16,503		1.73			870,282			13,520		1.55
Interest-bearing deposits in other banks		20,229			256		1.27	%		25,642			169		0.66	%		180,997			9,875		5.46			115,016			1,579		1.37			104,471			127		0.12
Total interest-earning assets		1,106,123			51,601		4.67	%		1,032,618			43,418		4.20	%		5,939,405			353,327		5.95			5,091,684			236,114		4.64			4,011,773			170,438		4.25
Allowance for loan losses		(8,773	)							(7,453	)							(41,665	)							(32,093	)							(26,132	)
Noninterest-earning assets		102,438								102,608								444,140								413,917								418,029
Total assets	$	1,199,788		$	51,601				$	1,127,773		$	43,418				$	6,341,880		$	353,327				$	5,473,508		$	236,114				$	4,403,670		$	170,438
Liabilities and Shareholders’ Equity
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	733,264		$	6,328		0.86	%	$	723,996		$	5,152		0.71	%	$	3,566,216		$	106,908		3.00	%	$	3,007,882		$	24,413		0.81	%	$	2,604,825		$	12,183		0.47	%
Subordinated debt																		105,369			5,323		5.05			106,054			5,108		4.82			68,183			3,526		5.17
Subordinated debt - trust preferred securities																		5,000			430		8.60			5,000			247		4.94			5,000			168		3.36
Bank Term Funding Program																		253,706			11,313		4.46			-			-		-			-			-		-
Advances from FHLB		65,513			737		1.12	%		53,516			561		1.05	%		329,726			13,702		4.16			271,025			6,479		2.39			47,325			554		1.17
First National Bankers Bank ("FNBB") Line of Credit																		-			-		-			2,500			121		4.84			-			-		-
Other borrowings		6,609			164		2.48	%		6,436			113		1.76	%		21,825			522		2.39			23,197			169		0.73			27,182			123		0.45
Total interest-bearing liabilities		805,386			7,229		0.90	%		783,948			5,826		0.74	%		4,281,842			138,198		3.23			3,415,658			36,537		1.07			2,752,515			16,554		0.60
Noninterest-bearing liabilities:
Noninterest-bearing deposits		254,765								221,047								1,412,979								1,539,938								1,196,970
Other liabilities		7,891								7,141								44,173								37,533								28,493
Total noninterest-bearing liabilities		262,656								228,188								1,457,152								1,577,471								1,225,463
Shareholders’ equity		131,746								115,637
Total liabilities and shareholders’ equity	$	1,199,788							$	1,127,773
Shareholders' equity:
Common shareholders' equity																		530,956								456,388								425,692
Preferred equity																		71,930								23,991								-
Total shareholders' equity																		602,886								480,379								425,692
Total liabilities and shareholders' equity																	$	6,341,880							$	5,473,508							$	4,403,670
Net interest rate spread⁽¹⁾							3.77	%							3.46	%							2.72	%							3.57	%							3.65	%
Net interest income				$	44,372							$	37,592							$	215,129							$	199,577							$	153,884
Net interest margin⁽²⁾							4.01	%							3.64	%							3.62	%							3.92	%							3.84	%
Overall cost of funds																							2.43	%							0.74	%							0.42	%

	For the Year Ended December 31, 2017 compared to the Year ended December 31, 2016							For the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022
	Increase (Decrease) due to change in							Increase (Decrease) due to change in
	Volume			Rate		Total		Volume			Rate			Total
	(Dollars in thousands)							(Dollars in thousands)
Interest-earning assets:
Total loans	$	5,072		$	2,976	$	8,048	$	55,835		$	49,460		$	105,295
Securities available for sale		(317	)		365		48
Interest-earning deposits in other banks		(69	)		156		87
Total increase (decrease) in interest income	$	4,686		$	3,497	$	8,183
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	$	80		$	1,096	$	1,176	$	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		135			41		176		2,439			4,784			7,223
FNBB Line of Credit									-			(121	)		(121	)
Other borrowings		4			47		51		(33	)		386			353
Total increase (decrease) in interest expense		219			1,184		1,403
Total increase in interest expense									30,422			71,239			101,661
Increase (decrease) in net interest income	$	4,467		$	2,313	$	6,780	$	27,726		$	(12,174	)	$	15,552

	For the Year Ended December 31, 2022 compared to the Year Ended December 31, 2021
	Increase (Decrease) due to change in
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Total loans	$	60,236		$	1,005		$	61,241
Securities		1,483			1,500			2,983
Interest-bearing deposits in other banks		145			1,307			1,452
Total increase in interest income	$	61,864		$	3,812		$	65,676
Interest-bearing liabilities:
Interest-bearing deposits	$	3,271		$	8,959		$	12,230
Subordinated debt		1,824			(241	)		1,583
Subordinated debt - trust preferred securities		-			80			80
Advances from FHLB		5,347			577			5,924
FNBB Line of Credit		120			-			120
Other borrowings		(29	)		75			46
Total increase in interest expense		10,533			9,450			19,983
Increase (decrease) in net interest income	$	51,331		$	(5,638	)	$	45,693

	For the Years Ended December 31,						Increase			For the Years Ended December 31,
	2017			2016			(Decrease)			2023			2022			Increase (Decrease)
	(Dollars in thousands)									(Dollars in thousands)
Noninterest income:
Service charges on deposit accounts	$	2,109		$	2,033		$	76		$	9,704		$	8,272		$	1,432
Debit card fee income		652			619			33
Automated Teller Machine (“ATM”) fees		193			183			10
Debit card and ATM fee income											6,590			6,407			183
Bank-owned life insurance income		632			789			(157	)		2,247			1,931			316
Gain on sales of investment securities		31			232			(201	)
Brokerage commissions		957			657			300
Gain on sales of loans											1,972			574			1,398
Loss on sales of investment securities											(2,565	)		(48	)		(2,517	)
Fees and brokerage commissions											7,247			6,964			283
Mortgage origination income		204			160			44			285			532			(247	)
Correspondent bank income		331			204			127			456			113			343
Pass-through income (loss) from SBIC partnerships		190			(44	)		234
Rental income		301			50			251
Gain (Loss) on sales of other real estate owned		(276	)		168			(444	)
Gain on sales of other real estate owned											646			33			613
Loss on sales of other assets											(15	)		(717	)		702
Gain on sale of banking center											945			-			945
Gain on extinguishment of debt											1,458			-			1,458
Swap Fee Income											964			-			964
Pass-through income from other investments											1,946			1,347			599
Other		294			370			(76	)		4,762			3,902			860
Total noninterest income	$	5,618		$	5,421		$	197		$	36,642		$	29,310		$	7,332

	As of December 31, 2017					As of December 31, 2016
	Amount		Percent			Amount		Percent
	(Dollars in thousands)					(Dollars in thousands)
Commercial	$	254,427		26.1	%	$	213,120		26.3	%
Real estate:
Construction and land		143,535		14.7	%		94,426		11.6	%
Farmland		10,480		1.1	%		9,217		1.1	%
1-4 family residential		157,505		16.2	%		129,052		15.9	%
Multi-family residential		20,717		2.1	%		22,737		2.8	%
Nonfarm nonresidential		337,699		34.6	%		298,057		36.8	%
Consumer		50,921		5.2	%		44,342		5.5	%
Total loans held for investment	$	975,284		100	%	$	810,951		100	%

	As of December 31, 2023					As of December 31, 2022
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Real Estate Loans:
Commercial	$	2,217,928		44.4	%	$	2,020,406		43.9	%
Construction		669,798		13.4			722,074		15.7
Residential		682,394		13.7			656,378		14.2
Total Real Estate Loans		3,570,120		71.5			3,398,858		73.8
Commercial		1,358,838		27.2			1,153,873		25.0
Consumer and Other		63,827		1.3			53,445		1.2
Total loans held for investment	$	4,992,785		100.0	%	$	4,606,176		100.0	%

	As of December 31, 2017
	One Year or Less		One Through Five Years		After Five Years		Total
	(Dollars in thousands)
Commercial	$	89,665	$	130,517	$	34,245	$	254,427
Real estate:
Construction and land		59,003		59,109		25,423		143,535
Farmland		1,265		6,919		2,296		10,480
1-4 family residential		21,564		56,763		79,178		157,505
Multi-family residential		1,643		7,323		11,751		20,717
Nonfarm nonresidential		36,638		155,602		145,459		337,699
Consumer		10,362		29,191		11,368		50,921
Total loans held for investment	$	220,140	$	445,424	$	309,720	$	975,284
Amounts with fixed rates	$	87,703	$	299,688	$	216,251	$	603,642
Amounts with floating rates	$	132,437	$	145,736	$	93,469	$	371,642

	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

							As of December 31,
							2023			2022			2021
	As of December 31, 2017 (Dollars in thousands)			As of December 31, 2016 (Dollars in thousands)			(Dollars in thousands)
Nonaccrual loans	$	12,535		$	7,126		$	16,943		$	11,054		$	12,868
Accruing loans 90 or more days past due		132			168			127			335			222
Total nonperforming loans		12,667			7,294			17,070			11,389			13,090
Nonaccrual debt securities		—			—
Other nonperforming assets								-			62			-
Other real estate owned:
Commercial real estate, construction, land and land development		227			1,187			1,326			1,199			1,348
Residential real estate		—			—			359			173			79
Total other real estate owned		227			1,187			1,685			1,372			1,427
Total nonperforming assets	$	12,894		$	8,481		$	18,755		$	12,823		$	14,517
Restructured loans-nonaccrual	$	2,008		$	816
Restructured loans-accruing	$	1,052		$	5,115
Ratio of nonperforming loans to total loans held for investment		1.30	%		0.90	%		0.34	%		0.25	%		0.41	%
Ratio of nonperforming assets to total assets		0.98	%		0.77	%		0.28			0.21			0.31
Ratio of nonaccrual loans to total loans held for investment								0.34			0.24			0.40

	As of December 31, 2017 (Dollars in thousands)		As of December 31, 2016 (Dollars in thousands)
Nonaccrual loans by category:
Real estate:
Construction and land	$	92	$	243
1-4 family residential		2,429		2,721
Multi-family residential		—		—
Nonfarm nonresidential		5,935		1,201
Commercial		3,638		2,763
Consumer		441		198
Total	$	12,535	$	7,126

	As of December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Real estate:
Construction and land	$	141,128	$	1,953	$	362	$	92	$	143,535
Farmland		10,480		—		—		—		10,480
1-4 family residential		148,845		4,657		1,574		2,429		157,505
Multi-family residential		20,677		—		40		—		20,717
Nonfarm nonresidential		325,216		4,861		1,687		5,935		337,699
Commercial		228,157		20,681		1,951		3,638		254,427
Consumer		49,787		672		21		441		50,921
Total	$	924,290	$	32,824	$	5,635	$	12,535	$	975,284

	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

	As of December 31, 2017 (Dollars in thousands)			As of December 31, 2016 (Dollars in thousands)
Average loans outstanding	$	890,683		$	795,625
Gross loans held for investment outstanding at end of period	$	975,284		$	810,951
Allowance for loan losses at beginning of period		8,162			7,244
Provision for loan losses		4,237			1,220
Charge-offs:
Real estate:
Construction, land and farmland		2			484
Residential		184			162
Nonfarm non-residential		617			473
Commercial		2,945			667
Consumer		36			3
Total charge-offs		3,784			1,789
Recoveries:
Real estate:
Construction, land and farmland		1			10
Residential		48			140
Nonfarm non-residential		23			1,258
Commercial		40			33
Consumer		38			46
Total recoveries		150			1,487
Net charge-offs		3,634			302
Allowance for loan losses at end of period	$	8,765		$	8,162
Ratio of allowance to end of period loans held for investment		0.90	%		1.01	%
Ratio of net charge-offs to average loans		0.41	%		0.04	%

	As of December 31, 2017					As of December 31, 2016
	Amount		Percent to Total			Amount		Percent to Total
	(Dollars in thousands)					(Dollars in thousands)
Real estate:
Construction and land	$	1,421		16.2	%	$	933		11.4	%
Farmland		76		0.9	%		75		0.9	%
1-4 family residential		1,284		14.7	%		1,228		15.1	%
Multi-family residential		144		1.6	%		172		2.1	%
Nonfarm nonresidential		2,323		26.5	%		2,314		28.4	%
Total real estate		5,248		59.9	%		4,722		57.9	%
Commercial		3,147		35.9	%		3,039		37.2	%
Consumer		370		4.2	%		401		4.9	%
Total allowance for loan losses	$	8,765		100	%	$	8,162		100	%

	As of December 31, 2017								As of December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)								(Dollars in thousands)
U.S. treasury securities									$	17,690	$	-	$	1,451	$	16,239
U.S. government agencies	$	9,008	$	13	$	68	$	8,953		10,258		-		848		9,410
Corporate bonds		13,074		59		92		13,041		49,609		-		5,770		43,839
Mortgage-backed securities										555,148		976		49,814		506,310
Municipal securities		76,553		353		427		76,479		331,273		298		27,798		303,773
Mortgage-backed securities		81,763		2		1,824		79,941
Other securities		831		—		97		734
Total	$	181,229	$	427	$	2,508	$	179,148	$	963,978	$	1,274	$	85,681	$	879,571

	As of December 31, 2017
	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. government agencies	$	1,004		0.96	%	$	1,000		1.11	%	$	6,949		2.46	%	$	—		—	%	$	8,953		2.14	%
Corporate bonds		—		—	%		6,580		2.73	%		6,461		4.28	%		—		—	%		13,041		3.50	%
Municipal securities		7,651		1.52	%		34,373		1.92	%		17,434		2.27	%		17,021		2.74	%		76,479		2.14	%
Mortgage-backed securities		12		0.20	%		6,033		1.67	%		39,619		1.50	%		34,277		1.93	%		79,941		1.70	%
Other securities		—		—	%		—		—	%		—		—	%		734		3.03	%		734		3.03	%
Total	$	8,667		1.46	%	$	47,986		1.98	%	$	70,463		2.04	%	$	52,032		2.21	%	$	179,148		2.05	%

	As of December 31, 2022
	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	$	-		-	%	$	30,115		1.00	%	$	-		-	%	$	-		-	%	$	30,115		1.00	%
U.S. government agencies		-		-	%		47,372		1.63	%		-		-	%		-		-	%		47,372		1.63	%
Corporate bonds		151		-	%		2,500		4.08	%		43,353		4.49	%		-		-	%		46,004		4.45	%
Mortgage-backed securities		2,458		0.97	%		41,738		1.65	%		172,301		1.69	%		235,228		1.94	%		451,725		1.81	%
Municipal securities		15,299		1.76	%		97,064		1.44	%		120,905		1.79	%		82,267		2.13	%		315,535		1.77	%
Total	$	17,908		1.64	%	$	218,789		1.49	%	$	336,559		2.08	%	$	317,495		1.99	%	$	890,751		1.90	%

	For the Year Ended December 31, 2017					For the Year Ended December 31, 2016
	Average Balance		Average Rate			Average Balance		Average Rate
	(Dollars in thousands)					(Dollars in thousands)
Interest-bearing demand accounts	$	35,258		0.65	%	$	36,200		0.19	%
Negotiable order of withdrawal (“NOW”) accounts		116,296		0.25	%		109,763		0.24	%
Limited access money market accounts and savings		236,766		0.51	%		241,577		0.41	%
Certificates and other time deposits > $250k		75,801		1.55	%		55,678		1.33	%
Certificates and other time deposits < $250k		269,143		1.27	%		280,778		1.10	%
Total interest-bearing deposits		733,264		0.86	%		723,996		0.71	%
Noninterest-bearing demand accounts		254,765		—	%		221,047		—	%
Total deposits	$	988,029		0.64	%	$	945,043		0.55	%

	For the Years Ended December 31
	2023					2022
	Average Balance		Average Rate			Average Balance		Average Rate
	(Dollars in thousands)
Interest-bearing demand accounts	$	507,782		3.40	%	$	298,845		1.31	%
Negotiable order of withdrawal ("NOW") accounts		468,094		1.33	%		536,742		0.30	%
Limited access money market accounts and savings		1,441,836		2.77	%		1,483,763		0.81	%
Certificates and other time deposits > $250k		498,054		4.01	%		208,661		1.03	%
Certificates and other time deposits < $250k		650,450		3.61	%		479,871		0.98	%
Total interest-bearing deposits		3,566,216		3.00	%		3,007,882		0.81	%
Noninterest-bearing demand accounts		1,412,979		-	%		1,539,938		-	%
Total deposits	$	4,979,195		2.15	%	$	4,547,820		0.54	%

	As of December 31, 2017		As of December 31, 2016
	(Dollars in thousands)
1 year or less	$	52,402	$	54,866
More than 1 year but less than 3 years		21,198		9,451
3 years or more but less than 5 years		16,930		9,029
5 years or more		—		—
Total	$	90,530	$	73,346

	Certificates of Deposit More Than $250,000		Certificates of Deposit of $100,000 Through $250,000
	(Dollars in thousands)
3 months or less	$	119,176	$	194,474
More than 3 months but less than 6 months		96,520		61,216
More than 6 months but less than 12 months		214,937		167,749
12 months or more		192,703		43,702
Total	$	623,336	$	467,141

	FHLB Advances
	(Dollars in Thousands)
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	%

December 31, 2022
Amount outstanding at year-end	$	410,100
Weighted average stated interest rate at year-end		3.88	%
Maximum month-end balance during the year	$	534,059
Average balance outstanding during the year	$	271,025
Weighted average interest rate during the year		2.39	%

	FHLB Advances
	(Dollars in Thousands)
December 31, 2017
Amount outstanding at year-end	$	75,000
Weighted average stated interest rate at year-end		1.96	%
Maximum month-end balance during the year	$	75,000
Average balance outstanding during the year	$	65,513
Weighted average interest rate during the year		1.13	%

December 31, 2016
Amount outstanding at year-end	$	47,064
Weighted average stated interest rate at year-end		2.64	%
Maximum month-end balance during the year	$	80,973
Average balance outstanding during the year	$	53,516
Weighted average interest rate during the year		1.05	%