What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-05-02 · 253 added, 118 removed, 810 unchanged (31% of the section changed)

10 unchanged sentences

We believe these factors include, but are not limited to, the following:

• risks relating to the proposed acquisition of Oakwood Bancshares, Inc.

(“Oakwood”) including, without limitation:

the timing of consummation of the proposed merger;

the risk that any condition to closing of the proposed merger may not be satisfied or waived;

the risk that the merger may not be completed at all;

the diversion of management time on issues related to the proposed merger;

unexpected transaction costs, including the costs of integrating operations;

the risks that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;

the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the merger being lower than expected;

the risk of deposit and customer attrition;

any changes in deposit mix;

unexpected operating and other costs, which may differ or change from expectation;

the risk of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees;

increased competitive pressures on solicitations of customers by competitors;

as well as difficulties and risks inherent with entering new markets;

• risks related to the integration of any other acquired businesses, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, risks related to entering a new geographic market, the time and costs associated with integrating systems, technology platforms, procedures and personnel, the ability to retain key employees and maintain relationships with significant customers, the need for additional capital to finance such transactions, and possible failures in realizing the anticipated benefits from acquisitions;

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BUSINESS FIRST

The following discussion and analysis focuses on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2023 to March 31, 2024, and its results of operations for the three months ended March 31, 2024.

The following discussion and analysis focuses on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2023 to June 30, 2024, and its results of operations for the three and six months ended June 30, 2024.

This discussion and analysis is intended to highlight and supplement information presented elsewhere in this report and should be read in conjunction with (i) the accompanying unaudited consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form 10-K for the year ended December 31, 2023 , including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein.

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We currently operate out of banking centers and loan production offices across Louisiana and Texas.

As of March 31, 2024, we had total assets of $6.7 billion, total loans of $5.1 billion, total deposits of $5.6 billion, and total shareholders’ equity of $649.0 million.

As of June 30, 2024, we had total assets of $6.7 billion, total loans of $5.2 billion, total deposits of $5.6 billion, and total shareholders’ equity of $664.5 million.

As a financial holding company operating through one reportable operating segment, community banking, we generate most of our revenues from interest income on loans, customer service and loan fees, and interest income from securities.

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Federal Reserve Bank ’ s Discount Window

On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $726.2 million and $1.0 billion as of March 31, 2024, and December 31, 2023, respectively, through the Federal Reserve discount window.

On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $851.1 million and $1.0 billion as of June 30, 2024, and December 31, 2023, respectively, through the Federal Reserve discount window.

The Bank has not yet drawn on either of the lines of credit as of the date of this report.

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a Texas corporation ("Oakwood"), entererd into an Agreement and Plan of Reorganization, providing for the acquisition by us, of Oakwood.

Oakwood had $843.0 million of total assets, including $732.0 million of deposits and $654.0 million of loans, as of December 31, 2023.

Oakwood had $839.7 million of total assets, including $726.6 million of deposits and $675.6 million of loans, as of March 31, 2024.

Financial Highlights

The financial highlights as of and for the three months ended March 31, 2024, include:

The financial highlights as of and for the six months ended June 30, 2024, include:

• Total assets of $6.7 billion, a $119.3 million, or 1.8%, increase from December 31, 2023.

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• Total deposits of $5.6 billion, a $314.9 million, or 6.0%, increase from December 31, 2023.

• Net income available to common shareholders of $12.2 million for the three months ended March 31, 2024, a $1.5 million, or 10.6%, decrease from the three months ended March 31, 2023.

• Net interest income of $51.5 million for the three months ended March 31, 2024, a decrease of $1.2 million, or 2.3%, from the three months ended March 31, 2023.

• Net income available to common shareholders of $28.1 million for the six months ended June 30, 2024, a $4.0 million, or 12.4%, decrease from the six months ended June 30, 2023.

• Net interest income of $105.5 million for the six months ended June 30, 2024, a decrease of $535,000, or 0.5%, from the six months ended June 30, 2023.

• Allowance for credit losses of 0.86% of total loans held for investment, compared to 0.88% as of December 31, 2023, and a ratio of nonperforming loans to total loans held for investment of 0.43%, compared to 0.34% as of December 31, 2023.

• Earnings per common share for the first three months of 2024 of $0.49 per basic common share and $0.48 per diluted common share, compared to $0.55 per basic common share and $0.54 per diluted common share for the first three months of 2023.

• Return on average assets of 0.74% over the first three months of 2024, compared to 0.91% for the first three months of 2023.

• Return on average common equity of 8.51% over the first three months of 2024, compared to 10.73% for the first three months of 2023.

• Earnings per common share for the first six months of 2024 of $1.11 per basic common share and $1.10 per diluted common share, compared to $1.28 per basic common share and $1.27 per diluted common share for the first six months of 2023.

• Return on average assets of 0.84% over the first six months of 2024, compared to 1.04% for the first six months of 2023.

• Return on average common equity of 9.73% over the first six months of 2024, compared to 12.39% for the first six months of 2023.

• Capital ratios for Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.49%, 9.29%, 10.57% and 12.88%, respectively, compared to 9.52%, 9.15%, 10.46% and 12.85% at December 31, 2023.

• Book value per common share of $23.24, an increase of 2.9% from $22.58 at December 31, 2023.

Results of Operations for the Three Months Ended March 31, 2024, and 2023

Results of Operations for the Three and Six Months Ended June 30, 2024, and 2023

Performance Summary

For the three months ended March 31, 2024, net income available to common shareholders was $12.2 million, or $0.49 per basic common share and $0.48 per diluted common share, compared to net income of $13.7 million, or $0.55 per basic common share and $0.54 per diluted common share, for the three months ended March 31, 2023.

Return on average assets, on an annualized basis, decreased to 0.74% for the three months ended March 31, 2024, from 0.91% for the three months ended March 31, 2023.

Return on average equity, on an annualized basis, decreased to 8.51% for the three months ended March 31, 2024, as compared to 10.73% for the three months ended March 31, 2023.

For the three months ended June 30, 2024, net income available to common shareholders was $15.9 million, or $0.63 per basic common share and $0.62 per diluted common share, compared to net income of $18.4 million, or $0.73 per basic and diluted common share, for the three months ended June 30, 2023.

Return on average assets, on an annualized basis, decreased to 0.95% for the three months ended June 30, 2024, from 1.18% for the three months ended June 30, 2023.

Return on average equity, on an annualized basis, decreased to 10.94% for the three months ended June 30, 2024, as compared to 13.99% for the three months ended June 30, 2023.

For the six months ended June 30, 2024, net income available to common shareholders was $28.1 million, or $1.11 per basic common share and $1.10 per diluted common share, compared to net income of $32.1 million, or $1.28 per basic common share and $1.27 per diluted common share, for the six months ended June 30, 2023.

Return on average assets, on an annualized basis, decreased to 0.84% for the six months ended June 30, 2024, from 1.04% for the six months ended June 30, 2023.

Return on average equity, on an annualized basis, decreased to 9.73% for the six months ended June 30, 2024, as compared to 12.39% for the six months ended June 30, 2023.

Net Interest Income

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We calculate average assets, liabilities, and equity using a daily average, and average yield/rate utilizing an actual day count convention.

For the three months ended March 31, 2024, net interest income totaled $51.5 million, and net interest margin and net interest spread were 3.32% and 2.36%, respectively, compared to $52.7 million, 3.75%, and 2.96%, respectively, for the three months ended March 31, 2023.

The average yield on the loan portfolio was 6.88% for the three months ended March 31, 2024, compared to 6.34% for the three months ended March 31, 2023, and the average yield on total interest-earning assets was 6.18% for the three months ended March 31, 2024, compared to 5.65% for the three months ended March 31, 2023.

For the three months ended March 31, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 103 basis points compared to the three months ended March 31, 2023, primarily due to the federal reserve increasing rates during 2023.

The following table presents, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts.

For the three months ended June 30, 2024, net interest income totaled $54.0 million, and net interest margin and net interest spread were 3.45% and 2.47%, respectively, compared to $53.3 million, 3.63%, and 2.75%, respectively, for the three months ended June 30, 2023.

The average yield on the loan portfolio was 7.07% for the three months ended June 30, 2024, compared to 6.54% for the three months ended June 30, 2023, and the average yield on total interest-earning assets was 6.38% for the three months ended June 30, 2024, compared to 5.84% for the three months ended June 30, 2023.

For the three months ended June 30, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 76

basis points compared to the three months ended June 30, 2023, primarily due to the Federal Reserve increasing rates during 2023.

For the six months ended June 30, 2024, net interest income totaled $105.5 million, and net interest margin and net interest spread were 3.39% and 2.42%, respectively, compared to $106.1 million, 3.69%, and 2.85%, respectively, for the six months ended June 30, 2023.

The average yield on the loan portfolio was 6.97% for the six months ended June 30, 2024, compared to 6.44% for the six months ended June 30, 2023, and the average yield on total interest-earning assets was 6.28% for the six months ended June 30, 2024, compared to 5.75% for the six months ended June 30, 2023.

For the six months ended June 30, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 88 basis points compared to the six months ended June 30, 2023, primarily due to the Federal Reserve increasing rates during 2023.

The following tables present, 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.

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however, the balances are reflected in average outstanding balances for the period.

For the three months ended March 31, 2024, and 2023, interest income not recognized on nonaccrual loans was not material.

For the three and six months ended June 30, 2024, and 2023, 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.

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Acquired loans were recorded at fair value at acquisition and accrete/amortize discounts and premiums as an adjustment to yield.

Averages presented in the table below, and throughout this report, are month-end averages.

For the Three Months Ended March 31,

Averages presented in the tables below, and throughout this report, are month-end averages.

For the Three Months Ended June 30,

Balance Interest

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(2) Net interest margin is equal to net interest income divided by average interest-earning assets.

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates.

For the purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

For the Three Months Ended March 31, 2024 compared to the

Three Months Ended March 31, 2023

For the Six Months Ended June 30,

Balance Interest

Earned/Interest

Paid Average Yield/Rate Average

Balance Interest

Earned/Interest

Paid Average Yield/Rate

(Dollars in thousands) (Unaudited)

Interest-earning assets:

Total loans $ 5,090,289 $ 176,551 6.97 % $ 4,790,843 $ 152,991 6.44 %

Securities 890,158 11,532 2.61 921,958 9,879 2.16

Interest-bearing deposits in other banks 288,426 7,798 5.44 87,282 2,470 5.71

Total interest-earning assets 6,268,873 195,881 6.28 5,800,083 165,340 5.75

Allowance for loan losses (40,988) (41,772)

Noninterest-earning assets 461,465 440,549

Total assets $ 6,689,350 $ 195,881 $ 6,198,860 $ 165,340

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing deposits $ 4,170,406 $ 78,929 3.81 % $ 3,372,358 $ 42,608 2.55 %

Subordinated debt 99,942 2,710 5.45 109,634 2,640 4.86

Subordinated debt - trust preferred securities 5,000 226 9.09 5,000 206 8.31

Bank Term Funding Program 130,220 2,788 4.31 207,411 4,689 4.56

Advances from FHLB 274,096 5,466 4.01 410,348 8,880 4.36

Other borrowings 17,640 222 2.53 21,502 242 2.27

Total interest-bearing liabilities 4,697,304 90,341 3.87 4,126,253 59,265 2.90

Noninterest-bearing liabilities:

Noninterest-bearing deposits 1,289,948 1,442,084

Other liabilities 49,754 36,601

Total noninterest-bearing liabilities 1,339,702 1,478,685

Shareholders' equity:

Common shareholders' equity 580,414 521,992

Preferred equity 71,930 71,930

Total shareholders' equity 652,344 593,922

Total liabilities and shareholders' equity $ 6,689,350 $ 6,198,860

Net interest rate spread (1) 2.42 % 2.85 %

Net interest income $ 105,540 $ 106,075

Net interest margin (2) 3.39 % 3.69 %

Overall cost of funds 3.03 % 2.15 %

___________________________

(1) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(2) Net interest margin is equal to net interest income divided by average interest-earning assets.

The following tables present 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 the purposes of these tables, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

For the Three Months Ended June 30, 2024 compared to the

Three Months Ended June 30, 2023

Increase (Decrease) due to change in

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Increase (decrease) in net interest income $ (1,693) $ 2,376 $ 683

For the Six Months Ended June 30, 2024 compared to the

Six Months Ended June 30, 2023

Increase (Decrease) due to change in

Volume Rate Total

(Dollars in thousands) (Unaudited)

Interest-earning assets:

Total loans $ 10,386 $ 13,174 $ 23,560

Securities (412) 2,065 1,653

Interest-bearing deposits in other banks 5,438 (110) 5,328

Total increase in interest income $ 15,412 $ 15,129 $ 30,541

Interest-bearing liabilities:

Interest-bearing deposits $ 15,104 $ 21,217 $ 36,321

Subordinated debt (263) 333 70

Subordinated debt - trust preferred securities - 20 20

Bank Term Funding Program (1,653) (248) (1,901)

Advances from FHLB (2,717) (697) (3,414)

Other borrowings (49) 29 (20)

Total increase in interest expense $ 10,422 $ 20,654 $ 31,076

Increase (decrease) in net interest income $ 4,990 $ (5,525) $ (535)

Provision for Credit Losses

Our provision for credit losses is a charge to income in order to bring our allowance for credit losses to a level deemed appropriate by management.

For a description of the factors taken into account by management in determining the allowance for credit losses see “— Financial Condition—Allowance for Credit Losses .” The provision for credit losses was $1.2 million for the three months ended March 31, 2024, and $3.2 million for the same period in 2023.

The lower provision for the three months ended March 31, 2024, compared to the same period in 2023 relates primarily to higher loan growth in 2023 as well as the application of qualitative factors within the CECL model.

For a description of the factors taken into account by management in determining the allowance for credit losses see “— Financial Condition—Allowance for Credit Losses .” The provision for credit losses was $1.3 million for the three months ended June 30, 2024, and $538,000 for the same period in 2023.

For the six months ended June 30, 2024, and 2023, the provision for credit losses was $2.5 million and $3.8 million, respectively.

The higher provision for the three months ended June 30, 2024, compared to the same period in 2023 relates primarily to higher net charge-offs in the current period, caused primarily by the resolution of two commercial relationships totaling $613,000 of net charge-offs.

The lower provision for the six months ended June 30, 2024, compared to the same period in 2023 relates primarily to an improved macro-economic and market outlook in the current six-month period.

Additionally, net charge-offs were elevated during the six months ended June 30, 2023 due to the resolution of certain acquired credit deteriorated loans.

Noninterest Income ( “ Other Income ” )

Our primary sources of noninterest income are service charges on deposit accounts, debit card and automated teller machine (“ATM”) fee income, income from bank-owned life insurance, fees and brokerage commissions 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 Three Months Ended March 31,

The following tables present, for the periods indicated, the major categories of noninterest income:

For the Three Months Ended June 30,

2024 2023 Increase (Decrease)

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Gain on sales of other real estate owned 2 14 (12)

Gain on extinguishment of debt - 941 (941)

Swap fee income 285 7 278

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Total noninterest income $ 12,176 $ 11,958 $ 218

Total noninterest income increased $1.0 million, or 11.9%, from the three months ended March 31, 2023.

For the Six Months Ended June 30,

2024 2023 Increase (Decrease)

(Dollars in thousands) (Unaudited)

Noninterest income:

Service charges on deposit accounts $ 4,976 $ 4,694 $ 282

Debit card and ATM fee income 3,726 3,216 510

Bank-owned life insurance income 1,206 1,071 135

Gain on sales of loans 2,599 1,105 1,494

Loss on sales of investment securities (1) (62) 61

Fees and brokerage commissions 3,812 3,604 208

Mortgage origination income 104 130 (26)

Correspondent bank income 414 131 283

Gain on sales of other real estate owned 65 223 (158)

Gain on extinguishment of debt - 941 (941)

Swap fee income 514 13 501

Pass-through income from other investments 686 2,985 (2,299)

Other 3,461 2,295 1,166

Total noninterest income $ 21,562 $ 20,346 $ 1,216

Total noninterest income increased $218,000, or 1.8%, for the three months ended June 30, 2024 from the same period in 2023.

The increase is primarily due to the increases in the gains on sales of loans of $2.0 million, other income of $744,000, debit card and ATM fee income of $304,000 and swap fee income of $278,000, offset with the gain on the extinguishment of debt of $941,000 which occurred in the same period in 2023 and $2.4 million less in pass-through income from other investments from the same period in 2023.

Total noninterest income increased $1.2 million, or 6.0%, for the six months ended June 30, 2024 from the same period in 2023.

The increase is primarily due to the increases in the gains on sales of loans of $1.5 million, other income of $1.4 million and swap fee income of $501,000, offset with the gain on the extinguishment of debt of $941,000 which occurred in the same period in 2023 and $2.3 million less in pass-through income from other investments from the same period in 2023.

Noninterest Expense ( “ Other Expense ” )

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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, among others.

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

For the Three Months Ended March 31,

The following tables present, for the periods indicated, the major categories of noninterest expense:

For the Three Months Ended June 30,

2024 2023 Increase (Decrease)

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Total noninterest expense $ 43,110 $ 39,702 $ 3,408

Total noninterest expense increased $3.8 million, or 9.9%, from the three months ended March 31, 2023, primarily attributed to the increase in salaries and employee benefits of $2.2 million, or 9.7%, and an increase in data processing of $1.1 million, or 73.7%.

Data processing for the three months ended March 31, 2023 was impacted by an accrual adjustment.

For the Six Months Ended June 30,

2024 2023 Increase (Decrease)

(Dollars in thousands) (Unaudited)

Salaries and employee benefits $ 50,939 $ 45,515 $ 5,424

Non-staff expenses:

Occupancy of bank premises 5,148 4,703 445

Depreciation and amortization 3,418 3,430 (12)

Data processing 5,220 4,520 700

FDIC assessment fees 1,702 2,025 (323)

Legal and professional fees 1,908 1,574 334

Advertising and promotions 2,111 2,374 (263)

Utilities and communications 1,392 1,441 (49)

Ad valorem shares tax 1,800 1,930 (130)

Directors' fees 550 539 11

Other real estate owned expenses and write-downs 108 169 (61)

Merger and conversion related expenses 749 171 578

Other 10,587 9,990 597

Total noninterest expense $ 85,632 $ 78,381 $ 7,251

For the three months ended June 30, 2024, total noninterest expense increased $3.4 million, or 8.6%, from the three months ended June 30, 2023, primarily attributed to the increase in salaries and employee benefits of $3.2 million, or 14.3%.

For the six months ended June 30, 2024, total noninterest expense increased $7.3 million, or 9.3%, from the six months ended June 30, 2023, primarily attributed to the increase in salaries and employee benefits of $5.4 million, or 11.9%.

Income Tax Expense

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Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

For the three months ended March 31, 2024, income tax expense totaled $3.6 million, a decrease of $572,000, or 13.6%, compared to $4.2 million for the same period in 2023.

Our effective tax rates for the three months ended March 31, 2024, and 2023 were 21.1% and 21.9%, respectively.

For the three months ended June 30, 2024, income tax expense totaled $4.6 million, a decrease of $746,000, or 14.1%, compared to $5.3 million for the same period in 2023.

Our effective tax rates for the three months ended June 30, 2024, and 2023 were 21.0% and 21.2%, respectively.

For the six months ended June 30, 2024, income tax expense totaled $8.2 million, a decrease of $1.3 million, or 13.9%, compared to $9.5 million for the same period in 2023.

Our effective tax rates for the six months ended June 30, 2024, and 2023 were 21.0% and 21.5%, respectively.

Financial Condition

Our total assets increased $111.0 million, or 1.7%, from December 31, 2023, to March 31, 2024, due primarily from the increase in our loan portfolio.

Our total assets increased $119.3 million, or 1.8%, from December 31, 2023, to June 30, 2024, due primarily from the increase in our loan portfolio.

Loan Portfolio

Our primary source of income is interest on loans to individuals, professionals and small-to-midsized businesses located in our markets.

Our loan portfolio consists primarily of commercial loans and real estate loans secured by commercial real estate properties located in our primary market areas.

Our loan portfolio 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 March 31, 2024, total loans, excluding mortgage loans held for sale, were $5.1 billion, an increase of $96.1 million, or 1.9%, compared to $5.0 billion as of December 31, 2023.

Additionally, $77,000, and $835,000 in loans were classified as loans held for sale as of March 31, 2024, and December 31, 2023, respectively.

Total loans held for investment as a percentage of total deposits were 91.3% and 95.1% as of March 31, 2024, and December 31, 2023, respectively.

Total loans held for investment as a percentage of total assets were 76.0% and 75.8% as of March 31, 2024, and December 31, 2023, respectively.

As of June 30, 2024, total loans, excluding mortgage loans held for sale, were $5.2 billion, an increase of $170.1 million, or 3.4%, compared to $5.0 billion as of December 31, 2023.

Additionally, $680,000, and $835,000 in loans were classified as loans held for sale as of June 30, 2024, and December 31, 2023, respectively.

Total loans held for investment as a percentage of total deposits were 92.8% and 95.1% as of June 30, 2024, and December 31, 2023, respectively.

Total loans held for investment as a percentage of total assets were 77.0% and 75.8% as of June 30, 2024, and December 31, 2023, respectively.

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

As of March 31, 2024 (Unaudited) As of December 31, 2023

As of June 30, 2024 (Unaudited) As of December 31, 2023

Amount Percent Amount Percent

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These loans are usually repaid through refinancing, cash flow from the borrower’s ongoing operations, development of the property, or sale of the property.

Commercial loans decreased slightly, by $2.0 million or 0.1%, remaining at $2.2 billion as of March 31, 2024.

Commercial loans decreased $19.8 million or 0.9%, remaining at $2.2 billion as of June 30, 2024.

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.

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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.

Construction loans decreased $7.8 million, or 1.2%, to $662.0 million as of March 31, 2024, from $669.8 million as of December 31, 2023.

Construction loans decreased $32.3 million, or 4.8%, to $637.5 million as of June 30, 2024, from $669.8 million as of December 31, 2023.

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.

2 unchanged sentences

Repayment of these loans primarily relies on successful rental and management of the property.

Residential loans increased $34.6 million, or 5.1%, to $717.0 million as of March 31, 2024, from $682.4 million as of December 31, 2023.

Residential loans increased $61.5 million, or 9.0%, to $743.9 million as of June 30, 2024, from $682.4 million as of December 31, 2023.

Commercial loans include general commercial and industrial, or C&I, loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion, and development loans, borrowing base loans, letters of credit and other loan products, primarily in the Company’s target markets that are underwritten based on the borrower’s ability to service the debt from income.

1 unchanged sentence

Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan.

Commercial loans increased $68.1 million, or 5.0%, to $1.4 billion as of March 31, 2024, from $1.4 billion as of December 31, 2023.

Commercial loans increased $161.6 million, or 11.9%, to $1.5 billion as of June 30, 2024, from $1.4 billion as of December 31, 2023.

Consumer and other loans include a variety of loans to individuals for personal, family and household purposes, including secured and unsecured installment and term loans.

The risk is based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.

Consumer and other loans increased $3.1 million, or 4.9%, to $67.0 million as of March 31, 2024, from $63.8 million as of December 31, 2023.

Consumer and other loans decreased $828,000, or 1.3%, to $63.0 million as of June 30, 2024, from $63.8 million as of December 31, 2023.

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 the date indicated are summarized in the following tables:

As of March 31, 2024

As of June 30, 2024

One Year or Less One Through Five

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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 $23.0 million and$18.8 million in nonperforming assets as of March 31, 2024, and December 31, 2023, respectively.

We had $21.6 million in nonperforming loans as of March 31, 2024, compared to $17.1 million as of December 31, 2023.

The increase in nonperforming assets from December 31, 2023, to March 31, 2024, is primarily due to two lending relationships secured by residential real estate.

We had $24.3 million and$18.8 million in nonperforming assets as of June 30, 2024, and December 31, 2023, respectively.

We had $22.4 million in nonperforming loans as of June 30, 2024, compared to $17.1 million as of December 31, 2023.

The increase in nonperforming assets from December 31, 2023, to June 30, 2024, is primarily due to two lending relationships secured by residential real estate and one commercial loan that is unsecured.

The following tables present information regarding nonperforming assets at the dates indicated:

As of March 31,

As of June 30,

2024 (Unaudited) As of December 31,

12 unchanged sentences

Ratio of nonaccrual loans to total loans held for investment 0.41 0.34

As of March 31, 2024 (Unaudited) As of December 31, 2023

As of June 30, 2024 (Unaudited) As of December 31, 2023

(Dollars in thousands)

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See Note 6 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 March 31, 2024

As of June 30, 2024

Pass Special Mention Substandard Doubtful Total

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• 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 March 31, 2024, the allowance for credit losses totaled $44.5 million, or 0.88%, of total loans held for investment.

As of June 30, 2024, the allowance for credit losses totaled $44.5 million, or 0.86%, of total loans held for investment.

As of December 31, 2023, the allowance for credit losses totaled $43.7 million, or 0.88%, of total loans held for investment.

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

As of and For the Three Months Ended

March 31, 2024 (Unaudited) As of and For the Year Ended December

As of and For the Six Months Ended

June 30, 2024 (Unaudited) As of and For the Year Ended December

(Dollars in thousands)

23 unchanged sentences

Ratio of allowance for credit losses to nonaccrual loans 211.86 258.15

As of and For the Three Months Ended

March 31, 2024 (Unaudited) As of and For the Year Ended

December 31, 2023 As of and For the Three Months Ended

March 31, 2023 (Unaudited)

As of and For the Six Months Ended

June 30, 2024 (Unaudited) As of and For the Year Ended

December 31, 2023 As of and For the Six Months Ended

June 30, 2023 (Unaudited)

Net Charge-offs

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The total allowance is available to absorb losses from any loan category.

As of March 31, 2024 (Unaudited) As of December 31, 2023 As of March 31, 2023 (Unaudited)

As of June 30, 2024 (Unaudited) As of December 31, 2023 As of June 30, 2023 (Unaudited)

Amount Percent to Total Amount Percent to Total Amount Percent to Total

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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 March 31, 2024, the carrying amount of investment securities totaled $872.9 million, a decrease of $6.7 million, or 0.8%, compared to $879.6 million as of December 31, 2023.

The decrease was primarily due to unrealized losses in the first three months of 2024.

Securities represented 13.0% and 13.4% of total assets as of March 31, 2024, and December 31, 2023, respectively.

As of June 30, 2024, the carrying amount of investment securities totaled $875.0 million, a decrease of $4.5 million, or 0.5%, compared to $879.6 million as of December 31, 2023.

The decrease was primarily due to unrealized losses and paydowns in the first six months of 2024.

Securities represented 13.1% and 13.4% of total assets as of June 30, 2024, and December 31, 2023, respectively.

Our investment portfolio consists entirely of securities classified as available for sale.

2 unchanged sentences

The following tables summarize the amortized cost and estimated fair value of investment securities as of the dates shown:

As of March 31, 2024

As of June 30, 2024

Amortized Cost Gross Unrealized

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All of our mortgage-backed securities are agency securities.

We do not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in our investment portfolio as of March 31, 2024.

The allowance for credit losses encompasses potential expected credit losses related to the securities portfolio.

2 unchanged sentences

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 both March 31, 2024 and December 31, 2023, was negligible and therefore, no allowance for credit loss was recorded related to our investment securities.

Based on our assessments, expected credit losses on the investment securities portfolio as of both June 30, 2024 and December 31, 2023, was negligible and therefore, no allowance for credit loss was recorded related to our investment securities.

The following tables set forth the fair value, maturities and approximated weighted average yield based on estimated annual income divided by the average amortized cost of the securities portfolio as of the dates indicated.

The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.

As of March 31, 2024

As of June 30, 2024

Within One Year After One Year but Within Five Years After Five Years but Within Ten Years After Ten Years Total

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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 4.53 years with an estimated effective duration of 3.71 years as of March 31, 2024.

As of March 31, 2024, and December 31, 2023, we did not own securities of any one issuer for which aggregate adjusted cost exceeded 10% of our consolidated shareholders’ equity as of such respective dates.

As of March 31, 2024, and December 31, 2023, the Company held other equity securities of $34.9 million and $33.9 million, respectively, comprised mainly of FHLB stock, small business investment companies (“SBICs”) and financial technology (“Fintech”) fund investments.

The weighted average life of our investment portfolio was 4.80 years with an estimated effective duration of 3.84 years as of June 30, 2024.

As of June 30, 2024, and December 31, 2023, we did not own securities of any one issuer for which aggregate adjusted cost exceeded 10% of our consolidated shareholders’ equity as of such respective dates.

As of June 30, 2024, and December 31, 2023, the Company held other equity securities of $38.8 million and $33.9 million, respectively, comprised mainly of FHLB stock, small business investment companies (“SBICs”) and financial technology (“Fintech”) fund investments.

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 March 31, 2024, were $5.6 billion, an increase of $324.0 million, or 6.2%, compared to $5.2 billion as of December 31, 2023.

Total uninsured deposits were $2.2 billion, or 39.8%, of total deposits as of March 31, 2024 compared to $2.0 billion, or 38.9%, of total deposits as of December 31, 2023.

Total deposits as of June 30, 2024, were $5.6 billion, an increase of $314.9 million, or 6.0%, compared to $5.2 billion as of December 31, 2023.

Total uninsured deposits were $2.3 billion, or 40.7%, of total deposits as of June 30, 2024 compared to $2.0 billion, or 38.9%, of total deposits as of December 31, 2023.

Since it is not reasonably practical to

provide a precise measure of uninsured deposits, the amounts are estimated and are based on the same methodologies and assumptions that are used for regulatory reporting requirements for the call report.

Noninterest-bearing deposits as of March 31, 2024, were $1.3 billion compared to $1.3 billion as of December 31, 2023, a decrease of $4.0 million, or 0.3%.

Average deposits for the three months ended March 31, 2024, were $5.4 billion, an increase of $376.2 million, or 7.6%, over the full year average for the year ended December 31, 2023, of $5.0 billion.

The average rate paid on total interest-bearing deposits increased over this period from 3.00% for the year ended December 31, 2023, to 3.76% for the three months ended March 31, 2024.

The increase in average rates was driven by the federal reserve raising rates during the year ended December 31, 2023.

In addition, the stability of noninterest-bearing demand accounts served to reduce the cost of deposits to 2.86% for the three months ended March 31, 2024, compared to 2.15% for the year ended December 31, 2023.

Noninterest-bearing deposits as of June 30, 2024, were $1.3 billion compared to $1.3 billion as of December 31, 2023, an increase of $11.1 million, or 0.9%.

Average deposits for the six months ended June 30, 2024, were $5.5 billion, an increase of $481.2 million, or 9.7%, over the full year average for the year ended December 31, 2023, of $5.0 billion.

The average rate paid on total interest-bearing deposits increased over this period from 3.00% for the year ended December 31, 2023, to 3.81% for the six months ended June 30, 2024.

The increase in average rates was driven by the Federal Reserve raising rates during the year ended December 31, 2023 and consumer demand for higher earning interest bearing accounts.

The cost of deposits increased to 2.91% for the six months ended June 30, 2024, compared to 2.15% for the year ended December 31, 2023.

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

For the Three Months Ended

March 31, 2024 (Unaudited) For the Year Ended

For the Six Months Ended

June 30, 2024 (Unaudited) For the Year Ended

December 31, 2023

10 unchanged sentences

Total deposits $ 5,460,354 2.91 % $ 4,979,195 2.15 %

The ratio of average noninterest-bearing deposits to average total deposits for the three months ended March 31, 2024, and the year ended December 31, 2023, was 24.0% and 28.4%, respectively.

The following table sets forth the contractual maturities of certain certificates of deposit at March 31, 2024:

The ratio of average noninterest-bearing deposits to average total deposits for the six months ended June 30, 2024, and the year ended December 31, 2023, was 23.6% and 28.4%, respectively.

The following table sets forth the contractual maturities of certain certificates of deposit at June 30, 2024:

Certificates of

9 unchanged sentences

Federal Funds Purchased Lines of Credit Relationships

We maintain Federal Funds Purchased Lines of Credit Relationships with the following correspondent banks and limits as of March 31, 2024:

We maintain Federal Funds Purchased Lines of Credit Relationships with the following correspondent banks and limits as of June 30, 2024:

Fed Funds Purchase

5 unchanged sentences

Total $ 145,000

We had no outstanding balances on these lines at March 31, 2024 and December 31, 2023.

We had no outstanding balances on these lines at June 30, 2024 and December 31, 2023.

Liquidity and Capital Resources

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 three months ended March 31, 2024, and the year ended December 31, 2023, liquidity needs were primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios.

For the six months ended June 30, 2024, and the year ended December 31, 2023, liquidity needs were primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios.

In addition, we also utilize, or have available, brokered deposits, purchased funds from correspondent banks, the Federal Reserve discount window, and overnight advances from the FHLB.

As of March 31, 2024, and December 31, 2023, we maintained five federal funds purchased lines of credit with correspondent banks which provided for extensions of credit with an availability to borrow up to an aggregate of $145.0 million.

There were no funds drawn under these lines of credit at March 31, 2024, and December 31, 2023.

We had an additional $1.2 billion of availability through the FHLB at both March 31, 2024, and December 31, 2023.

As of March 31, 2024 and December 31, 2023, we had $726.2 million and $1.0 billion, respectively, of availability through the Federal Reserve Discount Window.

As of June 30, 2024, and December 31, 2023, we maintained five federal funds purchased lines of credit with correspondent banks which provided for extensions of credit with an availability to borrow up to an aggregate of $145.0 million.

There were no funds drawn under these lines of credit at June 30, 2024, and December 31, 2023.

We had an additional $1.2 billion of availability through the FHLB at both June 30, 2024, and December 31, 2023.

As of June 30, 2024 and December 31, 2023, we had $851.1 million and $1.0 billion, respectively, of availability through the Federal Reserve Discount Window.

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 periods indicated.

Average total assets equaled $6.7 billion and $6.3 billion for the three months ended March 31, 2024, and the year ended December 31, 2023, respectively.

For the Three

Average total assets equaled $6.7 billion and $6.3 billion for the six months ended June 30, 2024, and the year ended December 31, 2023, respectively.

2024 (Unaudited) For the Year Ended

19 unchanged sentences

We do not expect a change in the primary source or use of our funds in the foreseeable future.

Our average net loans increased 8.9% for the three months ended March 31, 2024, compared to the same period in 2023.

Our average net loans increased 6.3% for the six months ended June 30, 2024, compared to the same period in 2023.

We predominantly invest excess deposits 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 4.53 years and an effective duration of 3.71 years as of March 31, 2024.

Our securities portfolio had a weighted average life of 4.80 years and an effective duration of 3.84 years as of June 30, 2024.

As of December 31, 2023, our securities portfolio had a weighted average life of 4.57 years and an effective duration of 3.81 years.

As of March 31, 2024, we had outstanding $1.2 billion in commitments to extend credit and $48.9 million in commitments associated with outstanding standby and commercial letters of credit.

As of June 30, 2024, we had outstanding $1.2 billion in commitments to extend credit and $50.8 million in commitments associated with outstanding standby and commercial letters of credit.

As of December 31, 2023, we had outstanding $1.2 billion in commitments to extend credit and $45.2 million in commitments associated with outstanding standby and commercial letters of credit.

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See “ Off Balance Sheet Items ” below for additional information.

As of March 31, 2024, and December 31, 2023 we had cash and cash equivalents, including federal funds sold, of $397.2 million and $377.2 million, respectively.

As of June 30, 2024, and December 31, 2023 we had cash and cash equivalents, including federal funds sold, of $321.6 million and $377.2 million, respectively.

We had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature for either period.

Capital Resources

Total shareholders’ equity increased to $649.0 million as of March 31, 2024, compared to $644.3 million as of December 31, 2023, an increase of $4.8 million, or 0.7%.

Total shareholders’ equity increased to $664.5 million as of June 30, 2024, compared to $644.3 million as of December 31, 2023, an increase of $20.3 million, or 3.1%.

This increase was primarily due to net income of $30.8 million offset with other comprehensive losses of $1.2 million resulting from the after-tax effect of unrealized losses in our investment securities portfolio, and dividends paid on preferred stock and common stock of $9.9 million.

On April 25, 2024, our Board declared a quarterly dividend in the amount of $18.75 per preferred share to the preferred shareholders of record as of May 15, 2024.

The dividend is to be paid on May 31, 2024, or as soon as practicable thereafter.

On April 25, 2024, our Board declared a quarterly dividend based upon our financial performance for the three months ended March 31, 2024, in the amount of $0.14 per common share to the common shareholders of record as of May 15, 2024.

The dividend is to be paid on May 31, 2024, or as soon as practicable thereafter.

On July 25, 2024, our Board declared a quarterly dividend in the amount of $18.75 per preferred share to the preferred shareholders of record as of August 15, 2024.

The dividend is to be paid on August 31, 2024, or as soon as practicable thereafter.

On July 25, 2024, our Board declared a quarterly dividend based upon our financial performance for the three months ended June 30, 2024, in the amount of $0.14 per common share to the common shareholders of record as of August 15, 2024.

The dividend is to be paid on August 31, 2024, or as soon as practicable thereafter.

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.

5 unchanged sentences

We are subject to regulatory capital requirements at the holding company and bank levels.

As of March 31, 2024, and December 31, 2023, we and b1BANK were in compliance with all applicable regulatory capital requirements, and b1BANK was classified as “well-capitalized,” for purposes of prompt corrective action regulations.

As of June 30, 2024, and December 31, 2023, we and b1BANK were in compliance with all applicable regulatory capital requirements, and b1BANK was classified as “well-capitalized,” for purposes of prompt corrective action regulations.

As we employ our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings.

1 unchanged sentence

The following table presents the actual capital amounts and regulatory capital ratios for us and b1BANK as of the dates indicated.

As of March 31, 2024 (Unaudited) As of December 31, 2023

As of June 30, 2024 (Unaudited) As of December 31, 2023

Amount Ratio Amount Ratio

10 unchanged sentences

FHLB Advances

Advances from the FHLB totaled approximately $308.2 million and $211.2 million at March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024, and December 31, 2023, the FHLB advances were collateralized by a blanket floating lien on certain securities and loans, had a weighted average stated rate of 4.04% and 3.65%, respectively, and mature within ten years.

Advances from the FHLB totaled approximately $305.2 million and $211.2 million at June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, and December 31, 2023, the FHLB advances were collateralized by a blanket floating lien on certain securities and loans, had a weighted average stated rate of 4.07% and 3.65%, respectively, and mature within ten years.

Bank Term Funding Program ( “ BTFP ” )

6 unchanged sentences

Contractual Obligations

The following tables summarize contractual obligations and other commitments to make future payments as of March 31, 2024, and December 31, 2023 (other than non-maturity deposit obligations), which consist of future cash payments associated with our contractual obligations pursuant to our FHLB advances, subordinated debt, revolving line of credit, and non-cancelable future operating leases.

The following tables summarize contractual obligations and other commitments to make future payments as of June 30, 2024, and December 31, 2023 (other than non-maturity deposit obligations), which consist of future cash payments associated with our contractual obligations pursuant to our FHLB advances, subordinated debt, revolving line of credit, and non-cancelable future operating leases.

Payments related to leases are based on actual payments specified in underlying contracts.

Advances from the FHLB totaled approximately $308.2 million and $211.2 million at March 31, 2024 and December 31, 2023, respectively.

Advances from the FHLB totaled approximately $305.2 million and $211.2 million at June 30, 2024 and December 31, 2023, respectively.

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 paid this debt off in full at the time of maturity.

The subordinated debt totaled $99.9 million and $100.0 million at March 31, 2024 and December 31, 2023, respectively, including premium.

We repaid this debt in full at the time of maturity.

The subordinated debt totaled $99.9 million and $100.0 million at June 30, 2024 and December 31, 2023, respectively, including premium.

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.

1 unchanged sentence

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, and $8.9 million, which was called on May 1, 2023 and ceased bearing interest as of such date.

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 $1.0 million and $1.1 million remaining at March 31, 2024 and December 31, 2023, respectively.

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 $948,000 and $1.1 million remaining at June 30, 2024 and December 31, 2023, respectively.

We recognized $1.5 million in gains on the extinguishment of this debt during the year ended December 31, 2023.

As of March 31, 2024

As of June 30, 2024

1 year or less More than 1 year

71 unchanged sentences

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 March 31, 2024 As of December 31, 2023

As of June 30, 2024 As of December 31, 2023

Change in Interest Rates (Basis Points) Percent Change in

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Core Net Income .

Core net income available to common shareholders, which excludes certain income and expenses, for the three months ended March 31, 2024, was $12.8 million, or $0.50 per diluted common share, compared to core net income available to common shareholders of $13.8 million, or $0.55 per diluted common share, for the three months ended March 31, 2023.

Notable noncore events impacting earnings for the three months ended March 31, 2024, included $50,000 in a gain on the sale of a former bank premises and $715,000 in acquisition-related expenses, compared to $103,000 in acquisition-related expenses for the same period in 2023.

For the Three Months Ended March 31,

Core net income available to common shareholders, which excludes certain income and expenses, for the three months ended June 30, 2024, was $16.3 million, or $0.64 per diluted common share, compared to core net income available to common shareholders of $17.7 million, or $0.70 per diluted common share, for the three months ended June 30, 2023.

Notable noncore events impacting earnings for the three months ended June 30, 2024, included $419,000 in acquisition-related expenses, compared to $941,000 in a gain on the extinguishment of debt due to the premium associated with the debt from the TCBI acquisition in 2022, which was attributed to the $5.7 million subordinated debt redemption, for the same period in 2023.

For the six months ended June 30, 2024, core net income available to common shareholders, was $29.1 million, or $1.14 per diluted common share, compared to core net income available to common shareholders of $31.5 million, or $1.25 per diluted common share, for the six months ended June 30, 2023.

Notable noncore events impacting earnings for the six months ended June 30, 2024, included $50,000 in a gain on the sale of a former bank premises and $1.1 million in acquisition-related expenses, compared to $941,000 in a gain on the extinguishment of debt due to the premium associated with the debt from the TCBI acquisition in 2022, which was attributed to the $5.7 million subordinated debt redemption, and $171,000 in acquisition-related expenses for the same period in 2023.

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

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

12 unchanged sentences

Losses on sale of securities - 61 1 62

Gain on extinguishment of debt - (941) - (941)

Core other income 12,176 11,078 21,513 19,467

7 unchanged sentences

Losses on sale of securities - 61 1 62

Gain on extinguishment of debt - (941) - (941)

Acquisition-related expenses (2) 419 68 1,134 171

4 unchanged sentences

Tax on losses on sale of securities - 13 - 13

Tax on gain on extinguishment of debt - (199) - (199)

Tax on acquisition-related expenses (2) 2 14 91 20

7 unchanged sentences

Losses on sale of securities, net of tax - 48 1 49

Gain on extinguishment of debt, net of tax - (742) - (742)

Acquisition-related expenses (2), net of tax 417 54 1,043 151

4 unchanged sentences

Losses on sale of securities, net of tax - - - -

Gain on extinguishment of debt, net of tax - (0.03) - (0.03)

Acquisition-related expenses (2), net of tax 0.02 - 0.04 0.01

22 unchanged sentences

____________________________

(1) Excludes the dilutive effect, if any, of 302,007 and 217,094 shares of common stock issuable upon exercise of outstanding stock options and restricted stock awards as of March 31, 2024 and December 31, 2023, respectively.

(1) Excludes the dilutive effect, if any, of 216,063 and 217,094 shares of common stock issuable upon exercise of outstanding stock options and restricted stock awards as of June 30, 2024 and December 31, 2023, respectively.

Tangible Common Equity to Tangible Assets .

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis