What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-07-31 · 184 added, 154 removed, 909 unchanged (27% of the section changed)

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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;

• risks relating to the Oakwood Merger and Oakwood Bank Merger (each as defined herein);

unexpected costs associated with the integration of operations;

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

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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;

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

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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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.

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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 June 30, 2024, and its results of operations for the three and six months ended June 30, 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 September 30, 2024, and its results of operations for the three and nine months ended September 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 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 of September 30, 2024, we had total assets of $6.9 billion, total loans of $5.2 billion, total deposits of $5.6 billion, and total shareholders’ equity of $699.5 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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The loans are secured by pledging the banks’ U.S.

treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets.

treasuries, agency securities, agency mortgage-backed securities,

and any other qualifying assets.

These pledged securities were valued at par for collateral purposes.

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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 $851.1 million and $1.0 billion as of June 30, 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 $921.9 million and $1.0 billion as of September 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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Acquisition of Oakwood Bancshares, Inc.

On April 25, 2024, we, and Oakwood Bancshares, Inc.

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

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.

On October 1, 2024, we consummated the merger of Oakwood Bancshares, Inc.

(“Oakwood”), the parent bank holding company for Oakwood Bank, with and into us, with us continuing as the surviving corporation (the “Oakwood Merger”) pursuant to the terms of that certain Agreement and Plan of Reorganization (the “Reorganization Agreement”), dated as of April 25, 2024, by and between us and Oakwood.

Immediately, following consummation of the Oakwood Merger, Oakwood Bank merged with and into the us, with us surviving the merger.

Pursuant to the terms of the Reorganization Agreement, upon consummation of the Oakwood Merger, we issued 3,914,012 shares of our common stock to the former shareholders of Oakwood.

As of September 30, 2024, Oakwood had $863.6 million of total assets, $700.2 million in loans and $741.3 million in deposits.

Financial Highlights

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

The financial highlights as of and for the nine months ended September 30, 2024, include:

• Total assets of $6.9 billion, a $304.1 million, or 4.6%, increase from December 31, 2023.

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• Total deposits of $5.6 billion, a $392.2 million, or 7.5%, increase from December 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.

• Net income available to common shareholders of $44.6 million for the nine months ended September 30, 2024, a $6.6 million, or 12.9%, decrease from the nine months ended September 30, 2023.

• Net interest income of $161.7 million for the nine months ended September 30, 2024, an increase of $285,000, or 0.2%, from the nine months ended September 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 0.50%, compared to 0.34% as of December 31, 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.

• Earnings per common share for the first nine months of 2024 of $1.77 per basic common share and $1.75 per diluted common share, compared to $2.04 per basic common share and $2.02 per diluted common share for the first nine months of 2023.

• Return on average assets of 0.89% over the first nine months of 2024, compared to 1.09% for the first nine months of 2023.

• Return on average common equity of 10.08% over the first nine months of 2024, compared to 13.00% for the first nine months of 2023.

• Capital ratios for Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.61%, 9.42%, 10.69% and 12.99%, respectively, compared to 9.52%, 9.15%, 10.46% and 12.85% at December 31, 2023.

• Book value per common share of $24.59, an increase of 8.9% from $22.58 at December 31, 2023.

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

Results of Operations for the Three and Nine Months Ended September 30, 2024, and 2023

Performance Summary

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.

For the three months ended September 30, 2024, net income available to common shareholders was $16.5 million, or $0.65 per basic and diluted common share, compared to net income of $19.1 million, or $0.76 per basic and diluted common share, for the three months ended September 30, 2023.

Return on average assets, on an annualized basis, decreased to 0.97% for the three months ended September 30, 2024, from 1.17% for the three months ended September 30, 2023.

Return on average equity, on an annualized basis, decreased to 10.76% for the three months ended September 30, 2024, as compared to 14.16% for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, net income available to common shareholders was $44.6 million, or $1.77 per basic common share and $1.75 per diluted common share, compared to net income of $51.2 million, or $2.04 per basic common share and $2.02 per diluted common share, for the nine months ended September 30, 2023.

Return on average assets, on an annualized basis, decreased to 0.89% for the nine months ended September 30, 2024, from 1.09% for the nine months ended September 30, 2023.

Return on average equity, on an annualized basis, decreased to 10.08% for the nine months ended September 30, 2024, as compared to 13.00% for the nine months ended September 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 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.

For the three months ended September 30, 2024, net interest income totaled $56.1 million, and net interest margin and net interest spread were 3.51% and 2.54%, respectively, compared to $55.3 million, 3.61%, and 2.68%, respectively, for the three months ended September 30, 2023.

The average yield on the loan portfolio was 7.12% for the three months ended September 30, 2024, compared to 6.84% for the three months ended September 30, 2023, and the average yield on total interest-earning assets was 6.42% for the three months ended September 30, 2024, compared to 6.10% for the three months ended September 30, 2023.

For the three months ended September 30, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 48 basis points compared to the three months ended September 30, 2023, primarily due to the Federal Reserve increasing rates during 2023.

For the nine months ended September 30, 2024, net interest income totaled $161.7 million, and net interest margin and net interest spread were 3.43% and 2.46%, respectively, compared to $161.4 million, 3.66%, and 2.79%, respectively, for the nine months ended September 30, 2023.

The average yield on the loan portfolio was 7.02% for the nine months ended September 30, 2024, compared to 6.58% for the nine months ended September 30, 2023, and the average yield on total interest-earning assets was 6.33% for the nine months ended September 30, 2024, compared to 5.87% for the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 74 basis points compared to the nine months ended September 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.

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

For the three and six months ended June 30, 2024, and 2023, interest income not recognized on nonaccrual loans was not material.

For the three and nine months ended September 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 tables below, and throughout this report, are month-end averages.

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Balance Interest

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Balance Interest

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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

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

Three Months Ended September 30, 2023

Increase (Decrease) due to change in

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Increase (decrease) in net interest income $ (1,387) $ 2,207 $ 820

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

Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2024 compared to the

Nine Months Ended September 30, 2023

Increase (Decrease) due to change in

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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 $1.3 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.

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 $1.7 million for the three months ended September 30, 2024, and $604,000 for the same period in 2023.

For the nine months ended September 30, 2024, and 2023, the provision for credit losses was $4.2 million and $4.4 million, respectively.

The higher provision for the three months ended September 30, 2024, compared to the same period in 2023 relates primarily to deterioration in the economic forecast in the current period, as compared to the prior period.

Additionally, during the three months ended September 30, 2023, certain nonperforming loans were resolved through charge-offs, with the remaining portfolio requiring a lower reserve replenishment rate.

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

Additionally, net charge-offs were elevated during the nine months ended September 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 tables present, for the periods indicated, the major categories of noninterest income:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

2024 2023 Increase (Decrease)

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Correspondent bank income 217 137 80

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

Gain (loss) on sales of other real estate owned (16) 85 (101)

Gain on sale of branch - 932 (932)

Gain on extinguishment of debt - 517 (517)

Swap fee income 937 8 929

Pass-through income from other investments 392 2,812 (2,420)

Pass-through income (loss) from other investments 336 (11) 347

Other 1,859 1,128 731

Total noninterest income $ 10,774 $ 9,883 $ 891

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2024 2023 Increase (Decrease)

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Gain on sales of other real estate owned 49 308 (259)

Gain on sale of branch - 932 (932)

Gain on extinguishment of debt - 1,458 (1,458)

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Total noninterest income $ 32,336 $ 30,229 $ 2,107

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.

Total noninterest income increased $891,000, or 9.0%, for the three months ended September 30, 2024 from the same period in 2023.

The increase is primarily due to the increases in other income of $731,000, debit card and ATM fee income of $283,000, swap fee income of $929,000, and pass-through income from other investments of $347,000, offset with the gain on the sale of a branch of $932,000 and a gain on the extinguishment of debt of $517,000 which occurred in the same period in 2023.

Total noninterest income increased $2.1 million, or 7.0%, for the nine months ended September 30, 2024 from the same period in 2023.

The increase is primarily due to the increases in the gains on sales of loans of $1.3 million, other income of $1.9 million and swap fee income of $1.4 million, offset with the gain on the extinguishment of debt of $1.5 million and the gain on the sale of a branch of $932,000 which occurred in the same period in 2023 and $2.0 million less in pass-through income from other investments from the same period in 2023.

Noninterest Expense ( “ Other Expense ” )

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

For the Three Months Ended June 30,

For the Three Months Ended September 30,

2024 2023 Increase (Decrease)

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Total noninterest expense $ 42,450 $ 38,607 $ 3,843

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2024 2023 Increase (Decrease)

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Total noninterest expense $ 128,082 $ 116,988 $ 11,094

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%.

For the three months ended September 30, 2024, total noninterest expense increased $3.8 million, or 10.0%, from the three months ended September 30, 2023, primarily attributed to the increase in salaries and employee benefits of $2.4 million, or 10.6%.

For the nine months ended September 30, 2024, total noninterest expense increased $11.1 million, or 9.5%, from the nine months ended September 30, 2023, primarily attributed to the increase in salaries and employee benefits of $7.8 million, or 11.5%.

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 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.

For the three months ended September 30, 2024, income tax expense totaled $4.9 million, a decrease of $581,000, or 10.5%, compared to $5.5 million for the same period in 2023.

Our effective tax rates for the three months ended September 30, 2024, and 2023 were 21.6% and 21.2%, respectively.

For the nine months ended September 30, 2024, income tax expense totaled $13.1 million, a decrease of $1.9 million, or 12.6%, compared to $15.0 million for the same period in 2023.

Our effective tax rates for the nine months ended September 30, 2024, and 2023 were 21.3% and 21.4%, respectively.

Financial Condition

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.

Our total assets increased $304.1 million, or 4.6%, from December 31, 2023, to September 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 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.

As of September 30, 2024, total loans, excluding mortgage loans held for sale, were $5.2 billion, an increase of $227.3 million, or 4.6%, compared to $5.0 billion as of December 31, 2023.

Additionally, $835,000 in loans were classified as loans held for sale as of December 31, 2023, and none at September 30, 2024.

Total loans held for investment as a percentage of total deposits were 92.5% and 95.1% as of September 30, 2024, and December 31, 2023, respectively.

Total loans held for investment as a percentage of total assets were 75.8% as of both September 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 June 30, 2024 (Unaudited) As of December 31, 2023

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

Amount Percent Amount Percent

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Real Estate Loans:

Commercial $ 2,198,119 42.6 % $ 2,217,928 44.4 %

Retail and Wholesale $ 550,064 10.5 % $ 573,725 11.5 %

Hospitality 285,129 5.5 249,027 5.0

Healthcare 216,294 4.1 201,098 4.0

Services 149,000 2.9 155,283 3.1

Energy 98,643 1.9 100,523 2.0

Other 957,240 18.3 938,272 18.8

Total Commercial 2,256,370 43.2 2,217,928 44.4

Construction 654,353 12.5 669,798 13.4

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Total loans held for investment $ 5,220,118 100.0 % $ 4,992,785 100.0 %

The following table summarizes our commercial real estate portfolio broken down into the geographic regions we operate in.

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

Amount Percent Amount Percent

(Dollars in thousands) (Unaudited)

Commercial real estate:

Dallas Region $ 581,862 25.8 % $ 618,608 27.9 %

New Orleans Region 456,300 20.2 439,087 19.8

North Louisiana Region 446,431 19.8 418,510 18.9

Capitol Region 236,593 10.5 213,492 9.6

Houston Region 231,204 10.3 243,097 10.9

Southwest Louisiana Region 221,816 9.8 201,538 9.1

Bayou Region 82,164 3.6 83,596 3.8

Total commercial real estate 2,256,370 100.0 % 2,217,928 100.0 %

Commercial loans are extensions of credit secured by owner-occupied and non-owner-occupied collateral.

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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 $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.

Commercial loans increased $38.4 million or 1.7%, to $2.3 billion as of September 30, 2024, from $2.2 billion as of December 31, 2023.

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.

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.

Construction loans decreased $15.4 million, or 2.3%, to $654.4 million as of September 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 $61.5 million, or 9.0%, to $743.9 million as of June 30, 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 September 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 $161.6 million, or 11.9%, to $1.5 billion as of June 30, 2024, from $1.4 billion as of December 31, 2023.

Commercial loans increased $137.6 million, or 10.1%, to $1.5 billion as of September 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 decreased $828,000, or 1.3%, to $63.0 million as of June 30, 2024, from $63.8 million as of December 31, 2023.

Consumer and other loans increased $5.2 million, or 8.2%, to $69.0 million as of September 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 June 30, 2024

As of September 30, 2024

One Year or Less One Through Five

70 unchanged sentences

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 $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.

We had $27.8 million and$18.8 million in nonperforming assets as of September 30, 2024, and December 31, 2023, respectively.

We had $26.1 million in nonperforming loans as of September 30, 2024, compared to $17.1 million as of December 31, 2023.

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

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

As of June 30,

As of September 30,

2024 (Unaudited) As of December 31,

12 unchanged sentences

Ratio of nonaccrual loans to total loans held for investment 0.50 0.34

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

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

(Dollars in thousands)

25 unchanged sentences

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 June 30, 2024

As of September 30, 2024

Pass Special Mention Substandard Doubtful Total

22 unchanged sentences

In determining the allowance for credit losses, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined.

The balance of the allowance for credit losses is based on internally assigned risk classifications of loans, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic

conditions on certain historical credit loss rates.

The balance of the allowance for credit losses is based on

internally assigned risk classifications of loans, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical credit loss rates.

For additional information, see Note 6 to the consolidated financial statements.

8 unchanged sentences

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

As of September 30, 2024, the allowance for credit losses totaled $45.0 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 Six Months Ended

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

As of and For the Nine Months Ended

September 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 174.09 258.15

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)

As of and For the Nine Months Ended

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

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

September 30, 2023 (Unaudited)

Net Charge-offs

18 unchanged sentences

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

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

As of September 30, 2024 (Unaudited) As of December 31, 2023 As of September 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 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.

As of September 30, 2024, the carrying amount of investment securities totaled $916.1 million, an increase of $36.5 million, or 4.2%, compared to $879.6 million as of December 31, 2023.

The increase was primarily due to unrealized gains in the first nine months of 2024.

Securities represented 13.3% and 13.4% of total assets as of September 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 June 30, 2024

As of September 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 June 30, 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 June 30, 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 September 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 June 30, 2024

As of September 30, 2024

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

23 unchanged sentences

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 4.80 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.

The weighted average life of our investment portfolio was 4.49 years with an estimated effective duration of 3.77 years as of September 30, 2024.

As of September 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 September 30, 2024, and December 31, 2023, the Company held other equity securities of $39.6 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 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.

Total deposits as of September 30, 2024, were $5.6 billion, an increase of $392.2 million, or 7.5%, compared to $5.2 billion as of December 31, 2023.

Total uninsured deposits were $2.4 billion, or 42.4%, of total deposits as of September 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 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.

Noninterest-bearing deposits as of September 30, 2024, were $1.2 billion compared to $1.3 billion as of December 31, 2023, a decrease of $108.1 million, or 8.3%.

Average deposits for the nine months ended September 30, 2024, were $5.5 billion, an increase of $520.7 million, or 10.5%, 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 nine months ended September 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 cost of deposits increased to 2.92% for the nine months ended September 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 Six Months Ended

June 30, 2024 (Unaudited) For the Year Ended

For the Nine Months Ended

September 30, 2024 (Unaudited) For the Year Ended

December 31, 2023

10 unchanged sentences

Total deposits $ 5,499,901 2.92 % $ 4,979,195 2.15 %

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:

The ratio of average noninterest-bearing deposits to average total deposits for the nine months ended September 30, 2024, and the year ended December 31, 2023, was 23.3% and 28.4%, respectively.

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

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

Fed Funds Purchase

5 unchanged sentences

Total $ 145,000

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

We had no outstanding balances on these lines at September 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 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.

For the nine months ended September 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 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.

As of September 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 September 30, 2024, and December 31, 2023.

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

As of September 30, 2024 and December 31, 2023, we had $921.9 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 six months ended June 30, 2024, and the year ended December 31, 2023, respectively.

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

September 30,

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 6.3% for the six months ended June 30, 2024, compared to the same period in 2023.

Our average net loans increased 6.3% for the nine months ended September 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 4.80 years and an effective duration of 3.84 years as of June 30, 2024.

Our securities portfolio had a weighted average life of 4.49 years and an effective duration of 3.77 years as of September 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 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 September 30, 2024, we had outstanding $1.2 billion in commitments to extend credit and $47.9 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.

1 unchanged sentence

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

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.

As of September 30, 2024, and December 31, 2023 we had cash and cash equivalents, including federal funds sold, of $383.2 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 $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 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.

Total shareholders’ equity increased to $699.5 million as of September 30, 2024, compared to $644.3 million as of December 31, 2023, an increase of $55.3 million, or 8.6%.

This increase was primarily due to net income of $48.6 million and other comprehensive income of $20.4 million resulting from the after-tax effect of unrealized gains in our investment securities portfolio offset with dividends paid on preferred stock and common stock of $14.8 million.

On October 24, 2024, our Board declared a quarterly dividend in the amount of $18.75 per preferred share to the preferred shareholders of record as of November 15, 2024.

The dividend is to be paid on November 30, 2024, or as soon as practicable thereafter.

On October 24, 2024, our Board declared a quarterly dividend based upon our financial performance for the three months ended September 30, 2024, in the amount of $0.14 per common share to the common shareholders of record as of November 15, 2024.

The dividend is to be paid on November 30, 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 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 of September 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 June 30, 2024 (Unaudited) As of December 31, 2023

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

Amount Ratio Amount Ratio

10 unchanged sentences

FHLB Advances

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.

Advances from the FHLB totaled approximately $367.2 million and $211.2 million at September 30, 2024 and December 31, 2023, respectively.

As of September 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 4.24% 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 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.

The following tables summarize contractual obligations and other commitments to make future payments as of September 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 $305.2 million and $211.2 million at June 30, 2024 and December 31, 2023, respectively.

Advances from the FHLB totaled approximately $367.2 million and $211.2 million at September 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 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.

The subordinated debt totaled $99.8 million and $100.0 million at September 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 $948,000 and $1.1 million remaining at June 30, 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 $890,000 and $1.1 million remaining at September 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 June 30, 2024

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

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

Change in Interest Rates (Basis Points) Percent Change in

31 unchanged sentences

Core Net Income .

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,

Core net income available to common shareholders, which excludes certain income and expenses, for the three months ended September 30, 2024, was $17.2 million, or $0.68 per diluted common share, compared to core net income available to common shareholders of $18.0 million, or $0.71 per diluted common share, for the three months ended September 30, 2023.

Notable noncore events impacting earnings for the three months ended September 30, 2024, included $319,000 in acquisition-related expenses and $511,000 in core conversion expenses, compared to $932,000 in a gain on the sale of our Leesville, Louisiana banking center and $517,000 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 remaining $3.2 million subordinated debt redemption, for the same period in 2023.

For the nine months ended September 30, 2024, core net income available to common shareholders, was $46.3 million, or $1.82 per diluted common share, compared to core net income available to common shareholders of $49.5 million, or $1.96 per diluted common share, for the nine months ended September 30, 2023.

Notable noncore events impacting earnings for the nine months ended September 30, 2024, $1.5 million in acquisition-related expenses and $511,000 in core conversion expenses, compared to $932,000 in a gain on the sale of our Leesville, Louisiana banking center, $1.5 million 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 $8.9 million subordinated debt redemption, and $173,000 in acquisition-related expenses for the same period in 2023.

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2024 2023 2024 2023

13 unchanged sentences

Losses on sale of securities 13 - 14 62

Gain on sale of branch - (932) - (932)

Gain on extinguishment of debt - (517) - (1,458)

3 unchanged sentences

Acquisition-related expenses (2) (319) (2) (1,453) (173)

Core conversion expenses (511) - (511) -

Core other expense 41,620 38,605 126,118 116,815

3 unchanged sentences

Losses on sale of securities 13 - 14 62

Gain on sale of branch - (932) - (932)

Gain on extinguishment of debt - (517) - (1,458)

Acquisition-related expenses (2) 319 2 1,453 173

Core conversion expenses 511 - 511 -

Core pre-tax income 23,616 24,519 63,675 68,091

3 unchanged sentences

Tax on losses on sale of securities 3 - 3 13

Tax on gain on sale of branch - (197) - (197)

Tax on gain on extinguishment of debt - (109) - (308)

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

Tax on core conversion expenses 108 - 108 -

Core provision for income taxes 5,041 5,205 13,319 14,555

6 unchanged sentences

Losses on sale of securities, net of tax 10 - 11 49

Gain on sale of branch, net of tax - (735) - (735)

Gain on extinguishment of debt, net of tax - (408) - (1,150)

Acquisition-related expenses (2), net of tax 319 2 1,362 153

Core conversion expenses, net of tax 403 - 403 -

Core net income available to common shareholders $ 17,224 $ 17,963 $ 46,305 $ 49,485

3 unchanged sentences

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

Gain on sale of branch, net of tax - (0.03) - (0.03)

Gain on extinguishment of debt, net of tax - (0.02) - (0.04)

Acquisition-related expenses (2), net of tax 0.01 - 0.05 0.01

Core conversion expenses, net of tax 0.02 - 0.02 -

Core diluted earnings per common share $ 0.68 $ 0.71 $ 1.82 $ 1.96

8 unchanged sentences

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 September

30, 2024 As of December 31,

11 unchanged sentences

____________________________

(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.

(1) Excludes the dilutive effect, if any, of 194,427 and 217,094 shares of common stock issuable upon exercise of outstanding stock options and restricted stock awards as of September 30, 2024 and December 31, 2023, respectively.

Tangible Common Equity to Tangible Assets .

3 unchanged sentences

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

As of September

30, 2024 As of December 31,

15 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