Business First Bancshares, Inc. 10-Q

Item 1. Financial Statements BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) March 31, 2025 (Unaudited) December 31, 2024 ASSETS Cash and Due from Banks $ 312,887 $ 319,098 Federal Funds Sold 117,422 197,669 Securities Purchased Under Agreements to Resell 50,589 50,835 Securities Available for Sale, at Fair Values (Amortized Cost of $ 987,573 at March 31, 2025 and $ 973,423 at December 31, 2024) 920,573 893,549 Mortgage Loans Held for Sale - 717 Loans and Lease Receivable, Net of Allowance for Loan Losses of $ 56,863 at March 31, 2025 and $ 54,840 at December 31, 2024 5,924,056 5,926,559 Premises and Equipment, Net 81,582 81,953 Accrued Interest Receivable 33,741 35,872 Other Equity Securities 40,947 41,100 Other Real Estate Owned 1,282 5,529 Cash Value of Life Insurance 117,950 117,645 Deferred Taxes 25,289 29,591 Goodwill 121,691 121,572 Core Deposit and Customer Intangible 16,538 17,252 Other Assets 20,181 18,149 Total Assets $ 7,784,728 $ 7,857,090 LIABILITIES Deposits: Noninterest Bearing $ 1,308,312 $ 1,357,045 Interest Bearing 5,149,869 5,154,286 Total Deposits 6,458,181 6,511,331 Securities Sold Under Agreements to Repurchase 19,046 22,621 Federal Home Loan Bank Borrowings 317,352 355,875 Subordinated Debt 92,702 99,760 Subordinated Debt - Trust Preferred Securities 5,000 5,000 Accrued Interest Payable 5,356 5,969 Other Liabilities 60,779 57,068 Total Liabilities 6,958,416 7,057,624 Commitments and Contingencies (See Note 12) SHAREHOLDERS' EQUITY Preferred Stock, No Par Value; 5,000,000 Shares Authorized; 72,010 Shares ($ 1,000 Liquidation Preference) Issued at both March 31, 2025 and December 31, 2024, respectively 71,930 71,930 Common Stock, $ 1 Par Value; 50,000,000 Shares Authorized; 29,572,297 and 29,552,358 Shares Issued and Outstanding at March 31, 2025 and December 31, 2024, respectively 29,572 29,552 Additional Paid-in Capital 501,609 500,024 Retained Earnings 276,045 260,958 Accumulated Other Comprehensive Loss ( 52,844 ) ( 62,998 ) Total Shareholders' Equity 826,312 799,466 Total Liabilities and Shareholders' Equity $ 7,784,728 $ 7,857,090 The accompanying notes are an integral part of these financial statements. 4 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) For the Three Months Ended March 31, 2025 2024 Interest Income: Interest and Fees on Loans $ 102,992 $ 85,947 Interest and Dividends on Non-taxable Securities 1,075 1,074 Interest and Dividends on Taxable Securities 6,190 4,525 Interest on Federal Funds Sold and Due From Banks 3,436 4,465 Total Interest Income 113,693 96,011 Interest Expense: Interest on Deposits 42,439 38,029 Interest on Borrowings 5,271 6,451 Total Interest Expense 47,710 44,480 Net Interest Income 65,983 51,531 Provision for Credit Losses 2,812 1,186 Net Interest Income after Provision for Credit Losses 63,171 50,345 Other Income: Service Charges on Deposit Accounts 2,860 2,439 Loss on Sales of Securities ( 1 ) ( 1 ) Gain on Sales of Loans 1,256 139 Other Income 9,111 6,809 Total Other Income 13,226 9,386 Other Expenses: Salaries and Employee Benefits 29,497 25,416 Occupancy and Equipment Expense 7,356 5,357 Other Expenses 13,725 11,749 Total Other Expenses 50,578 42,522 Income Before Income Taxes 25,819 17,209 Provision for Income Taxes 5,276 3,639 Net Income 20,543 13,570 Preferred Stock Dividends 1,350 1,350 Net Income Available to Common Shareholders $ 19,193 $ 12,220 Earnings Per Common Share: Basic $ 0.65 $ 0.49 Diluted $ 0.65 $ 0.48 The accompanying notes are an integral part of these financial statements. 5 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in thousands) For the Three Months Ended March 31, 2025 2024 Consolidated Net Income $ 20,543 $ 13,570 Other Comprehensive Income (Loss): Unrealized Gain (Loss) on Investment Securities 12,872 ( 6,417 ) Unrealized Gain on Share of Other Equity Investments - 14 Reclassification Adjustment for Losses on Sale of AFS Investment Securities Included in Net Income 1 1 Income Tax Effect ( 2,719 ) 1,353 Other Comprehensive Income (Loss) 10,154 ( 5,049 ) Consolidated Comprehensive Income $ 30,697 $ 8,521 The accompanying notes are an integral part of these financial statements. 6 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (Dollars in thousands, except per share data) Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity Balances at December 31, 2023 $ 71,930 $ 25,352 $ 397,447 $ 216,115 $ ( 66,585 ) $ 644,259 Comprehensive Income: Net Income - - - 13,570 - 13,570 Other Comprehensive Loss - - - - ( 5,049 ) ( 5,049 ) Cash Dividends Declared on Preferred Stock, $ 18.75 Per Share - - - ( 1,350 ) - ( 1,350 ) Cash Dividends Declared on Common Stock, $ 0.14 Per Share - - - ( 3,593 ) - ( 3,593 ) Stock Based Compensation Cost - 133 1,064 - - 1,197 Balances at March 31, 2024 $ 71,930 $ 25,485 $ 398,511 $ 224,742 $ ( 71,634 ) $ 649,034 Balances at December 31, 2024 $ 71,930 $ 29,552 $ 500,024 $ 260,958 $ ( 62,998 ) $ 799,466 Comprehensive Income: Net Income - - - 20,543 - 20,543 Other Comprehensive Income - - - - 10,154 10,154 Cash Dividends Declared on Preferred Stock, $ 18.75 Per Share - - - ( 1,350 ) - ( 1,350 ) Cash Dividends Declared on Common Stock, $ 0.14 Per Share - - - ( 4,106 ) - ( 4,106 ) Stock Based Compensation Cost - 20 1,585 - - 1,605 Balances at March 31, 2025 $ 71,930 $ 29,572 $ 501,609 $ 276,045 $ ( 52,844 ) $ 826,312 The accompanying notes are an integral part of these financial statements 7 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) For the Three Months Ended March 31, 2025 2024 Cash Flows From Operating Activities: Consolidated Net Income $ 20,543 $ 13,570 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses 2,812 1,186 Depreciation and Amortization 1,438 1,153 Net Accretion of Purchase Accounting Adjustments ( 513 ) ( 319 ) Stock Based Compensation Cost 1,605 1,197 Net Amortization of Securities 350 634 Loss on Sales of Securities 1 1 Gain on Sale of Loans ( 298 ) ( 24 ) Income on Other Equity Securities ( 1,064 ) ( 509 ) (Gain) Loss on Sale of Other Real Estate Owned, Net of Writedowns 286 ( 63 ) Increase in Cash Value of Life Insurance ( 808 ) ( 578 ) Deferred Income Tax Expense 1,627 1,876 Gain on Extinguishment of Debt ( 630 ) - Changes in Assets and Liabilities: Decrease in Accrued Interest Receivable 2,131 590 (Increase) Decrease in Other Assets ( 2,040 ) 1,994 Decrease in Accrued Interest Payable ( 613 ) ( 10,911 ) Increase (Decrease) in Other Liabilities 3,899 ( 2,194 ) Net Cash Provided by Operating Activities 28,726 7,603 Cash Flows From Investing Activities: Purchases of Securities Available for Sale ( 50,074 ) ( 24,333 ) Proceeds from Maturities / Sales of Securities Available for Sale 13,932 7,663 Proceeds from Paydowns of Securities Available for Sale 21,640 16,287 Net Cash Paid in Acquisition - ( 3,279 ) Purchases of Other Equity Securities ( 1,121 ) ( 713 ) Redemption of Other Equity Securities 2,338 238 Purchase of Life Insurance - ( 3,000 ) Proceeds from Death Benefit of Cash Value of Life Insurance 503 - Net (Increase) Decrease in Loans 1,311 ( 94,879 ) Net Purchases of Premises and Equipment ( 1,067 ) ( 389 ) Gain on Disposal of Premises and Equipment ( 155 ) - Proceeds from Sales of Other Real Estate 3,961 409 Net Decrease in Securities Purchased Under Agreements to Resell 246 - Net (Increase) Decrease in Federal Funds Sold 80,247 ( 60,158 ) Net Cash Provided by (Used in) Investing Activities 71,761 ( 162,154 ) (CONTINUED) 8 Table of Contents For the Three Months Ended March 31, 2025 2024 Cash Flows From Financing Activities: Net Increase (Decrease) in Deposits ( 52,774 ) 323,960 Net Decrease in Securities Sold Under Agreements to Repurchase ( 3,575 ) ( 1,678 ) Net Advances (Repayments) on Federal Home Loan Bank Borrowings ( 38,523 ) 97,008 Repayments on Bank Term Funding Program - ( 300,000 ) Repayment of Subordinated Debt ( 6,370 ) - Payment of Dividends on Preferred Stock ( 1,350 ) ( 1,350 ) Payment of Dividends on Common Stock ( 4,106 ) ( 3,593 ) Net Cash Provided by (Used in) Financing Activities ( 106,698 ) 114,347 Net Decrease in Cash and Due From Banks ( 6,211 ) ( 40,204 ) Cash and Due From Banks at Beginning of Period 319,098 226,110 Cash and Due From Banks at End of Period $ 312,887 $ 185,906 Supplemental Disclosures for Cash Flow Information: Cash Payments for: Interest on Deposits $ 42,992 $ 38,852 Interest on Borrowings $ 5,331 $ 16,539 Income Tax Payments $ - $ - Supplemental Schedule for Noncash Investing and Financing Activities: Change in the Unrealized Gain (Loss) on Securities Available for Sale $ 12,873 $ ( 6,416 ) Change in the Unrealized Gain on Equity Securities $ - $ 14 Change in Deferred Tax Effect on the Unrealized (Gain) Loss on Securities Available for Sale $ ( 2,719 ) $ 1,353 Transfer of Loans to Other Real Estate $ - $ - The accompanying notes are an integral part of these financial statements. 9 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Basis of Presentation – The unaudited consolidated financial statements include the accounts of Business First Bancshares, Inc. (the “Company”) and its two direct, wholly-owned subsidiaries, b1BANK (the “Bank”), and Coastal Commerce Statutory Trust I; and the Bank’s wholly-owned subsidiaries, Business First Insurance, LLC, Smith Shellnut Wilson, LLC, Waterstone LSP, LLC ("Waterstone"), and b1 Securities, LLC ("b1Securities"). The Bank operates out of full-service banking centers and loan production offices in markets across Louisiana, the Dallas/Fort Worth metroplex and Houston, Texas. As a state bank, it is subject to regulation by the Office of Financial Institutions (“OFI”), State of Louisiana, and the Federal Deposit Insurance Corporation (“FDIC”) and undergoes periodic examinations by these agencies. The Company is also regulated by the Federal Reserve and is subject to periodic examinations. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial results for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions are eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year. These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted or abbreviated. These interim financial statements should be read in conjunction with the audited consolidated financial statements and footnote disclosures for the Company’s previously filed Form 10-K for the year ended December 31, 2024. Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Critical accounting estimates that are particularly susceptible to significant change for the Company include the determination of the acquired loans and allowance for credit losses and purchase accounting adjustments (other than loans). Other estimates include goodwill, fair value of financial instruments, investment securities and the assessment of income taxes. Management does not anticipate any material changes to estimates in the near term. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, economic conditions in the Company’s markets, and changes in applicable banking regulations. Actual results may ultimately differ from estimates. Accounting Standards Adopted in Current Period None Accounting Standards Not Yet Adopted ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 requires public business entities to disclose additional information in specified categories with respect to the rate reconciliation for federal, state and foreign income taxes. In addition, the updates also require more details about reconciling items in the rate reconciliation in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. ASU 2023-09 will become effective for the Company starting December 31, 2025. ASU 2023-09 will not have a significant impact on our financial statements. Note 2 – Reclassifications – Certain reclassifications may have been made to conform to reporting in 2025. These reclassifications have no material effect on previously reported shareholders’ equity or net income. 10 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 3 – Mergers and Acquisitions – Waterstone, LSP, LLP On January 31, 2024, the Company consummated the acquisition, through b1BANK, of Waterstone, headquartered in Katy, Texas. Waterstone offers community banks and small businesses a range of small business administration lending services including planning, pre-qualification, packaging, closing and disbursements, servicing and liquidation. Upon consummation of the acquisition, the Company paid $ 3.3 million in cash to the former owners of Waterstone. Oakwood Bancshares, Inc. On October 1, 2024, the Company consummated the merger of Oakwood Bancshares, Inc. (“Oakwood”), headquartered in the Dallas, Texas region, with and into the Company, pursuant to the terms of that certain Agreement and Plan of Reorganization (the “Oakwood Reorganization Agreement”), dated as of April 25, 2024, by and between the Company and Oakwood. Also on October 1, 2024, Oakwood’s wholly owned banking subsidiary, Oakwood Bank, was merged with and into b1BANK. Pursuant to the terms of the Oakwood Reorganization Agreement, upon consummation of the Oakwood acquisition, the Company issued 3,973,134 shares of its common stock to the former shareholders of Oakwood. At September 30, 2024, Oakwood reported $ 863.6 million in total assets, $ 700.2 million in loans and $ 741.3 million in deposits. The following table reflects the consideration paid for Oakwood’s net assets and the identifiable assets purchased and liabilities assumed at their fair values as of October 1, 2024. The fair values are provisional estimates and may be adjusted for a period of up to one year from the date of acquisition if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. 11 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Cost and Allocation of Purchase Price for Oakwood Bancshares, Inc. (Oakwood): (Dollars in thousands, except per share data) Purchase Price: Shares Issued to Oakwood's Shareholders on October 1, 2024 3,973,134 Closing Stock Price on September 30, 2024 $ 25.67 Total Stock Issued $ 101,990 Partial Shares Paid in Cash 10 Other Consideration, Including Equity Awards 1,819 Total Purchase Price $ 103,819 Net Assets Acquired: Cash and Cash Equivalents $ 102,691 Securities Available for Sale 15,996 Loans and Leases Receivable, Net of Allowance 687,456 Premises and Equipment, Net 16,020 Cash Value of Life Insurance 16,105 Core Deposit Intangible 7,640 Other Assets 9,364 Total Assets 855,272 Deposits 742,347 Borrowings 22,189 Other Liabilities 17,082 Total Liabilities 781,618 Net Assets Acquired 73,654 Goodwill Resulting from Merger $ 30,165 The Company has recorded approximately $ 679,000 and $ 1.6 million of acquisition-related costs within merger and conversion-related expenses and salaries and benefits for the three months ended March 31, 2025, and year ended December 31, 2024, respectively. The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed presented above. Cash and Cash Equivalents: The carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets. Securities Available for Sale: Fair values for securities were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that were not in an active market or other inputs that were observable in the market. In the absence of observable inputs, fair value was estimated based on pricing models/estimations. Loans and Leases Receivable: Fair values for loans were based on a discounted cash flow methodology that considered factors including, but not limited to, loan type, classification status, remaining term, prepayment speed, and current discount rates. The discount rates used for loans were based on current market rates for new originations of comparable loans and included adjustments for any liquidity concerns. The discount rate did not include an explicit factor for credit losses, as that was included within the estimated cash flows. Acquired loans are evaluated as either purchased with a more-than insignificant amount of credit deterioration (“PCD”) or an insignificant amount of credit deterioration (“non-PCD”) at acquisition, based upon management’s assessment of whether or not a loan has experienced more than insignificant credit deterioration since origination. This evaluation is completed by management using a variety of factors, including individual loan characteristics as well as 12 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS industry type and collateral evaluation, among other factors. At acquisition, management designated loans with a fair value of $ 146.9 million as PCD. The fair value was inclusive of an $ 8.4 million PCD allowance and $ 2.3 million non-credit fair value discount from the acquired contractual value. The remainder of the Oakwood loan portfolio, with a fair value of $ 540.6 million at acquisition included a non-credit fair value discount of $ 2.0 million from the acquired contractual value. Core Deposit Intangible (“CDI”): The fair value for core deposit intangible assets was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, including interest cost, and alternative cost of funds. The CDI is being amortized over 10 years based upon the period over which estimated economic benefits are estimated to be received. Deposits: The fair values used for the demand and savings deposits, by definition, equal the amount payable on demand at the acquisition date. Fair values for time deposits were estimated using a discounted cash flow analysis, that applied interest rates currently being offered to the contractual interest rates on such time deposits. Borrowings: Fair values for borrowings were based on estimated market rates over the remaining terms of the subordinated debt issuances. Pro forma tables for Oakwood were impractical to include due to the cost versus benefit of including such disclosures. Note 4 – Earnings per Common Share – Basic earnings per share (“EPS”) represents income available to common shareholders divided by the weighted average number of common shares outstanding; no dilution for any potentially convertible shares is included in the calculation. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential common shares that may be issued by the Company relate to outstanding stock options, unvested restricted stock awards (“RSAs”), unvested restricted stock units ("RSUs") and performance shares, excluding any that were antidilutive. In addition, nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of EPS pursuant to the two-class method. For the Three Months Ended March 31, 2025 2024 (Dollars in thousands, except per share data) Numerator: Net Income $ 20,543 $ 13,570 Less: Preferred Stock Dividends 1,350 1,350 Net Income Available to Common Shares $ 19,193 $ 12,220 Denominator: Weighted Average Common Shares Outstanding 29,329,668 25,127,187 Dilutive Effect of Stock Options and RSAs 216,253 302,007 Weighted Average Dilutive Common Shares 29,545,921 25,429,194 Basic Earnings Per Common Share From Net Income Available to Common Shares $ 0.65 $ 0.49 Diluted Earnings Per Common Share From Net Income Available to Common Shares $ 0.65 $ 0.48 13 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 5 – Securities – The amortized cost and fair values of securities available for sale as of March 31, 2025, and December 31, 2024 are summarized as follows: March 31, 2025 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury Securities $ 17,616 $ - $ 756 $ 16,860 U.S. Government Agencies 10,141 - 463 9,678 Corporate Securities 49,617 340 2,679 47,278 Mortgage-Backed Securities 610,212 1,181 39,606 571,787 Municipal Securities 299,987 31 25,048 274,970 Total Securities Available for Sale $ 987,573 $ 1,552 $ 68,552 $ 920,573 December 31, 2024 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury Securities $ 17,631 $ - $ 956 $ 16,675 U.S. Government Agencies 10,164 - 576 9,588 Corporate Securities 47,855 348 3,038 45,165 Mortgage-Backed Securities 584,321 542 47,125 537,738 Municipal Securities 313,452 23 29,092 284,383 Total Securities Available for Sale $ 973,423 $ 913 $ 80,787 $ 893,549 The following tables present a summary of securities with gross unrealized losses and fair values at March 31, 2025 and December 31, 2024, aggregated by investment category and length of time in a continued unrealized loss position. Due to the nature of these investments and current prevailing market prices, these unrealized losses are considered non-credit related. March 31, 2025 Less Than 12 Months 12 Months or Greater Total (Dollars in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. Treasury Securities $ - $ - $ 16,860 $ 756 $ 16,860 $ 756 U.S. Government Agencies - - 9,678 463 9,678 463 Corporate Securities 9,408 140 26,583 2,539 35,991 2,679 Mortgage-Backed Securities 113,544 1,985 331,076 37,621 444,620 39,606 Municipal Securities 32,115 444 231,000 24,604 263,115 25,048 Total Securities Available for Sale $ 155,067 $ 2,569 $ 615,197 $ 65,983 $ 770,264 $ 68,552 14 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 Less Than 12 Months 12 Months or Greater Total (Dollars in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. Treasury Securities $ - $ - $ 16,675 $ 956 $ 16,675 $ 956 U.S. Government Agencies - - 9,588 576 9,588 576 Corporate Securities 4,262 132 28,894 2,906 33,156 3,038 Mortgage-Backed Securities 151,443 3,618 341,347 43,507 492,790 47,125 Municipal Securities 33,240 686 240,768 28,406 274,008 29,092 Total Securities Available for Sale $ 188,945 $ 4,436 $ 637,272 $ 76,351 $ 826,217 $ 80,787 As of March 31, 2025, and December 31, 2024, respectively, no allowance for credit losses was recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to credit quality. This determination is based on the Company’s analysis of the underlying risk characteristics including credit ratings, historical loss experience, and other qualitative factors. Further, the securities continue to make principal and interest payments under their contractual terms and management does not have the intent to sell any of the securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of amortized cost basis. Therefore, the Company has determined the unrealized losses are due to changes in market interest rates compared to rates when the securities were acquired. The amortized cost and fair values of securities available for sale as of March 31, 2025, by contractual maturity are shown below. Actual maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Amortized Cost Fair Value (Dollars in thousands) Less Than One Year $ 32,372 $ 31,864 One to Five Years 192,443 181,372 Over Five to Ten Years 344,890 321,123 Over Ten Years 417,868 386,214 Total Securities Available for Sale $ 987,573 $ 920,573 Securities available for sale with a fair value of $ 402.4 million and $ 385.4 million, were pledged as collateral on public deposits and for other purposes as required or permitted by law as of March 31, 2025, and December 31, 2024, respectively. At March 31, 2025 and December 31, 2024, accrued interest receivable on securities was $ 4.1 million and $ 4.9 million, respectively, and included within accrued interest receivable on the consolidated balance sheets. 15 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 6 – Loans and the Allowance for Loan Losses – Loans receivable at March 31, 2025 and December 31, 2024 are summarized as follows: March 31, 2025 December 31, 2024 (Dollars in thousands) Real Estate Loans: Commercial $ 2,472,121 $ 2,483,223 Construction 633,698 670,502 Residential 934,357 884,533 Total Real Estate Loans 4,040,176 4,038,258 Commercial 1,862,176 1,868,675 Consumer and Other 78,567 74,466 Total Loans Held for Investment 5,980,919 5,981,399 Less: Allowance for Loan Losses ( 56,863 ) ( 54,840 ) Net Loans $ 5,924,056 $ 5,926,559 The performing 1-4 family residential, multi-family residential, commercial real estate, and commercial loans, are pledged, under a blanket lien, as collateral securing advances from the FHLB at March 31, 2025 and December 31, 2024. Commercial and agricultural loans are pledged against the Federal Reserve Banks’ (“FRB”) discount window as of March 31, 2025, and December 31, 2024. Net deferred loan origination fees were $ 12.0 million and $ 12.6 million at March 31, 2025 and December 31, 2024, respectively, and are netted in their respective loan categories above. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies overdrafts as loans in its consolidated balance sheets. At March 31, 2025 and December 31, 2024, overdrafts of $ 7.8 million and $ 3.0 million, respectively, have been reclassified to loans. The Bank is the lead lender on participations sold, without recourse, to other financial institutions which amounts are not included in the consolidated balance sheets. The unpaid principal balances of mortgages and other loans serviced for others were approximately $ 739.6 million and $ 747.0 million at March 31, 2025 and December 31, 2024, respectively. The Company had servicing rights of $ 958,000 and $ 832,000 recorded as of March 31, 2025, and December 31, 2024, respectively, and is recorded within other assets. The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located in its general market areas throughout Louisiana and Texas. Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Bank develops and documents a systematic method for determining its allowance for credit losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate. Portfolio Segments and Risk Factors The loan portfolio is disaggregated into portfolio segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally a disaggregation of a portfolio segment. The Company's loan portfolio segments are Real Estate, Commercial, and Consumer and Other. The classes and risk characteristics of each segment are discussed in more detail below. The segmentation and disaggregation of the portfolio is part of the ongoing credit monitoring process. 16 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Real Estate Portfolio Segment Real Estate: Commercial loans are extensions of credit secured by owner-occupied and non-owner-occupied collateral. Repayment is generally dependent on the successful operations of the property. General economic conditions may impact the performance of these types of loans, including fluctuations in the value of real estate, vacancy rates, and unemployment trends. Real estate commercial loans also include farmland loans that can be, or are, used for agricultural purposes. These loans are usually repaid through refinancing, cash flow from the borrower’s ongoing operations, development of the property, or sale of the property. Real Estate: Construction loans include loans to small-to-midsized businesses to construct owner-occupied properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single-family homes in the Company’s market areas. Risks associated with these loans include fluctuations in the value of real estate, project completion risk and changes in market trends. The Company is also exposed to risk based on the ability of the construction loan borrower to finance the loan or sell the property upon completion of the project, which may be affected by changes in secondary market terms and criteria for permanent financing since the time that the Company funded the loan. Real Estate: Residential loans include first and second lien 1-4 family mortgage loans, as well as home equity lines of credit, in each case primarily on owner-occupied primary residences. The Company is exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship. Real estate residential loans also include multi-family residential loans originated to provide permanent financing for multi-family residential income producing properties. Repayment of these loans primarily relies on successful rental and management of the property. Commercial Portfolio Segment Commercial loans include general commercial and industrial, or C&I, loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion, and development loans, borrowing base loans, letters of credit and other loan products, primarily in the Company’s target markets that are underwritten based on the borrower’s ability to service the debt from income. Commercial loan risk is derived from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan. Consumer and Other Portfolio Segment Consumer and other loans include a variety of loans to individuals for personal, family and household purposes, including secured and unsecured installment and term loans. The risk is based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any. The following table sets forth, as of March 31, 2025, and December 31, 2024, the balance of the allowance for credit losses by loan portfolio segment. The allowance for credit losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments. 17 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Allowance for Credit Losses and Recorded Investment in Loans Receivable March 31, 2025 (Dollars in thousands) Real Estate: Commercial Real Estate: Construction Real Estate: Residential Commercial Consumer and Other Total Allowance for Loan Losses: Beginning Balance $ 23,460 $ 7,162 $ 8,036 $ 15,667 $ 515 $ 54,840 Charge-offs ( 2 ) ( 3 ) ( 225 ) ( 865 ) ( 553 ) ( 1,648 ) Recoveries 5 98 6 508 54 671 Provision (Recovery) ( 138 ) ( 1,046 ) 1,216 2,454 514 3,000 Ending Balance $ 23,325 $ 6,211 $ 9,033 $ 17,764 $ 530 $ 56,863 Reserve for Unfunded Loan Commitments: Beginning Balance $ 228 $ 1,311 $ 358 $ 1,765 $ 26 $ 3,688 Provision (Recovery) ( 11 ) ( 130 ) ( 52 ) 3 2 ( 188 ) Ending Balance $ 217 $ 1,181 $ 306 $ 1,768 $ 28 $ 3,500 Total Allowance for Credit Losses $ 23,542 $ 7,392 $ 9,339 $ 19,532 $ 558 $ 60,363 18 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 (Dollars in thousands) Real Estate: Commercial Real Estate: Construction Real Estate: Residential Commercial Consumer and Other Total Allowance for Loan Losses: Beginning Balance $ 17,676 $ 6,596 $ 5,485 $ 10,424 $ 233 $ 40,414 Adjustment for Oakwood on PCD Loans 4,013 1,420 374 2,603 - 8,410 Charge-offs 263 ( 2,261 ) ( 297 ) ( 986 ) ( 2,392 ) ( 5,673 ) Recoveries 86 515 14 236 329 1,180 Provision (Recovery) 1,422 892 2,460 3,390 2,345 10,509 Ending Balance $ 23,460 $ 7,162 $ 8,036 $ 15,667 $ 515 $ 54,840 Reserve for Unfunded Loan Commitments: Beginning Balance $ 206 $ 1,546 $ 177 $ 1,372 $ 23 $ 3,324 Provision (Recovery) 22 ( 235 ) 181 393 3 364 Ending Balance $ 228 $ 1,311 $ 358 $ 1,765 $ 26 $ 3,688 Total Allowance for Credit Losses $ 23,688 $ 8,473 $ 8,394 $ 17,432 $ 541 $ 58,528 Included within the above allowance, in the tables above, are loans which management has individually evaluated to determine an allowance for credit losses. The following table summarizes, by segment, the loan balance and specific allowance allocation for those loans which have been individually evaluated. March 31, 2025 December 31, 2024 Loan Balance Specific Allocations Loan Balance Specific Allocations (Dollars in thousands) Real Estate Loans: Commercial $ 45,329 $ 3,512 $ 42,407 $ 3,529 Construction 12,261 975 11,777 975 Residential 11,791 519 11,012 519 Total Real Estate Loans 69,381 5,006 65,196 5,023 Commercial 102,715 4,898 99,234 2,505 Consumer and Other - - - - Total $ 172,096 $ 9,904 $ 164,430 $ 7,528 19 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Credit Quality Indicators We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of 10 to 80. Individual loan officers review updated financial information for all pass grade loans to reassess the risk grade, generally on at least an annual basis. When a loan has a risk grade of 60, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” and subject to additional and more frequent monitoring by both the loan officer and senior credit and risk personnel. When a loan has a risk grade of 70 or higher, a special assets officer monitors the loan on an on-going basis. The following tables set forth the credit quality indicators, disaggregated by loan segment, as of March 31, 2025, and December 31, 2024: 20 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025 Criticized Pass (Risk Grade 10-45) Special Mention (Risk Grade 50) Substandard (Risk Grade 60) Doubtful (Risk Grade 70) Loss (Risk Grade 80) Total Current Period Charge- offs (Dollars in thousands) Real Estate: Commercial Originated in 2025 $ 66,170 $ - $ - $ - $ - $ 66,170 $ - Originated in 2024 286,146 11,288 15,059 - - 312,493 - Originated in 2023 204,334 25,788 133 - - 230,255 - Originated in 2022 714,244 53,136 2,913 - - 770,293 - Originated in 2021 383,732 7,507 463 - - 391,702 2 Originated Prior to 2021 624,894 15,506 8,093 841 - 649,334 - Revolving 49,120 2,274 480 - - 51,874 - Revolving Loans Converted to Term - - - - - - - Total Real Estate: Commercial $ 2,328,640 $ 115,499 $ 27,141 $ 841 $ - $ 2,472,121 $ 2 Real Estate: Construction Originated in 2025 $ 37,507 $ - $ - $ - $ - $ 37,507 $ - Originated in 2024 213,237 - 400 - - 213,637 - Originated in 2023 77,715 - 806 - - 78,521 - Originated in 2022 145,267 5,161 1,305 - - 151,733 1 Originated in 2021 46,997 - 1,763 - - 48,760 - Originated Prior to 2021 49,198 95 2,069 - - 51,362 2 Revolving 51,781 397 - - - 52,178 - Revolving Loans Converted to Term - - - - - - - Total Real Estate: Construction $ 621,702 $ 5,653 $ 6,343 $ - $ - $ 633,698 $ 3 Real Estate: Residential Originated in 2025 $ 13,053 $ - $ - $ - $ - $ 13,053 $ - Originated in 2024 78,800 - 221 - - 79,021 - Originated in 2023 104,479 323 985 - - 105,787 - Originated in 2022 237,923 816 1,546 5 - 240,290 8 Originated in 2021 179,502 166 224 - - 179,892 - Originated Prior to 2021 189,244 8,014 6,394 227 - 203,879 101 Revolving 109,840 110 822 - - 110,772 116 Revolving Loans Converted to Term 1,663 - - - - 1,663 - Total Real Estate: Residential $ 914,504 $ 9,429 $ 10,192 $ 232 $ - $ 934,357 $ 225 Commercial Originated in 2025 $ 95,637 $ 101 $ - $ - $ - $ 95,738 $ - Originated in 2024 376,532 207 4,488 - - 381,227 5 Originated in 2023 255,401 1,145 3,470 - - 260,016 64 Originated in 2022 231,083 4,678 9,410 - - 245,171 239 Originated in 2021 157,745 2,347 1,952 16 - 162,060 266 Originated Prior to 2021 177,291 1,433 1,586 109 - 180,419 291 Revolving 522,520 5,673 9,352 - - 537,545 - Revolving Loans Converted to Term - - - - - - - Total Commercial $ 1,816,209 $ 15,584 $ 30,258 $ 125 $ - $ 1,862,176 $ 865 Consumer and Other Originated in 2025 $ 3,914 $ - $ - $ - $ - $ 3,914 $ - Originated in 2024 10,356 - 6 - - 10,362 16 Originated in 2023 5,912 - 14 - - 5,926 32 Originated in 2022 3,987 - 15 - - 4,002 6 Originated in 2021 1,923 - 91 - - 2,014 - Originated Prior to 2021 27,706 - 125 - - 27,831 2 Revolving 24,501 - 17 - - 24,518 497 Revolving Loans Converted to Term - - - - - - - Total Consumer and Other $ 78,299 $ - $ 268 $ - $ - $ 78,567 $ 553 Total Loans $ 5,759,354 $ 146,165 $ 74,202 $ 1,198 $ - $ 5,980,919 $ 1,648 21 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 Criticized Pass (Risk Grade 10-45) Special Mention (Risk Grade 50) Substandard (Risk Grade 60) Doubtful (Risk Grade 70) Loss (Risk Grade 80) Total Current Period Charge- offs (Dollars in thousands) Real Estate: Commercial Originated in 2024 $ 300,564 $ - $ 15,271 $ - $ - $ 315,835 $ - Originated in 2023 223,301 22,051 135 - - 245,487 - Originated in 2022 752,449 40,646 - - - 793,095 2 Originated in 2021 400,133 5,861 470 - - 406,464 - Originated in 2020 147,800 1,853 635 - - 150,288 5 Originated Prior to 2020 508,370 4,779 6,557 851 - 520,557 ( 270 ) Revolving 50,813 195 480 - - 51,488 - Revolving Loans Converted to Term 9 - - - - 9 - Total Real Estate: Commercial $ 2,383,439 $ 75,385 $ 23,548 $ 851 $ - $ 2,483,223 $ ( 263 ) Real Estate: Construction Originated in 2024 $ 203,537 $ - $ 402 $ - $ - $ 203,939 $ - Originated in 2023 86,505 - 586 - - 87,091 46 Originated in 2022 176,301 2,886 2,188 - - 181,375 278 Originated in 2021 86,514 - 3,522 - - 90,036 1,937 Originated in 2020 26,646 - 14 - - 26,660 - Originated Prior to 2020 23,696 154 1,990 - - 25,840 - Revolving 54,990 396 - - - 55,386 - Revolving Loans Converted to Term 175 - - - - 175 - Total Real Estate: Construction $ 658,364 $ 3,436 $ 8,702 $ - $ - $ 670,502 $ 2,261 Real Estate: Residential Originated in 2024 $ 80,126 $ - $ 225 $ - $ - $ 80,351 $ 2 Originated in 2023 102,618 175 244 - - 103,037 3 Originated in 2022 228,784 1,179 1,200 8 - 231,171 12 Originated in 2021 145,072 205 - - - 145,277 1 Originated in 2020 69,222 315 555 9 - 70,101 2 Originated Prior to 2020 133,993 1,122 6,170 234 - 141,519 73 Revolving 111,452 167 1,091 - - 112,710 204 Revolving Loans Converted to Term 367 - - - - 367 - Total Real Estate: Residential $ 871,634 $ 3,163 $ 9,485 $ 251 $ - $ 884,533 $ 297 Commercial Originated in 2024 $ 399,093 $ 223 $ 4,308 $ - $ - $ 403,624 $ 1 Originated in 2023 286,436 1,385 2,301 - - 290,122 76 Originated in 2022 235,534 8,471 1,611 - - 245,616 459 Originated in 2021 178,248 2,562 1,684 - - 182,494 276 Originated in 2020 81,809 41 707 - - 82,557 97 Originated Prior to 2020 100,096 2,526 629 300 - 103,551 77 Revolving 546,947 10,771 2,671 - - 560,389 - Revolving Loans Converted to Term 322 - - - - 322 - Total Commercial $ 1,828,485 $ 25,979 $ 13,911 $ 300 $ - $ 1,868,675 $ 986 Consumer and Other Originated in 2024 $ 12,084 $ - $ 8 $ - $ - $ 12,092 $ 32 Originated in 2023 7,118 - 33 - - 7,151 84 Originated in 2022 4,646 - 18 - - 4,664 427 Originated in 2021 2,195 - 49 - - 2,244 4 Originated in 2020 1,183 - 60 - - 1,243 31 Originated Prior to 2020 22,352 - 64 - - 22,416 40 Revolving 24,474 - 137 - - 24,611 1,774 Revolving Loans Converted to Term 45 - - - - 45 - Total Consumer and Other $ 74,097 $ - $ 369 $ - $ - $ 74,466 $ 2,392 Total Loans $ 5,816,019 $ 107,963 $ 56,015 $ 1,402 $ - $ 5,981,399 $ 5,673 22 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The above classifications follow regulatory guidelines and can generally be described as follows: • Pass loans are of satisfactory quality. • Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values. • Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary. • Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable. As of March 31, 2025, and December 31, 2024, loan balances outstanding more than 90 days past due and still accruing interest amounted to $ 5.6 million and $ 860,000 , respectively. As of March 31, 2025, and December 31, 2024, loan balances outstanding on nonaccrual status amounted to $ 35.9 million and $ 24.1 million, respectively. The Bank considers all loans more than 90 days past due as nonperforming loans. The following tables provide an analysis of the aging of loans and leases as of March 31, 2025, and December 31, 2024. All loans greater than 90 days past due are generally placed on nonaccrual status. Aged Analysis of Past Due Loans Receivable March 31, 2025 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Past Due Total Past Due Current Total Loans Receivable Recorded Investment Over 90 Days Past Due and Still Accruing Real Estate Loans: Commercial $ 3,687 $ 5,060 $ 11,220 $ 19,967 $ 2,452,154 $ 2,472,121 $ 5,214 Construction 1,423 - 4,264 5,687 628,011 633,698 235 Residential 4,417 707 5,116 10,240 924,117 934,357 84 Total Real Estate Loans 9,527 5,767 20,600 35,894 4,004,282 4,040,176 5,533 Commercial 5,688 963 15,642 22,293 1,839,883 1,862,176 102 Consumer and Other 515 34 135 684 77,883 78,567 - Total $ 15,730 $ 6,764 $ 36,377 $ 58,871 $ 5,922,048 $ 5,980,919 $ 5,635 23 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Past Due Total Past Due Current Total Loans Receivable Recorded Investment Over 90 Days Past Due and Still Accruing Real Estate Loans: Commercial $ 6,688 $ 303 $ 3,035 $ 10,026 $ 2,473,197 $ 2,483,223 $ - Construction 1,700 594 4,600 6,894 663,608 670,502 - Residential 2,631 786 5,174 8,591 875,942 884,533 482 Total Real Estate Loans 11,019 1,683 12,809 25,511 4,012,747 4,038,258 482 Commercial 8,741 1,075 7,674 17,490 1,851,185 1,868,675 240 Consumer and Other 177 48 262 487 73,979 74,466 138 Total $ 19,937 $ 2,806 $ 20,745 $ 43,488 $ 5,937,911 $ 5,981,399 $ 860 The following table presents non-accrual loans by segment as of March 31, 2025, and December 31, 2024, respectively. March 31, 2025 December 31, 2024 (Dollars in thousands) Real Estate Loans: Commercial $ 6,348 $ 3,621 Construction 4,705 5,251 Residential 7,273 7,078 Total Real Estate Loans 18,326 15,950 Commercial 17,426 8,039 Consumer and Other 163 158 Total $ 35,915 $ 24,147 The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Bank makes loan modifications, primarily utilizing internal renegotiation programs via direct customer contact, that manage customers’ debt exposures held only by the Bank. Additionally, the Bank makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire unsecured debt structures. During the periods ended March 31, 2025, and December 31, 2024, the concessions granted to certain borrowers included extending the payment due dates and offering below market contractual interest rates, and were not significant to the consolidated financial statements. Accrued interest receivable of $ 3.1 million and $ 3.4 million was outstanding as of March 31, 2025, and December 31, 2024, respectively, for all loan deferrals, primarily attributable to the COVID-19 pandemic and, to a much lesser extent, hurricanes which occurred in 2020 and 2021. These loans are no longer within their deferral periods. The accrued interest on the loans is due at their maturity. At March 31, 2025 and December 31, 2024, accrued interest receivable on loans was $ 29.7 million and $ 30.9 million, respectively, and included within accrued interest receivable on the consolidated balance sheets. 24 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 7 – Long Term Debt – During the quarter ended March 31, 2025, the Company redeemed $ 7.0 million of its $ 52.5 million subordinated debt that matures in 2031. As part of this redemption, the Company recognized a $ 630,000 gain on the extinguishment of this debt. Note 8 – Bank Term Funding Program ( “ BTFP ” ) – On March 12, 2023, the Federal Reserve Board developed the BTFP, which offered loans to banks with a term of up to one year . The loans were secured by pledging the banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities were valued at par for collateral purposes. The Bank participated in the BTFP and had outstanding debt of $ 300.0 million at December 31, 2023. These loans bore a fixed rate of 4.38 % and matured on March 22, 2024, at which time the Bank repaid them in full. Note 9 – Federal Home Loan Bank ( “ FHLB ” ) Borrowings – The Company had outstanding advances from the FHLB of $ 317.4 million and $ 355.9 million as of March 31, 2025, and December 31, 2024, respectively, consisting of: One fixed rate loan with an original principal balance of $ 60.0 million. The loan was made in 2021 and the balance at March 31, 2025 and December 31, 2024 was $ 20.3 million and $ 23.3 million, respectively, with interest at 0.89 %. Principal and interest payments are due monthly and the loan matures in November 2026. One fixed rate loan of $ 875,000 at both March 31, 2025, and December 31, 2024, that was acquired during the TCBI acquisition, with interest at 4.88 % paid monthly. Principal is due at maturity in April 2025. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 4.89 % paid monthly. Principal is due at maturity in July 2025. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 4.65 % paid monthly. Principal is due at maturity in January 2026. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 4.56 % paid monthly. Principal is due at maturity in July 2026. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 4.13 % paid monthly. Principal is due at maturity in October 2028. This advance has put options beginning in October 2024. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 3.92 % paid monthly. Principal is due at maturity in October 2030. This advance has put options beginning in October 2024. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 3.72 % paid monthly. Principal is due at maturity in October 2033. This advance has put options beginning in October 2024. One fixed rate loan of $ 25.0 million at both March 31, 2025, and December 31, 2024, with interest at 3.57 % paid monthly. Principal is due at maturity in October 2033. This advance has put options beginning in October 2024. One fixed rate loan with an original principal balance of $ 10.0 million. The loan was made in 2020 and was acquired during the Oakwood acquisition. The balance at March 31, 2025 and December 31, 2024 was $ 1.2 million and $ 1.7 million, respectively, with interest at 0.52 %. Principal and interest payments are due monthly and the loan matures in October 2025. One fixed rate loan of $ 25.0 million at both March 31, 2025 and December 31, 2024, with interest at 4.84 % paid monthly. Principal is due at maturity in December 2026. One fixed rate loan of $ 25.0 million at both March 31, 2025 and December 31, 2024, with interest at 4.78 % paid monthly. Principal is due at maturity in September 2027. 25 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS One fixed rate loan of $ 25.0 million at both March 31, 2025 and December 31, 2024, with interest at 4.73 % paid monthly. Principal is due at maturity in March 2028. One fixed rate loan of $ 25.0 million at both March 31, 2025 and December 31, 2024, with interest at 4.69 % paid monthly. Principal is due at maturity in September 2028. One short term, twelve-day , fixed rate loan of $ 20.0 million at March 31, 2025, with interest at 4.38 %. Principal and interest was due, paid and rolled into a $ 20.0 million renewal, at maturity in April 2025. One short term, fifteen-day , fixed rate loan of $ 55.0 million at December 31, 2024, with interest at 4.38 %. Principal and interest was due, paid and rolled into a $ 30.0 million renewal, at maturity in January 2025. The renewal was also paid in January 2025. The Company had an additional $ 1.6 billion remaining on the FHLB line availability at March 31, 2025. 26 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 10 – Other Income and Expense – The Company has a single reportable operating segment which is presented as the Consolidated Statements of Income. An analysis of other income for the Company's single reportable operating segment is as follows: For the Three Months Ended March 31, 2025 2024 (Dollars in thousands) Debit Card and ATM Fee Income $ 1,858 $ 1,776 Cash Value of Life Insurance Income 808 579 Fees and Brokerage Commissions 2,148 1,937 Pass-Through Income from SBIC Partnerships 751 294 Gain on Extinguishment of Debt 630 - Swap Fee Income 739 229 Other 2,177 1,994 Total Other Income $ 9,111 $ 6,809 An analysis of other expenses for the Company's single reportable operating segment is as follows: For the Three Months Ended March 31, 2025 2024 (Dollars in thousands) Advertising and Promotions $ 1,291 $ 1,145 Communications 591 525 Ad Valorem Shares Tax 1,125 900 Data Processing Fees 3,236 2,579 Directors' Fees 279 282 Insurance 404 546 Legal and Professional Fees 1,013 866 Office Supplies and Printing 311 290 Regulatory Assessments 1,257 935 Merger and Conversion Costs 250 340 Other 3,968 3,341 Total Other Expenses $ 13,725 $ 11,749 Note 11 – Leases – The Bank leases certain branch offices through non-cancelable operating leases with terms that range from one to ten years and contain various renewal options for certain of the leases. Certain leases provide for increases in minimum monthly rental payments as defined by the lease agreement. Rental expense under these agreements was $ 2.3 million and $ 1.5 million for the three months ended March 31, 2025, and 2024, respectively. At March 31, 2025, the Company had a weighted average lease term of 6.4 years and a weighted average discount rate of 3.81 %. 27 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Future minimum lease payments under these leases are as follows: (Dollars in thousands) April 1, 2025 through December 31, 2025 $ 4,513 January 1, 2026 through December 31, 2026 5,735 January 1, 2027 through December 31, 2027 5,491 January 1, 2028 through December 31, 2028 4,944 January 1, 2029 through December 31, 2029 4,153 January 1, 2030 and Thereafter 8,955 Total Future Minimum Lease Payments 33,791 Less Imputed Interest ( 3,998 ) Present Value of Lease Liabilities $ 29,793 Note 12 – Commitments and Contingencies – In the normal course of business, the Bank is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and commercial letters of credit which are not included in the accompanying financial statements. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and commercial letters of credit is represented by the contractual amount of those instruments. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit. The Bank uses the same credit policies in making such commitments and conditional obligations as it does for instruments that are included in the balance sheet. In the normal course of business, the Bank has made commitments to extend credit of approximately $ 1.3 billion and $ 1.4 billion at March 31, 2025, and December 31, 2024, respectively, and standby and commercial letters of credit of approximately $ 49.9 million and $ 50.0 million at March 31, 2025 and December 31, 2024, respectively. As discussed in Note 6, we have a reserve for unfunded loan commitments of $ 3.5 million and $ 3.7 million at March 31, 2025 and December 31, 2024, respectively. In the normal course of business, the Bank is involved in various legal proceedings. In the opinion of management and counsel, the disposition or ultimate resolution of such proceedings would not have a material adverse effect on the Bank’s financial statements. Note 13– Fair Value of Financial Instruments – Fair Value Disclosures The Company groups its financial assets and liabilities measured at fair value in three levels. Fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: • Level 1 – Includes the most reliable sources and includes quoted prices in active markets for identical assets or liabilities. • Level 2 – Includes observable inputs. Observable inputs include inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates) as well as inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). 28 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS • Level 3 – Includes unobservable inputs and should be used only when observable inputs are unavailable. Recurring Basis Fair values of investment securities available for sale were primarily measured using information from a third-party pricing service. This pricing service provides information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data from market research publications. The fair values of mortgage loans held for sale are based on commitments on hand from investors within the secondary market for loans with similar characteristics. The following tables present the balance of assets and liabilities measured on a recurring basis as of March 31, 2025, and December 31, 2024. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a recurring basis. Fair Value Level 1 Level 2 Level 3 (Dollars in thousands) March 31, 2025 Available for Sale: U.S. Treasury Securities $ 16,860 $ - $ 16,860 $ - U.S. Government Agency Securities 9,678 - 9,678 - Corporate Securities 47,278 - 34,769 12,509 Mortgage-Backed Securities 571,787 - 571,787 - Municipal Securities 274,970 - 249,225 25,745 Loans Held for Sale - - - - Total $ 920,573 $ - $ 882,319 $ 38,254 December 31, 2024 Available for Sale: U.S. Treasury Securities $ 16,675 $ - $ 16,675 $ - U.S. Government Agency Securities 9,588 - 9,588 - Corporate Securities 45,165 - 32,665 12,500 Mortgage-Backed Securities 537,738 - 537,738 - Municipal Securities 284,383 - 259,666 24,717 Loans Held for Sale 717 - 717 - Total $ 894,266 $ - $ 857,049 $ 37,217 The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Company's ability to observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy. 29 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The table below provides a reconciliation for assets measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, as of March 31, 2025, and December 31, 2024. Municipal Corporate Securities Securities (Dollars in thousands) Balance at December 31, 2023 $ 20,847 $ 7,968 Realized Gains (Losses) Included in Net Income - - Unrealized Gains (Losses) Included in Other Comprehensive Loss ( 2,339 ) 782 Purchases 9,938 5,000 Sales - - Maturities, Prepayments, and Calls ( 3,729 ) ( 1,250 ) Transfers Into Level 3 - - Transfers Out of Level 3 - - Balance at December 31, 2024 24,717 12,500 Realized Gains (Losses) Included in Net Income - - Unrealized Gains Included in Other Comprehensive Loss 1,504 9 Purchases - - Sales - - Maturities, Prepayments, and Calls ( 476 ) - Transfers Into Level 3 - - Transfers Out of Level 3 - - Balance at March 31, 2025 $ 25,745 $ 12,509 The following table provides quantitative information about significant unobservable inputs used in fair value measurements of Level 3 assets measured at fair value on a recurring basis at March 31, 2025. Estimated Valuation Unobservable Range of Fair Value Technique Inputs Discounts (Dollars in thousands) March 31, 2025 Municipal Securities $ 25,745 Present Value of Expected Future Cash Flow Model Liquidity Premium 1 % Corporate Securities 12,509 Present Value of Expected Future Cash Flow Model Liquidity Premium 2 % Nonrecurring Basis The Company has segregated all financial assets and liabilities that are measured at fair value on a nonrecurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis. The fair value of the individually evaluated loans is measured at the fair value of the collateral for collateral-dependent loans. Individually evaluated loans are Level 3 assets measured using appraisals from external parties of the collateral less any prior liens and adjusted for estimated selling costs. Adjustments may be made by management based on a customized internally developed discounting matrix. Repossessed assets are initially recorded at fair value less 30 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS estimated cost to sell, which is generally 10 %. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Bank records repossessed assets as Level 3. Fair Value Level 1 Level 2 Level 3 (Dollars in thousands) March 31, 2025 Assets: Individually Evaluated Loans $ 68,853 $ - $ - $ 68,853 Other Nonperforming Assets 1,282 - - 1,282 Total $ 70,135 $ - $ - $ 70,135 December 31, 2024 Assets: Individually Evaluated Loans $ 62,138 $ - $ - $ 62,138 Other Nonperforming Assets 5,529 - - 5,529 Total $ 67,667 $ - $ - $ 67,667 Fair Value Financial Instruments The fair value of a financial instruments is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. In accordance with GAAP, certain financial instruments and all non-financial instruments are excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Short-Term Investments – For those short-term instruments, the carrying amount is a reasonable estimate of fair value. Securities Purchased Under Agreements to Resell - The carrying amount approximates its fair value. Securities – Fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Loans – The fair value for loans is estimated using discounted cash flow analyses, with interest rates currently being offered for similar loans to borrowers with similar credit rates. Loans with similar classifications are aggregated for purposes of the calculations. The allowance for loan losses, which was used to measure the credit risk, is subtracted from loans. Cash Value of Bank-Owned Life Insurance (“BOLI”) – The carrying amount approximates its fair value. Other Equity Securities – The carrying amount approximates its fair value. Deposits – The fair value of demand deposits and certain money market deposits is the amount payable at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses, with interest rates currently offered for deposits of similar remaining maturities. 31 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Borrowings – The fair value of FHLB advances and other long-term borrowings is estimated using the rates currently offered for advances of similar maturities. The carrying amount of short-term borrowings maturing within ninety days approximates the fair value. Commitments to Extend Credit and Standby and Commercial Letters of Credit – The fair values of commitments to extend credit and standby and commercial letters of credit do not differ significantly from the commitment amount and are therefore omitted from this disclosure. The estimated approximate fair values of the Bank’s financial instruments as of March 31, 2025, and December 31, 2024 are as follows: Carrying Amount Total Fair Value Level 1 Level 2 Level 3 (Dollars in thousands) March 31, 2025 Financial Assets: Cash and Short-Term Investments $ 430,309 $ 430,309 $ 430,309 $ - $ - Securities Purchased Under Agreements to Resell 50,589 50,589 - 50,589 - Securities 920,573 920,573 - 882,319 38,254 Loans Held for Sale - - - - - Loans - Net 5,924,056 5,831,741 - - 5,831,741 Cash Value of BOLI 117,950 117,950 - 117,950 - Other Equity Securities 40,947 40,947 - - 40,947 Total $ 7,484,424 $ 7,392,109 $ 430,309 $ 1,050,858 $ 5,910,942 Financial Liabilities: Deposits $ 6,458,181 $ 6,455,852 $ - $ - $ 6,455,852 Borrowings 434,100 431,891 - 431,891 - Total $ 6,892,281 $ 6,887,743 $ - $ 431,891 $ 6,455,852 32 Table of Contents BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Carrying Amount Total Fair Value Level 1 Level 2 Level 3 (Dollars in thousands) December 31, 2024 Financial Assets: Cash and Short-Term Investments $ 516,767 $ 516,767 $ 516,767 $ - $ - Securities Purchased Under Agreements to Resell 50,835 50,835 - 50,835 - Securities 893,549 893,549 - 856,332 37,217 Loans Held for Sale 717 717 - 717 - Loans - Net 5,926,559 5,832,326 - - 5,832,326 Cash Value of BOLI 117,645 117,645 - 117,645 - Other Equity Securities 41,100 41,100 - - 41,100 Total $ 7,547,172 $ 7,452,939 $ 516,767 $ 1,025,529 $ 5,910,643 Financial Liabilities: Deposits $ 6,511,331 $ 6,513,709 $ - $ - $ 6,513,709 Borrowings 483,256 465,834 - 465,834 - Total $ 6,994,587 $ 6,979,543 $ - $ 465,834 $ 6,513,709 Note 14– Subsequent Events – On April 4, 2025, the Company sold the Kaplan banking center, located in Kaplan, Louisiana, to Currency Bank headquartered in Baton Rouge, Louisiana, in accordance with the Branch Purchase and Assumption Agreement dated December 12, 2024. The sale included $ 51.2 million in deposits, $ 2.3 million in loans, and $ 1.4 million in fixed assets, net of depreciation. The deposit premium paid by Currency Bank as consideration was 8.00 % of total deposits assumed at closing. The loans and deposits associated with the Kaplan banking center were included in the consolidated balance sheet as of March 31, 2025. 33 Table of Contents