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What changed in Business First Bancshares, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Business First Bancshares, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+384 added−425 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-02)

Top changes in Business First Bancshares, Inc.'s 2023 10-K

384 paragraphs added · 425 removed · 288 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

66 edited+28 added−19 removed225 unchanged
Biggest changeWe believe our investments in technology will also allow us to maintain our “high tech/high touch” approach without the need for an extensive network of brick and mortar locations. 7 Table of Contents Our Markets Our banking operations are currently organized into five regions in Louisiana, which include the largest metropolitan areas in the state, the Dallas/Fort Worth metroplex, and Houston, which we service through our banking centers and loan production offices.
Biggest changeOur Markets Our banking operations are currently organized into five regions in Louisiana, which include the largest metropolitan areas in the state, the Dallas/Fort Worth metroplex, and Houston, which we service through our banking centers and loan production offices. We will continue to look for talented teams of bankers in markets and potential acquisitions that fit our model going forward.
The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied offices/warehouses/production facilities, office buildings, hotels, mixed-use residential/commercial properties, retail centers and multi-family properties. Our commercial real estate loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios. Residential Real Estate Loans.
The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied and non—owner occupied offices/warehouses/production facilities, office buildings, hotels, mixed-use residential/commercial properties, retail centers and multi-family properties. Our commercial real estate loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios. Residential Real Estate Loans.
We have historically maintained a disciplined and conservative approach to strategic acquisitions, with our acquisitions to date being (i) the acquisition of American Gateway Financial Corporation within our home market of Baton Rouge in 2015; (ii) the acquisition of Minden Bancorp, Inc. within our second oldest market, Northwest Louisiana, on January 1, 2018; (iii) the acquisition of Richland State Bancorp, Inc., which is in the Northeast Louisiana region, on December 1, 2018; (iv) the acquisition of Pedestal Bancshares, Inc., which operated in southern Louisiana, on May 1, 2020; (v) the acquisition of Smith Shellnut Wilson, LLC, which operates out of the Jackson, Mississippi area, on April 1, 2021; and (vi) the acquisition of Texas Citizens Bancorp, Inc., which operates in Houston, on March 1, 2022, the last three of which are described in further detail below.
We have historically maintained a disciplined and conservative approach to strategic acquisitions, with our acquisitions to date being (i) the acquisition of American Gateway Financial Corporation within our home market of Baton Rouge in 2015; (ii) the acquisition of Minden Bancorp, Inc. within our second oldest market, Northwest Louisiana, on January 1, 2018; (iii) the acquisition of Richland State Bancorp, Inc., which is in the Northeast Louisiana region, on December 1, 2018; (iv) the acquisition of Pedestal Bancshares, Inc., which operated in southern Louisiana, on May 1, 2020; (v) the acquisition of Smith Shellnut Wilson, LLC, which operates out of the Jackson, Mississippi area, on April 1, 2021; and (vi) the acquisition of Texas Citizens Bancorp, Inc., which operates in Houston, on March 1, 2022, the last two of which are described in further detail below.
A combination of the Chief Banking Officer and Chief Credit Officer (or their assigns) may approve up to $5.0 million. All relationships exceeding $5.0 million are approved by the Executive Loan Committee. All loans exceeding $10.0 million are required to be approved by the Director’s Loan Committee, which is comprised of board members.
A combination of the Chief Banking Officer and Chief Credit Officer (or their assigns) may approve up to $5.0 million. All relationships exceeding $5.0 million are approved by the Executive Loan Committee. All relationships exceeding $10.0 million are required to be approved by the Director’s Loan Committee, which is comprised of board members.
Loans may be approved using the Incremental authority when the relationship has already been approved using the Matrix authority, with senior lenders being able to approve up to $250,000, market presidents being able to approve up to $350,000, regional market presidents and higher authorities up to $1.5 million, cumulatively.
Loans may be approved using the Incremental authority when the relationship has already been approved using the Matrix authority, with senior lenders being able to approve up to $250,000, market leaders being able to approve up to $350,000, regional presidents and higher authorities up to $1.5 million, cumulatively.
As previously mentioned, the Company and Bank elected to adopt the CBLR framework for the year ended December 31, 2020 and elected to revert to the risk weighted ratios for the years ended December 31, 2022 and 2021. Corrective Measures for Capital Deficiencies.
As previously mentioned, the Company and Bank elected to adopt the CBLR framework for the year ended December 31, 2020 and elected to revert to the risk weighted ratios for the years ended December 31, 2023, 2022 and 2021. Corrective Measures for Capital Deficiencies.
Accordingly, we aim to attract, develop, and retain employees who can drive financial and strategic growth objectives and build long-term shareholder value while upholding our Guiding Principles: Relationship-Driven Team; Thoughtful, Disciplined Decision-Making; Meaningful Communication; Doing the Right Thing the Right Way; and Striving to Be the Best Through Continual Improvement.
Accordingly, we aim to attract, develop, and retain employees who can drive financial and strategic growth objectives and build long-term shareholder value while upholding our Guiding Principles of a relationship-driven team, thoughtful, disciplined decision-making, meaningful communication, doing the right thing the right way; and striving to be the best through continual improvement.
We cannot predict the nature of future fiscal and monetary policies or the effect of these policies on our operations and activities, financial condition, results of operations, growth plans or future prospects. 23 Table of Contents Impact of Current Laws and Regulations The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus has a negative impact on our profitability.
We cannot predict the nature of future fiscal and monetary policies or the effect of these policies on our operations and activities, financial condition, results of operations, growth plans or future prospects. 20 Table of Contents Impact of Current Laws and Regulations The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus has a negative impact on our profitability.
An institution would be subject to limitations on certain activities including payment of dividends, share repurchases and discretionary bonuses to executive officers if its capital level is below the buffered ratio. As of December 31, 2022, the Company’s capital meets or exceeds these capital requirements, including the buffer.
An institution would be subject to limitations on certain activities including payment of dividends, share repurchases and discretionary bonuses to executive officers if its capital level is below the buffered ratio. As of December 31, 2023, the Company’s capital meets or exceeds these capital requirements, including the buffer.
The reporting and reviews provide management with additional information for assessing our asset quality. 10 Table of Contents Deposits Our deposits serve as the primary funding source for lending, investing and other general banking purposes. We offer business accounts and cash management services, including business checking and savings accounts, and treasury management services.
The reporting and reviews provide management with additional information for assessing our asset quality. 9 Table of Contents Deposits Our deposits serve as the primary funding source for lending, investing and other general banking purposes. We offer business accounts and cash management services, including business checking and savings accounts, and treasury management services.
The Financial Crimes Enforcement Network, or FinCEN, issued final rules under the BSA in July 2016 that clarify and strengthen the due diligence requirements for banks with regard to their customers. The Office of Foreign Assets Control, or OFAC, administers laws and Executive Orders that prohibit U.S. entities from engaging in transactions with certain prohibited parties.
The Financial Crimes Enforcement Network, or FinCEN, issued final rules under the BSA in July 2016 that clarify and strengthen the due diligence requirements for banks with regard to their customers. 19 Table of Contents The Office of Foreign Assets Control, or OFAC, administers laws and Executive Orders that prohibit U.S. entities from engaging in transactions with certain prohibited parties.
These requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of the Bank. 17 Table of Contents Capital Adequacy Requirements.
These requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of the Bank. 15 Table of Contents Capital Adequacy Requirements.
In addition, the collateral securing C&I loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipated, exposing us to increased credit risk. As a result of these additional complexities, variables and risks, C&I loans require extensive underwriting and servicing. 8 Table of Contents Construction and Development Loans .
In addition, the collateral securing C&I loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipated, exposing us to increased credit risk. As a result of these additional complexities, variables and risks, C&I loans require extensive underwriting and servicing. Construction and Development Loans .
Prior to the expansion into the Houston market from the TCBI merger, each of our expansions into new markets to date has been accomplished organically. 5 Table of Contents ● Disciplined Acquisition Strategy. While we will remain focused on organic expansion, we will continue to identify and evaluate opportunities for strategic business acquisitions as they arise from time to time.
Prior to the expansion into the Houston market from the TCBI merger, each of our expansions into new markets to date has been accomplished organically. ● Disciplined Acquisition Strategy. While we will remain focused on organic expansion, we will continue to identify and evaluate opportunities for strategic business acquisitions as they arise from time to time.
This description is not intended to describe all laws and regulations applicable to us and our subsidiaries, and the description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described herein. Business First Bancshares, Inc.
This description is not intended to describe all laws and regulations applicable to us and our subsidiaries, and the description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described herein. 12 Table of Contents Business First Bancshares, Inc.
We believe their collaborative and cohesive approach to working relationships permeates every level of our organization, creating synergies that leave us well-positioned for future growth and helps us attract and retain other talented and entrepreneurial bankers as members of our team. ● History of Disciplined Expansion.
We believe their collaborative and cohesive approach to working relationships permeates every level of our organization, creating synergies that leave us well-positioned for future growth and helps us attract and retain other talented and entrepreneurial bankers as members of our team. 6 Table of Contents ● History of Disciplined Expansion.
Further changes effected by the passage of EGRRCPA are discussed below. 14 Table of Contents Revised Rules on Regulatory Capital. Regulatory capital rules pursuant to the Basel III requirements, released in July 2013 and effective January 1, 2015, implemented higher minimum capital requirements for bank holding companies and banks.
Further changes effected by the passage of EGRRCPA are discussed below. Revised Rules on Regulatory Capital. Regulatory capital rules pursuant to the Basel III requirements, released in July 2013 and effective January 1, 2015, implemented higher minimum capital requirements for bank holding companies and banks.
Our acquisition, construction, land development, and other land portfolio is currently over the regulatory guidance percentage threshold due to the timing of draws on several larger construction and development projects and our portfolio secured by multi-family and nonfarm nonresidential properties and loans for acquisition, construction, land development, and other land is within the percentage threshold. Community Reinvestment Act.
Our acquisition, construction, land development, and other land portfolio is currently over the regulatory guidance percentage threshold due to the timing of draws on several larger construction and development projects and our portfolio secured by multi-family and nonfarm nonresidential properties and loans for acquisition, construction, land development, and other land is within the percentage threshold. 18 Table of Contents Community Reinvestment Act.
All of our banking centers and loan production offices are located in Louisiana and Texas, and our subsidiary registered investment advisor (RIA), Smith Shellnut Wilson, LLC, or SSW, is located in Mississippi.
All banking centers and loan production offices are in Louisiana and Texas, and our subsidiary registered investment advisor (RIA), Smith Shellnut Wilson, LLC, or SSW, is in Mississippi.
With the exception of loans secured by cash deposited with us, all commercial loans require a minimum of two approvers (the banker and one other individual with higher authority).
With the exception of loans secured by cash deposited with us, all commercial loans require a minimum of two approvers (the banker and at least one other individual with higher authority).
Information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is not part of this Annual Report on Form 10-K. 13 Table of Contents Supervision and Regulation General The U.S. banking industry is highly regulated under federal and state law.
Information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is not part of this Annual Report on Form 10-K. Supervision and Regulation General The U.S. banking industry is highly regulated under federal and state law.
Credit Policies and Procedures General . We adhere to what we believe are disciplined underwriting standards, but also remain cognizant of the need to serve the credit needs of customers in our primary market areas by offering flexible loan solutions in a responsive and timely manner.
We adhere to what we believe are disciplined underwriting standards, but also remain cognizant of the need to serve the credit needs of customers in our primary market areas by offering flexible loan solutions in a responsive and timely manner.
In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank under a capital restoration plan would be assumed by the bankruptcy trustee and entitled to a priority of payment. In the event of a bank holding company’s bankruptcy under Chapter 11 of the U.S.
In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank under a capital restoration plan would be assumed by the bankruptcy trustee and entitled to a priority of payment. 14 Table of Contents In the event of a bank holding company’s bankruptcy under Chapter 11 of the U.S.
We have also built treasury and cash management programs that cater to our target customers. 6 Table of Contents ● True Community Banking Model . Despite being located in Louisiana’s largest metropolitan areas and in the two largest metropolitan areas in the state of Texas, we have a true community banking mindset.
We have also built treasury and cash management programs that cater to our target customers. ● True Community Banking Model . Despite being located in Louisiana’s largest metropolitan areas and in the two largest metropolitan areas in the state of Texas, we have a true community banking mindset.
For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed dividends, or might be required to consent to a consolidation or to divest the troubled institution or other affiliates. 15 Table of Contents Acquisitions by Bank Holding Companies.
For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed dividends, or might be required to consent to a consolidation or to divest the troubled institution or other affiliates. Acquisitions by Bank Holding Companies.
We make C&I loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion and development loans, borrowing base loans, letters of credit and other loan products, primarily in our target markets that are underwritten on the basis of the borrower’s ability to service the debt from income.
We make C&I loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion and development loans, borrowing base loans, accounts receivable factoring, agricultural financing, letters of credit and other loan products, primarily in our target markets that are underwritten on the basis of the borrower’s ability to service the debt from income.
Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant laws and regulations, could have serious legal, reputational and financial consequences for the institution. 22 Table of Contents Privacy.
Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant laws and regulations, could have serious legal, reputational and financial consequences for the institution. Privacy.
Such legislation, regulation and policies have had a significant effect on the operations and activities, financial condition, results of operations, growth plans and future prospects of commercial banks in the past and are expected to continue to do so.
Such legislation, regulation and policies have had a significant effect on the operations and activities, financial condition, results of operations, growth plans and future prospects of commercial banks in the past and are expected to continue to do so. 21 Table of Contents
Although all lending involves a degree of risk, we work to mitigate these risks through conservative underwriting policies and consistent monitoring of credit quality indicators. Commercial and Industrial Loans .
Although all lending involves a degree of risk, we work to mitigate these risks through conservative underwriting policies and consistent monitoring of credit quality indicators. 7 Table of Contents Commercial and Industrial Loans .
Smith Shellnut Wilson, LLC ( “ SSW ” ). On March 22, 2021, we, through b1BANK, entered into a definitive agreement to acquire SSW, a registered investment advisor with approximately $3.5 billion in assets under management, specializing in managing investment portfolios for corporations, foundations and individuals. The acquisition of SSW was consummated on April 1, 2021.
On March 22, 2021, we, through b1BANK, entered into a definitive agreement to acquire SSW, a registered investment advisor with approximately $3.5 billion in assets under management, specializing in managing investment portfolios for corporations, foundations and individuals. The acquisition of SSW was consummated on April 1, 2021.
We carefully manage the size of our workforce and reallocate resources as needed. For 2022, we managed an average of $6.2 million in loans held for investment and $6.5 million in deposits per FTE. Diversity . We have an organization-wide focus to improve recruitment and retention of women and ethnic minorities.
We carefully manage the size of our workforce and reallocate resources as needed. For 2023, we managed an average of $6.6 million in loans held for investment and $6.9 million in deposits per FTE. Diversity . We have an organization-wide focus to improve recruitment and retention of women and ethnic minorities.
Attraction, Development and Retention . We measure the success of our talent acquisition strategy on speed and quality of acquisition, diversity of new colleagues, retention, and overall performance metrics. Each of these metrics is tracked for each of the key business lines. Sourcing strategies and support structures are modified to ensure that performance targets are met consistently.
We measure the success of our talent acquisition strategy on quality of acquisition, diversity of new colleagues and retention. Each of these metrics is tracked for all key business lines. Sourcing strategies and support structures are modified to ensure that performance targets are met consistently.
An unsatisfactory CRA record could substantially delay approval or result in denial of an application. The Bank received a “satisfactory” rating in its most recent CRA examination in April, 2020. 21 Table of Contents Consumer Laws and Regulations. The Bank is subject to numerous laws and regulations intended to protect consumers in transactions with the Bank.
An unsatisfactory CRA record could substantially delay approval or result in denial of an application. The Bank received a “satisfactory” rating in its most recent CRA examination in April, 2023. Consumer Laws and Regulations. The Bank is subject to numerous laws and regulations intended to protect consumers in transactions with the Bank.
Bankruptcy Code, the trustee will be deemed to have assumed and will be required to cure immediately any deficit under any commitment by the debtor holding company to any of the federal banking agencies to maintain the capital of an insured depository institution, and any claim for breach of such obligation will generally have priority over most other unsecured claims. 16 Table of Contents Scope of Permissible Activities.
Bankruptcy Code, the trustee will be deemed to have assumed and will be required to cure immediately any deficit under any commitment by the debtor holding company to any of the federal banking agencies to maintain the capital of an insured depository institution, and any claim for breach of such obligation will generally have priority over most other unsecured claims.
Our consumer loans, which are underwritten primarily based on the borrower’s financial condition and, in some cases, are unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
Our consumer loans, which are underwritten primarily based on the borrower’s financial condition and, in some cases, are unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any. 8 Table of Contents Credit Policies and Procedures General .
Further, in the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its shareholders, including any depository institution holding company (such as us) or any shareholder or creditor thereof.
Further, in the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its shareholders, including any depository institution holding company (such as us) or any shareholder or creditor thereof. 17 Table of Contents Incentive Compensation Guidance.
In 2022, we launched our Intern Insights Program which focuses on creating a pipeline between young diverse talent and the banking industry. Specifically, recruiting efforts focused on junior year finance and accounting majors at Southern University and A&M College in Baton Rouge, a historically black university, for our Intern Insights Program.
In 2023, we completed a second year of our Intern Insights Program which focuses on creating a pipeline between young diverse talent and the banking industry. Specifically, recruiting efforts focused on junior year finance and accounting majors at Southern University and A&M College in Baton Rouge, a historically black university, for our Intern Insights Program.
For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with GAAP, management’s certifications signed by our and the Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the financial statements, and an attestation by the auditors regarding the Bank’s internal controls must be submitted.
For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), management’s certifications signed by our and the Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the financial statements, and an attestation by the auditors regarding the Bank’s internal controls must be submitted.
As of December 31, 2022, on a consolidated basis, we had total assets of $6.0 billion, total loans of $4.6 billion, total deposits of $4.8 billion and shareholders’ equity of $580.5 million. Our common stock is listed on the Nasdaq Global Select Market under the symbol “BFST”.
As of December 31, 2023, on a consolidated basis, we had total assets of $6.6 billion, total loans of $5.0 billion, total deposits of $5.2 billion and shareholders’ equity of $644.3 million. Our common stock is listed on the Nasdaq Global Select Market under the symbol “BFST”.
Generally, the aggregate of these loans cannot exceed the institution’s total unimpaired capital and surplus, although a bank’s regulators may determine that a lesser amount is appropriate. Loans to senior executive officers of a bank are even further restricted.
Generally, the aggregate of these loans cannot exceed the institution’s total unimpaired capital and surplus, although a bank’s regulators may determine that a lesser amount is appropriate. Loans to senior executive officers of a bank are even further restricted. Insiders are subject to enforcement actions for accepting loans in violation of applicable restrictions.
The penalties can be as high as $1,000,000 for each day the activity continues. Anti-tying Restrictions.
The penalties can exceed $1,000,000 for each day the activity continues. Anti-tying Restrictions.
Our policies require rapid notification of delinquency and prompt initiation of collection actions. We maintain a list of loans, or the Watch List that receive additional attention if we believe there may be a potential credit risk. The Watch List is presented to the board of directors monthly.
Our policies require rapid notification of delinquency and prompt initiation of collection actions. We maintain a list of loans, the “Watch List,” that receive additional attention if we believe there may be a potential credit risk.
Furthermore, in 2022, we implemented online exit surveys to provide feedback and help increase retention of women and ethnic minorities.
Furthermore, in 2023, we continued the use of online exit surveys to provide feedback and help increase retention of women and ethnic minorities.
Incentive Compensation Guidance. The federal banking agencies have issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of those organizations by encouraging excessive risk-taking.
The federal banking agencies have issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of those organizations by encouraging excessive risk-taking. The incentive compensation guidance sets expectations for banking organizations concerning their incentive compensation arrangements and related risk-management, control and governance processes.
Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5.0% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be adequately capitalized.
The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5.0% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be adequately capitalized.
At least semiannually, the FDIC will update its loss and income projections for the Deposit Insurance Fund and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required.
We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. At least semiannually, the FDIC will update its loss and income projections for the Deposit Insurance Fund and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required.
The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors and is calculated based on an institution’s average consolidated total assets minus average tangible equity. 20 Table of Contents We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.
The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors and is calculated based on an institution’s average consolidated total assets minus average tangible equity.
Pursuant to section 201(b) of EGRRCPA, the federal bank regulatory agencies adopted a final rule in 2019 imposing a minimum community bank leverage ratio requirement of 9.0%.
Pursuant to section 201(b) of EGRRCPA, the federal bank regulatory agencies adopted a final rule in 2019 imposing a minimum community bank leverage ratio requirement of 9.0%, which was reduced on a temporary basis under the CARES Act in 2020-2021.
Other important competitive factors in our industry and markets include office locations and hours, quality of customer service, community reputation, continuity of personnel and services, capacity and willingness to extend credit, and ability to offer sophisticated banking products and services.
These competitors attempt to gain market share through their financial product mix, pricing strategies and banking center locations. Other important competitive factors in our industry and markets include office locations and hours, quality of customer service, community reputation, continuity of personnel and services, capacity and willingness to extend credit, and ability to offer sophisticated banking products and services.
Compensation and benefits include market-competitive pay, health insurance options, a health reimbursement account (HRA), a flexible spending account (FSA), dependent care, employer-paid life insurance, voluntary life insurance, dental and vision insurance, employer-paid short-term disability, employer-paid long-term disability, employee assistance programs, employee discounts on our products, critical illness insurance, accident insurance, hospital indemnity insurance, pet insurance, identity and fraud protection, MetLife legal plan, paid time off, (including paid volunteer leave), training and professional development opportunities, and an employer-paid financial wellness program. 12 Table of Contents We periodically review compensation and benefits by grade level and position to ensure similar positions are paid comparatively and to ensure that we have a competitive and valuable offering to meet the well-being and needs of our employees.
Compensation and benefits include market-competitive pay, health insurance options, a health reimbursement account (HRA), a flexible spending account (FSA), dependent care, employer-paid life insurance, voluntary life insurance, dental and vision insurance, employer-paid short-term disability, employer-paid long-term disability, employee assistance programs, employee discounts on our products, critical illness insurance, accident insurance, hospital indemnity insurance, pet insurance, identity and fraud protection, MetLife legal plan, paid time off, (including paid volunteer leave), training and professional development opportunities, and an employer-paid financial wellness program.
We also compete with mortgage companies, brokerage firms, consumer finance companies, mutual funds, securities firms, insurance companies, third-party payment processors, fintech companies and other financial intermediaries for certain of our products and services.
We also compete with mortgage companies, brokerage firms, consumer finance companies, mutual funds, securities firms, insurance companies, third-party payment processors, fintech companies and other financial intermediaries for certain of our products and services. Some of our competitors are not subject to the regulatory restrictions and level of regulatory supervision applicable to us.
As of December 31, 2022, our colleagues had the following attributes: Female Minority (3) Employees 505 total (67.5%) 148 total (19.8%) Officials and Managers (1) 98 total (55.7%) 30 total (17.0%) Executive Officers (2) 3 total (23.1%) 1 total (7.7%) (1) Based on EEO-1 job classifications. (2) Based on b1BANK’s Executive Team.
As of December 31, 2023, our colleagues had the following attributes: Female Minority (3) Employees 520 total (67.5%) 166 total (21.6%) Officials and Managers (1) 113 total (58.3%) 33 total (17.0%) Executive Officers (2) 3 total (21.4%) 1 total (7.1%) (1) Based on EEO-1 job classifications. (2) Based on b1BANK’s Executive Team.
As of December 31, 2022, the Bank met the requirements to be categorized as well capitalized under the prompt corrective action framework currently in effect. 18 Table of Contents Banks that are adequately, but not well, capitalized may not accept, renew or rollover brokered deposits except with a waiver from the Federal Reserve and are subject to restrictions on the interest rates that can be paid on its deposits.
Banks that are adequately, but not well, capitalized may not accept, renew or rollover brokered deposits except with a waiver from the Federal Reserve and are subject to restrictions on the interest rates that can be paid on its deposits.
In the event an institution becomes undercapitalized, it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount.
The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy.
These components, together with active credit management, are the foundation of our credit culture, which we believe is critical to enhancing the long-term value of our organization to our customers, employees, shareholders and communities. 9 Table of Contents Credit Concentrations .
Our lending policies do not provide for any loans that are highly speculative, subprime, or that have high loan-to-value ratios. These components, together with active credit management, are the foundation of our credit culture, which we believe is critical to enhancing the long-term value of our organization to our customers, employees, shareholders and communities. Credit Concentrations .
Insiders are subject to enforcement actions for accepting loans in violation of applicable restrictions. 19 Table of Contents Restrictions on Distribution of Bank Dividends and Assets. The Bank is subject to certain restrictions on dividends under federal and state laws, regulations and policies.
Restrictions on Distribution of Bank Dividends and Assets. The Bank is subject to certain restrictions on dividends under federal and state laws, regulations and policies.
Available Information The Company files reports and other information with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934, as amended. The SEC maintains an Internet site that contains reports, proxy and information statements and other information about issuers, like the Company, who file electronically with the SEC. The address of that site is http://www.sec.gov.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information about issuers, like the Company, who file electronically with the SEC. The address of that site is http://www.sec.gov . Documents filed by the Company with the SEC are available from the Company without charge (except for exhibits to the documents).
Any new branch, whether located inside or outside of Louisiana, must also be approved by the FDIC, as the Bank’s primary federal regulator. The Bank may also establish offices in other states by merging with banks or by purchasing branches of other banks in other states, subject to certain restrictions. Restrictions on Transactions with Affiliates and Insiders.
The Bank may also establish offices in other states by merging with banks or by purchasing branches of other banks in other states, subject to certain restrictions. 16 Table of Contents Restrictions on Transactions with Affiliates and Insiders.
The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. For the year ended December 31, 2020, the Company and Bank elected to adopt the CBLR framework.
The community bank leverage ratio requirement is currently 9.0% after being temporarily reduced under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework.
We offer, among other products, checking, savings and money market accounts, certificates of deposit, commercial and consumer loans, mortgage loans, real estate loans, and other installment and term loans.
Our Products and Services b1BANK is an independent financial institution that is engaged in substantially all of the business operations customarily conducted by financial institutions in Louisiana and Texas. We offer, among other products, checking, savings and money market accounts, certificates of deposit, commercial and consumer loans, mortgage loans, real estate loans, and other installment and term loans.
The capital calculation is calculated monthly. As of December 31, 2022, the Bank had a legal lending limit of approximately $328.8 million for loans not fully secured with readily marketable collateral, and its “in-house” lending limit was $71.0 million as of such date. Our credit underwriters are based throughout our footprint and service all of our markets from those locations.
As of December 31, 2023, the Board has set the “in-house” household lending limit was $60.0 million with an additional borrower “in-house” lending limit of $20.0 million as of such date. Our credit underwriters are based throughout our footprint and service all of our markets from those locations.
Key items related to our human capital resources are described below. Structure . As of December 31, 2022, we had 727 full-time and 21 part-time employees (total of 748 employees) located in Arkansas (remote), Kentucky (remote), Louisiana, Michigan (remote), Mississippi, Nevada (remote), South Dakota (remote), Tennessee (remote), Texas, and Virginia (remote). Full-time equivalents (FTEs) were 742.
Our employees reside coast to coast, with personnel located in Alabama (remote), Arkansas (remote), Illinois (remote), Kentucky (remote), Louisiana, Mississippi, Nevada (remote), North Carolina (remote), South Dakota (remote), Tennessee (remote), Texas, and Virginia (remote). Full-time equivalents (FTEs) as of December 31, 2023, were 761.
For the years ended December 31, 2022 and 2021, the Company and Bank elected to revert to the risk-weighted ratios. Imposition of Liability for Undercapitalized Subsidiaries. Bank regulators are required to take prompt corrective action to resolve problems associated with insured depository institutions whose capital declines below certain levels.
Bank regulators are required to take prompt corrective action to resolve problems associated with insured depository institutions whose capital declines below certain levels. In the event an institution becomes undercapitalized, it must submit a capital restoration plan.
Some of our competitors are not subject to the regulatory restrictions and level of regulatory supervision applicable to us. 11 Table of Contents Interest rates on loans and deposits, as well as prices on fee-based services, are typically significant competitive factors within banking and financial services industry.
Interest rates on loans and deposits, as well as prices on fee-based services, are typically significant competitive factors within banking and financial services industry. Many of our competitors are much larger financial institutions that have greater financial resources than we do and compete aggressively for market share.
We will carefully consider acquisition opportunities that we believe are consistent with our strategic vision and provide attractive risk-adjusted returns to our shareholders. Recent Acquisition Activity Pedestal Bancshares, Inc. On January 22, 2020, we entered into an agreement and plan of reorganization with Pedestal Bancshares, Inc., and its wholly-owned banking subsidiary, Pedestal Bank, headquartered in Houma, Louisiana.
We will carefully consider acquisition opportunities that we believe are consistent with our strategic vision and provide attractive risk-adjusted returns to our shareholders. 5 Table of Contents Recent Acquisition Activity Smith Shellnut Wilson, LLC ( “ SSW ” ).
(3) Includes Hispanic/Latino, Black/African American, Asian, American Indian/Alaska Native, Native Hawaiian/Other Pacific Islander Compensation and Benefits . We strive to provide pay, benefits, and services that help meet the varying needs of our employees.
(3) Includes Hispanic/Latino, Black/African American, Asian, American Indian/Alaska Native, Native Hawaiian/Other Pacific Islander In addition to our continued Diversity Equity and Inclusion (“DEI”) efforts, we have emphasized merit-based promotions in an effort to promote from within, foster talent development of our best human capital resources, and increase the our organic growth. Compensation and Benefits .
Removed
The acquisition was consummated on May 1, 2020. As a result of the transaction, we acquired Pedestal Bank’s twenty-two branch locations across southern Louisiana, total assets of $1.4 billion, net loans of $935.8 million and total deposits of $1.2 billion. The acquisition expanded our presence in our South to Southwest Louisiana markets.
Added
We believe our investments in technology will also allow us to maintain our “high tech/high touch” approach without the need for an extensive network of brick and mortar locations.
Removed
We will continue to look for talented teams of bankers in markets and potential acquisitions that fit our model going forward. Our Products and Services b1BANK is an independent financial institution that is engaged in substantially all of the business operations customarily conducted by financial institutions in Louisiana and Texas.
Added
The Risk Committee of the Board reviews a list of loans under foreclosure proceedings while the Impairment Committee reviews a list of impaired loans exceeding $500,000 as well as the list of Classified borrowers with exposures of $250,000 or greater. Impairment Committee minutes are reviewed by the Risk Committee.
Removed
We also originate for resale 1-4 family mortgage loans, and those loans are included as a part of our consumer real estate loan portfolio until sold to investors.
Added
Key items that drive our human capital resources are described below. 10 Table of Contents Structure . As of December 31, 2023, we proudly employ 751 full-time and 19 part-time employees (for a total of 770 employees).
Removed
We offer consumer loans as an accommodation to our existing customers and do not market consumer loans to persons who do not have a pre-existing relationship with us.
Added
We provide pay, benefits, and services that not only meet the varying needs of our employees but are in line with our equilibrium for competitive compensation.
Removed
Our lending policies do not provide for any loans that are highly speculative, subprime, or that have high loan-to-value ratios.
Added
Periodic and objective reviews of compensation and benefits by grade level and position are conducted to ensure similar positions are paid comparatively and to solidify that we continuously provide a competitive and valuable offering to satisfy the well-being and needs of our employees. Attraction, Development and Retention .
Removed
Our board has established an “in-house” lending limit to any single customer equal to 15% of the Bank’s Tier 1 and Tier 2 Capital in the case of loans that are not fully secured, with an additional 10% of the Bank’s Tier 1 and Tier 2 Capital in the case of loans that are fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations at least equal to the amount of the loan.
Added
In 2023, our Talent Development team made significant strides in enhancing and expanding our training initiatives. Our goals were to directly benefit our clients by elevating service standards through strategic development programs.
Removed
Many of our competitors are much larger financial institutions that have greater financial resources than we do and compete aggressively for market share. These competitors attempt to gain market share through their financial product mix, pricing strategies and banking center locations.
Added
Key among these was the integration of Submittable, which is an online platform used to streamline the submission and review processes into our internal application for external learning and development programs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

74 edited+7 added−29 removed235 unchanged
Biggest changeWhile we have not recorded any impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of our existing goodwill or goodwill we may acquire in the future will not result in findings of impairment and related write-downs, which could adversely affect our business, financial condition and results of operations.
Biggest changeWhile we have not recorded any impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of our existing goodwill or goodwill we may acquire in the future will not result in findings of impairment and related write-downs, which could adversely affect our business, financial condition and results of operations. 33 Table of Contents Risks Related to the Regulation of Our Industry We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could have an adverse effect on our business, financial condition and results of operations.
Because of the uncertainty of estimates involved in these matters, we may be required to significantly increase our allowance for credit losses or sustain loan losses that are significantly higher than the reserve provided, or otherwise incur charges that could have a material adverse effect on our business, financial condition and results of operations.
Because of the uncertainty of estimates involved in these matters, we may be required to significantly increase our allowance for credit losses or sustain credit losses that are significantly higher than the reserve provided, or otherwise incur charges that could have a material adverse effect on our business, financial condition and results of operations.
Our success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which requires them to, among other things: ● attract and retain experienced and talented bankers in each of our markets; 25 Table of Contents ● maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; ● increase our operating efficiency and profitability; ● implement new technologies to enhance the client experience, keep pace with our competitors and improve efficiency; ● attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; ● attract sufficient loans that meet prudent credit standards, including in our commercial and industrial and owner-occupied commercial real estate loan categories; ● maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; ● obtain federal and state regulatory approvals; ● manage our credit, interest rate and liquidity risk; ● develop new, and grow our existing, streams of noninterest income; ● oversee the performance of third party service providers that provide material services to our business; and ● maintain expenses in line with their current projections.
Our success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which requires them to, among other things: ● attract and retain experienced and talented bankers in each of our markets; ● maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; ● increase our operating efficiency and profitability; ● implement new technologies to enhance the client experience, keep pace with our competitors and improve efficiency; ● attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; ● attract sufficient loans that meet prudent credit standards, including in our commercial and industrial and owner-occupied commercial real estate loan categories; ● maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; ● obtain federal and state regulatory approvals; ● manage our credit, interest rate and liquidity risk; ● develop new, and grow our existing, streams of noninterest income; ● oversee the performance of third party service providers that provide material services to our business; and ● maintain expenses in line with their current projections.
In addition to market interest rates, other factors that could cause adverse changes to the fair value of our securities include, but are not limited to, rating agency actions with respect to the securities, defaults by the issuer or with respect to the underlying securities, and continued instability in the capital markets.
In addition to market interest rates, other factors that could cause adverse changes to the fair value of our securities include, but are not limited to, rating agency actions with respect to the securities, defaults by the issuer with respect to the underlying securities, and continued instability in the capital markets.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations and financial condition. 42 Table of Contents Risks Associated with our Common Stock The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your common shares at the volume, prices and times desired.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations and financial condition. 37 Table of Contents Risks Associated with our Common Stock The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your common shares at the volume, prices and times desired.
These provisions, and the corporate and banking laws and regulations applicable to us: ● enable our board of directors to issue additional shares of authorized, but unissued capital stock; ● enable our board of directors, without shareholder approval, to issue “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by the board; ● enable our board of directors to increase the size of the board and fill the vacancies created by the increase; ● do not provide for cumulative voting in the election of directors; ● enable our board of directors to amend our bylaws without shareholder approval; ● require the vote of holders of at least 80% of the outstanding shares of our capital stock to modify the sections of our articles of incorporation addressing limitation of liability and indemnification of our officers and directors; ● require the request of holders of at least 25% of the outstanding shares of our capital stock entitled to vote at a meeting to call a special shareholders’ meeting; ● establish an advance notice procedure for director nominations and other shareholder proposals; and ● require prior regulatory application and approval of any transaction involving control of our organization.
These provisions, and the corporate and banking laws and regulations applicable to us: ● enable our board of directors to issue additional shares of authorized, but unissued capital stock; ● enable our board of directors, without shareholder approval, to issue “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by the board; 39 Table of Contents ● enable our board of directors to increase the size of the board and fill the vacancies created by the increase; ● do not provide for cumulative voting in the election of directors; ● enable our board of directors to amend our bylaws without shareholder approval; ● require the vote of holders of at least 80% of the outstanding shares of our capital stock to modify the sections of our articles of incorporation addressing limitation of liability and indemnification of our officers and directors; ● require the request of holders of at least 25% of the outstanding shares of our capital stock entitled to vote at a meeting to call a special shareholders’ meeting; ● establish an advance notice procedure for director nominations and other shareholder proposals; and ● require prior regulatory application and approval of any transaction involving control of our organization.
Our acquisition activities could be material to our business and involve a number of risks, including those associated with: ● the identification of suitable candidates for acquisition; ● the diversion of management attention from the operation of our existing business to identify, evaluate and negotiate potential transactions; ● the ability to attract funding to support additional growth within acceptable risk tolerances; ● the use of inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; ● the ability to maintain asset quality; ● the adequacy of due diligence and the potential exposure to unknown or contingent liabilities related to the acquisition ● the retention of customers and key personnel, including bankers; ● the timing and uncertainty associated with obtaining necessary regulatory approvals; ● the incurrence of an impairment of goodwill associated with an acquisition and adverse effects on our results of operations ● the ability to successfully integrate acquired businesses; and ● the maintenance of adequate regulatory capital.
Our acquisition activities could be material to our business and involve a number of risks, including those associated with: ● the identification of suitable candidates for acquisition; ● the diversion of management attention from the operation of our existing business to identify, evaluate and negotiate potential transactions; ● the ability to attract funding to support additional growth within acceptable risk tolerances; ● the use of inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; ● the ability to maintain asset quality; ● the adequacy of due diligence and the potential exposure to unknown or contingent liabilities related to the acquisition 27 Table of Contents ● the retention of customers and key personnel, including bankers; ● the timing and uncertainty associated with obtaining necessary regulatory approvals; ● the incurrence of an impairment of goodwill associated with an acquisition and adverse effects on our results of operations ● the ability to successfully integrate acquired businesses; and ● the maintenance of adequate regulatory capital.
Unexpected deterioration in the credit quality of our commercial real estate loan portfolio would require us to increase our provision for loan losses, which would reduce our profitability, and could adversely affect our business, financial condition, results of operations and prospects. 27 Table of Contents Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
Unexpected deterioration in the credit quality of our commercial real estate loan portfolio would require us to increase our provision for credit losses, which would reduce our profitability, and could adversely affect our business, financial condition, results of operations and prospects. 24 Table of Contents Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
Increased market volatility could have an adverse effect on the market price of our common stock, which could make it difficult to sell your common shares at the volume, prices and times desired. 43 Table of Contents Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future sales of equity securities.
Increased market volatility could have an adverse effect on the market price of our common stock, which could make it difficult to sell your common shares at the volume, prices and times desired. 38 Table of Contents Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future sales of equity securities.
These changes are beyond our control, can be difficult to predict, and could materially impact how we report our financial condition and results of operations. 35 Table of Contents We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology.
These changes are beyond our control, can be difficult to predict, and could materially impact how we report our financial condition and results of operations. 31 Table of Contents We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology.
We review goodwill for impairment at least annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired. Our goodwill impairment test is performed annually and was completed as of October 1, 2022. The annual test did not indicate any impairment as of the testing date.
We review goodwill for impairment at least annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired. Our goodwill impairment test is performed annually and was completed as of October 1, 2023. The annual test did not indicate any impairment as of the testing date.
Because we have a large average loan size, if only a few of our largest borrowers become unable to repay their loan obligations as a result of economic or market conditions or personal circumstances, our nonperforming loans and our provision for loan losses could increase significantly, which could have an adverse effect on our business, financial condition and results of operations. 28 Table of Contents Our allowance for loan losses may prove to be insufficient to absorb losses inherent in our loan portfolio, which could have a material adverse effect on our business, financial condition and results of operations.
Because we have a large average loan size, if only a few of our largest borrowers become unable to repay their loan obligations as a result of economic or market conditions or personal circumstances, our nonperforming loans and our provision for credit losses could increase significantly, which could have an adverse effect on our business, financial condition and results of operations. 25 Table of Contents Our allowance for credit losses may prove to be insufficient to absorb losses inherent in our loan portfolio, which could have a material adverse effect on our business, financial condition and results of operations.
A disaster could, therefore, result in decreased revenue and loan losses that could have an adverse effect on our business, financial condition and results of operations. We earn income by originating residential mortgage loans for resale in the secondary mortgage market, and disruptions in that market could reduce our operating income.
A disaster could, therefore, result in decreased revenue and credit losses that could have an adverse effect on our business, financial condition and results of operations. We earn income by originating residential mortgage loans for resale in the secondary mortgage market, and disruptions in that market could reduce our operating income.
They require management to make subjective or complex judgments, estimates or assumptions, and changes in those estimates or assumptions could have a significant impact on our consolidated financial statements. These critical accounting policies and estimates include acquired loans and allowance for loan losses and purchase accounting adjustments (other than loans).
They require management to make subjective or complex judgments, estimates or assumptions, and changes in those estimates or assumptions could have a significant impact on our consolidated financial statements. These critical accounting policies and estimates include acquired loans and allowance for credit losses and purchase accounting adjustments (other than loans).
This could adversely affect our liquidity, which could impair our ability to fund operations and meet obligations as they become due and could have a material adverse effect on our business, financial condition and results of operations. 29 Table of Contents Our ability to maintain our reputation is critical to the success of our business.
This could adversely affect our liquidity, which could impair our ability to fund operations and meet obligations as they become due and could have a material adverse effect on our business, financial condition and results of operations. 26 Table of Contents Our ability to maintain our reputation is critical to the success of our business.
In addition, our regulators, as an integral part of their periodic examination, review our methodology for calculating, and the adequacy of, our allowance for loan losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination.
In addition, our regulators, as an integral part of their periodic examination, review our methodology for calculating, and the adequacy of, our allowance for credit losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination.
Inaccurate management assumptions, deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification or deterioration of additional problem loans, acquisition of problem loans and other factors, both within and outside of our control, may require us to increase our allowance for loan losses.
Inaccurate management assumptions, deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification or deterioration of additional problem loans, acquisition of problem loans and other factors, both within and outside of our control, may require us to increase our allowance for credit losses.
Further, if actual charge-offs in future periods exceed the amounts allocated to the allowance for loan losses, we may need additional provisions for loan losses to restore the adequacy of our allowance for loan losses. Finally, the measure of our allowance for loan losses is dependent on the adoption and interpretation of accounting standards.
Further, if actual charge-offs in future periods exceed the amounts allocated to the allowance for credit losses, we may need additional provisions for credit losses to restore the adequacy of our allowance for credit losses. Finally, the measure of our allowance for credit losses is dependent on the adoption and interpretation of accounting standards.
Along with its core deposits, the Bank utilizes alternative funding methods, including brokered and wholesale time deposits, short- and long-term borrowings through a correspondent bank, FHLB advances, securities sold under agreements to repurchase and Federal Funds Purchased borrowings.
Along with its core deposits, the Bank utilizes alternative funding methods, including brokered and wholesale time deposits, short- and long-term borrowings through a correspondent bank, FHLB advances, Bank Term Funding Program (“BTFP”), securities sold under agreements to repurchase and Federal Funds Purchased borrowings.
Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of our general unsecured creditors, including the holders of any note obligations. 41 Table of Contents We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements.
Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of our general unsecured creditors, including the holders of any note obligations. We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements.
Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm our reputation, and otherwise have an adverse effect on our business, financial condition and results of operations. 36 Table of Contents We necessarily collect, use and hold personal and financial information concerning individuals and businesses with which we have a banking relationship.
Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm our reputation, and otherwise have an adverse effect on our business, financial condition and results of operations. We necessarily collect, use and hold personal and financial information concerning individuals and businesses with which we have a banking relationship.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. 39 Table of Contents We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could require charges to earnings. 37 Table of Contents Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we acquired in connection with the purchase of another financial institution.
If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could require charges to earnings. Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we acquired in connection with the purchase of another financial institution.
As of December 31, 2022, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in our markets and the substantial majority of our secured loans were secured by collateral located in our markets.
As of December 31, 2023, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in our markets and the substantial majority of our secured loans were secured by collateral located in our markets.
Business – Supervision and Regulation – b1BANK – Capital Adequacy Requirements. ” New activities and expansion require regulatory approvals, and failure to obtain them may restrict our growth. From time to time, we may complement and expand our business by pursuing strategic acquisitions of financial institutions and other complementary businesses.
Business – Supervision and Regulation – b1BANK – Capital Adequacy Requirements. ” 34 Table of Contents New activities and expansion require regulatory approvals, and failure to obtain them may restrict our growth. From time to time, we may complement and expand our business by pursuing strategic acquisitions of financial institutions and other complementary businesses.
The geographic concentration of our business in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, imposes risks and may magnify the consequences of any regional or local economic downturn affecting our markets, including any downturn in the real estate sector. 24 Table of Contents We conduct our operations exclusively in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston.
The geographic concentration of our business in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, imposes risks and may magnify the consequences of any regional or local economic downturn affecting our markets, including any downturn in the real estate sector. We conduct our operations exclusively in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston.
As such, shares of our common stock rank junior to all of our outstanding indebtedness, including our outstanding subordinated notes in the amount of $110.7 million, our trust preferred securities of $5.0 million, and to other non-equity claims against us and our assets available to satisfy claims against us, including in our liquidation.
As such, shares of our common stock rank junior to all of our outstanding indebtedness, including our outstanding subordinated notes in the amount of $100.0 million, our trust preferred securities of $5.0 million, and to other non-equity claims against us and our assets available to satisfy claims against us, including in our liquidation.
Any such adjustments are reflected in our results of operations in the periods in which they become known. Following the testing date, management determined no triggering event had occurred through December 31, 2022. As of December 31, 2022, our goodwill totaled $88.5 million.
Any such adjustments are reflected in our results of operations in the periods in which they become known. Following the testing date, management determined no triggering event had occurred through December 31, 2023. As of December 31, 2023, our goodwill totaled $88.4 million.
However, in the recent past, disruptions in the secondary market for residential mortgage loans have limited the market for, and liquidity of, most mortgage loans other than conforming Fannie Mae and Federal Home Loan Mortgage Corporation, or Freddie Mac, loans.
However, in the recent past, disruptions in the secondary market for residential mortgage loans have limited the market for, and liquidity of, most mortgage loans other than conforming Fannie Mae and Federal Home Loan Mortgage Corporation, or Freddie Mac, loans. The effects of these disruptions in the secondary market for residential mortgage loans may reappear.
The Federal Reserve may require us to commit capital resources to support the Bank. Under longstanding Federal Reserve policy which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial and managerial strength to the Bank and to commit resources to support the Bank.
Under longstanding Federal Reserve policy which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial and managerial strength to the Bank and to commit resources to support the Bank.
Business – Supervision and Regulation – Business First Bancshares, Inc. – Regulatory Restrictions on Dividends. ” 44 Table of Contents Our corporate governance documents, and certain corporate and banking laws applicable to us, could make a takeover more difficult.
Business – Supervision and Regulation – Business First Bancshares, Inc. – Regulatory Restrictions on Dividends. ” Our corporate governance documents, and certain corporate and banking laws applicable to us, could make a takeover more difficult.
Our loan portfolio includes owner-occupied and non-owner-occupied commercial real estate loans for individuals and businesses for various purposes, which are secured by commercial properties, as well as real estate acquisition, construction and development loans. As of December 31, 2022, approximately $2.8 billion, or 61.7% of our loan portfolio is secured by commercial real estate.
Our loan portfolio includes owner-occupied and non-owner-occupied commercial real estate loans for individuals and businesses for various purposes, which are secured by commercial properties, as well as real estate acquisition, construction and development loans. As of December 31, 2023, approximately $2.9 billion, or 57.8% of our loan portfolio is secured by commercial and construction real estate.
As of December 31, 2022, we were outside the 300.0% regulatory guideline for commercial real estate, and the 100.0% regulatory guideline for construction, land development, and other land loans due to the timing of draws on several larger construction and development projects.
As of December 31, 2023, we were within the 300.0% regulatory guideline for commercial real estate, as well as the 100.0% regulatory guideline for construction, land development, and other land loans due to the timing of draws on several larger construction and development projects.
As of December 31, 2022, approximately $1.1 billion, or 23.7%, of our total loans were commercial loans to businesses. In general, these loans are collateralized by general business assets, including, among other things, accounts receivable, inventory and equipment and most are backed by a personal guaranty of the borrower or principal.
As of December 31, 2023, approximately $1.4 billion, or 27.2%, of our total loans were commercial loans to businesses. In general, these loans are collateralized by general business assets, including, among other things, accounts receivable, inventory and equipment and most are backed by a personal guaranty of the borrower or principal.
As of December 31, 2022, brokered and wholesale deposits, including reciprocal deposits, comprised 13.1% of our total deposits, and our borrowings comprised 96.5% of our total shareholders’ equity. As a result of the rise in interest rates during 2022, these funding sources have become significantly more expensive than in past years.
As of December 31, 2023, brokered and wholesale deposits, including reciprocal deposits, comprised 20.5% of our total deposits, and our borrowings comprised 98.6% of our total shareholders’ equity. As a result of the rise in interest rates during 2022 and 2023, these funding sources have become significantly more expensive than in past years.
Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. As of December 31, 2022, 31.1% of our earning assets and 68.7% of our interest-bearing liabilities were variable rate.
Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. As of December 31, 2023, 35.5% of our earning assets and 58.7% of our interest-bearing liabilities were variable rate.
As of December 31, 2022, $636.0 million, or approximately 13.2%, of our total deposits consisted of deposit accounts of public bodies, such as state or local municipalities, or public funds. These types of deposits are often secured and typically fluctuate on a seasonal basis due to timing differences between tax collection and expenditures.
As of December 31, 2023, $657.5 million, or approximately 12.5%, of our total deposits consisted of deposit accounts of public bodies, such as state or local municipalities, or public funds. These types of deposits are often secured and typically fluctuate on a seasonal basis due to timing differences between tax collection and expenditures.
The effects of these disruptions in the secondary market for residential mortgage loans may reappear. 32 Table of Contents In addition, because government-sponsored entities like Fannie Mae and Freddie Mac, who account for a substantial portion of the secondary market, are governed by federal law, any future changes in laws that significantly affect the activity of these entities could, in turn, adversely affect our operations.
In addition, because government-sponsored entities like Fannie Mae and Freddie Mac, who account for a substantial portion of the secondary market, are governed by federal law, any future changes in laws that significantly affect the activity of these entities could, in turn, adversely affect our operations.
Our business depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be repaid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure.
As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be repaid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure.
Any future special assessments, increases in assessment rates or premiums, or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could materially and adversely affect our business, financial condition, and results of operations. We are expecting an increase in FDIC insurance premiums in 2023 due to increased regulatory rates.
Any future special assessments, increases in assessment rates or premiums, or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could materially and adversely affect our business, financial condition, and results of operations.
The market value of real estate can fluctuate significantly in a short period of time. As of December 31, 2022, approximately $3.4 billion, or 73.8%, of our total loans were comprised of loans with real estate as a primary or secondary component of collateral.
The market value of real estate can fluctuate significantly in a short period of time. As of December 31, 2023, approximately $3.6 billion, or 71.5%, of our total loans were comprised of loans with real estate as a primary or secondary component of collateral.
Our ability to compete successfully will depend on a number of factors, including, among other things: ● our ability to develop, maintain and build long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; ● our scope, relevance and pricing of products and services offered to meet customer needs and demands; ● the rate at which we introduce new products and services relative to our competitors; ● customer satisfaction with our level of service; ● our ability to expand our market position; ● industry and general economic trends; and ● our ability to keep pace with technological advances and to invest in new technology.
We expect competition to continue to intensify due to financial institution consolidation; legislative, regulatory and technological changes; and the emergence of alternative banking sources. 22 Table of Contents Our ability to compete successfully will depend on a number of factors, including, among other things: ● our ability to develop, maintain and build long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; ● our scope, relevance and pricing of products and services offered to meet customer needs and demands; ● the rate at which we introduce new products and services relative to our competitors; ● customer satisfaction with our level of service; ● our ability to expand our market position; ● industry and general economic trends; and ● our ability to keep pace with technological advances and to invest in new technology.
As of December 31, 2022, we held approximately $1.4 million in other real estate owned (“OREO”) of which $711,000 is related to former bank facilities.
As of December 31, 2023, we held approximately $1.7 million in other real estate owned (“OREO”) of which $279,000 is related to former bank facilities.
As of December 31, 2022, we had $1.3 billion in unfunded credit commitments to our customers.
As of December 31, 2023, we had $1.2 billion in unfunded credit commitments to our customers.
Interest rates increased rapidly during 2022 to levels that we have not experienced in recent history. Interest rates may increase further, or they may remain at current levels for some time. This new interest rate environment could have a number of effects on our business, which may include reduced loan demand, increased delinquencies and increased loan paydowns and payoffs.
Interest rates may increase further, or they may remain at current levels for some time. This new interest rate environment could have a number of effects on our business, which may include reduced loan demand, increased delinquencies and increased loan paydowns and payoffs.
As of December 31, 2022, our average loan size (including unfunded commitments) was approximately $367,000. Further, as of December 31, 2022, our 10 largest borrowing relationships ranged from approximately $31.2 million to $73.7 million (including unfunded commitments) and averaged approximately $4.7 million in total commitments and $3.0 million in principal balance, respectively.
As of December 31, 2023, our average loan size (including unfunded commitments) was approximately $415,000. Further, as of December 31, 2023, our 10 largest borrowing relationships ranged from approximately $35.4 million to $77.6 million (including unfunded commitments) and averaged approximately $4.4 million in total commitments and $3.0 million in principal balance, respectively.
Accordingly, investment securities with unrealized losses may have diminished utility as a source of liquidity prior to maturity. 33 Table of Contents Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity and could, in turn, have an adverse effect on our business, financial condition and results of operations.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity and could, in turn, have an adverse effect on our business, financial condition and results of operations.
If these funding sources become more expensive or difficult to access, our net interest income may decline, our liquidity and ability to make new loans may be impaired, or we may fail to meet regulatory capital requirements, any of which could have an adverse effect on our business, financial condition and results of operations. 34 Table of Contents The fair value of our investment securities can fluctuate due to factors outside of our control.
If these funding sources become more expensive or difficult to access, our net interest income may decline, our liquidity and ability to make new loans may be impaired, or we may fail to meet regulatory capital requirements, any of which could have an adverse effect on our business, financial condition and results of operations.
The determination of the appropriate level of the allowance for loan losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.
Additionally, the allowance incorporates historical industry loss data as part of the estimate. The determination of the appropriate level of the allowance for credit losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.
If we are unable to attract and retain profitable bankers, or if our bankers fail to meet our expectations in terms of customer relationships and profitability, we may be unable to execute our business strategy, which could have an adverse effect on our business, financial condition and results of operations. 26 Table of Contents We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.
If we are unable to attract and retain profitable bankers, or if our bankers fail to meet our expectations in terms of customer relationships and profitability, we may be unable to execute our business strategy, which could have an adverse effect on our business, financial condition and results of operations.
Business – Supervision and Regulation – b1BANK – Capital Adequacy Requirements. ” Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations could have an adverse effect on our business, financial condition, results of operations and prospects. 38 Table of Contents The Board of Governors of the Federal Reserve System, or the Federal Reserve, the Federal Deposit Insurance Corporation, or the FDIC, and the Louisiana Office of Financial Institutions, or the Louisiana OFI, periodically conduct examinations of various aspects of our business, including our compliance with laws and regulations.
Business – Supervision and Regulation – b1BANK – Capital Adequacy Requirements. ” Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations could have an adverse effect on our business, financial condition, results of operations and prospects.
Our articles of incorporation authorize us to issue up to 50,000,000 shares of common stock. As of February 22, 2023, there are 25,110,313 shares of our common stock issued and outstanding.
Our articles of incorporation authorize us to issue up to 50,000,000 shares of common stock. As of February 20, 2024, there are 25,356,393 shares of our common stock issued and outstanding.
We maintain an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio. As of December 31, 2022, our allowance for loan losses totaled $38.2 million, which represents approximately 0.83% of our total loans held for investment.
We maintain an allowance for credit losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio, including unfunded commitments. As of December 31, 2023, our allowance for credit losses totaled $43.7 million, which represents approximately 0.88% of our total loans held for investment.
Further, acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future acquisition, and the carrying amount of any goodwill that we currently maintain or may acquire may be subject to impairment in future periods. 31 Table of Contents Interest rate shifts could have an adverse effect on our business, financial condition, results of operations and growth prospects.
Further, acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future acquisition, and the carrying amount of any goodwill that we currently maintain or may acquire may be subject to impairment in future periods.
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, or at all, which could have an adverse effect on our business, financial condition and results of operations.
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, or at all, which could have an adverse effect on our business, financial condition and results of operations. 23 Table of Contents Our ability to attract and retain profitable bankers is critical to the success of our business strategy, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.
Failure to adequately manage the risks associated with our anticipated growth through de novo branching could have an adverse effect on our business, financial condition and results of operations. 30 Table of Contents We may pursue acquisitions in the future, which could expose us to financial, execution and operational risks that could have an adverse effect on our business, financial condition, results of operations and growth prospects.
We may pursue acquisitions in the future, which could expose us to financial, execution and operational risks that could have an adverse effect on our business, financial condition, results of operations and growth prospects.
Your investment is subject to investment risk, and you must be capable of affording the loss of your entire investment.
Your investment is subject to investment risk, and you must be capable of affording the loss of your entire investment. ITEM 1B. Unresolved Staff Comments. Not applicable.
Management has implemented controls to monitor our commercial real estate lending concentrations, but we cannot predict the extent to which this guidance will impact our operations or capital requirements.
Management has implemented controls to monitor our commercial real estate lending concentrations as well as the progress of commercial real estate construction projects with loans exceeding $1.0 million, but we cannot predict the extent to which this guidance will impact our operations or capital requirements.
We utilize alternative sources of funding, which may become more expensive or may not be available in the future, which could have an adverse effect on our business, financial condition and results of operations.
If we fail to maintain capital to meet regulatory requirements, we could be subject to enforcement actions, which could have an adverse effect on our business, financial condition and results of operations. 30 Table of Contents We utilize alternative sources of funding, which may become more expensive or may not be available in the future, which could have an adverse effect on our business, financial condition and results of operations.
Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.
Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets. 28 Table of Contents The markets in which we operate are susceptible to hurricanes and other natural disasters and adverse weather, which could result in a disruption of our operations and increases in credit losses.
The level of the allowance reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral.
The level of the allowance reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral. The allowance also incorporates our current views on our current risk management practices, which may change in the future.
Selling securities with an unrealized loss would result in the realization of such losses, which would negatively impact regulatory capital, among other effects.
Selling securities with an unrealized loss would result in the realization of such losses, which would negatively impact regulatory capital, among other effects. Accordingly, investment securities with unrealized losses may have diminished utility as a source of liquidity prior to maturity.
A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs, and reputational damage, any of which could have an adverse effect on our business, results of operations, financial condition and future prospects.
Our systems and those of our third party vendors may also become vulnerable to damage or disruption due to circumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters, network failures, and viruses and malware. 32 Table of Contents A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs, and reputational damage, any of which could have an adverse effect on our business, results of operations, financial condition, and future prospects.
If customers move money out of bank deposits and into other investments such as money market funds, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
If customers move money out of bank deposits and into other investments such as money market funds, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income. 29 Table of Contents Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities, and proceeds from the issuance and sale of our equity and debt securities to investors.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. 35 Table of Contents Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expense associated with the foreclosure process or prevent us from foreclosing at all.
The expanding body of federal, state and local regulations and/or the licensing of loan collections or other aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance and subject us to litigation. 40 Table of Contents Loan collection is subject to extensive regulation by federal, state and local governmental authorities as well as to various laws and judicial and administrative decisions imposing requirements and restrictions on those activities.
The expanding body of federal, state and local regulations and/or the licensing of loan collections or other aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance and subject us to litigation.
The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates.
Interest rate shifts could have an adverse effect on our business, financial condition, results of operations and growth prospects. The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates.
As of December 31, 2022, the fair value of our investment securities portfolio was approximately $890.8 million, which included a net unrealized loss of approximately $94.8 million. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
The fair value of our investment securities can fluctuate due to factors outside of our control. As of December 31, 2023, the fair value of our investment securities portfolio was approximately $879.6 million, which included a net unrealized loss of approximately $84.4 million.
Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, we could be subject to enforcement actions, which could have an adverse effect on our business, financial condition and results of operations.
Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us.
Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. We expect competition to continue to intensify due to financial institution consolidation; legislative, regulatory and technological changes; and the emergence of alternative banking sources.
Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures.
For example, fixed-rate securities are generally subject to decreases in market value when interest rates rise. The Federal Open Market Committee raised the target federal funds rate several times in 2022 and is expected to continue raising the rates in 2023.
The Federal Open Market Committee raised the target federal funds rate several times in 2022 and 2023.
Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities, and proceeds from the issuance and sale of our equity and debt securities to investors. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank (“FRB”) of Atlanta and the FHLB of Dallas.
Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank (“FRB”) of Atlanta and the FHLB of Dallas. We also borrow funds from third-party lenders, such as other financial institutions.
If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition, results of operations, and capital.
Moreover, the CECL model is heavily dependent on macroeconomic forecasts, with changes in those forecasts potentially requiring material increases to our level of allowance for credit losses which could adversely affect our business, financial condition, results of operations, and capital.
Our ability to attract and retain profitable bankers is critical to the success of our business strategy, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.
Failure to adequately manage the risks associated with our anticipated growth through de novo branching could have an adverse effect on our business, financial condition and results of operations.
Removed
Accordingly, the CECL model could require financial institutions like the Bank to increase their allowances for credit losses. Moreover, the CECL model likely would create more volatility in our level of allowance for credit losses.
Added
We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses. Our business depends on our ability to successfully measure and manage credit risk.
Removed
Our interest sensitivity profile was asset sensitive as of December 31, 2022, meaning that we estimate our net interest income would increase more from rising interest rates than from falling interest rates; however, customer and market responses to a changing interest rate environment are highly uncertain and there is no guarantee that our net interest income would increase if interest rates rise.
Added
As of December 31, 2023, our modeled interest sensitivity was close to neutral, but slightly asset sensitive. Should the assumptions in the model occur, we estimate our net interest income to experience a minor increase if rates rise, and a minor decrease if rates decline.
Removed
The markets in which we operate are susceptible to hurricanes and other natural disasters and adverse weather, which could result in a disruption of our operations and increases in loan losses.
Added
However, it is likely that customer and market responses would differ from those in the model, and there is no guarantee that actual results will match modeled results. Interest rates increased rapidly during 2022 and 2023 to levels that we have not experienced in recent history.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed4 unchanged
Biggest changeMine Safety Disclosures. Not applicable. 47 Table of Contents PART I
Biggest changeMine Safety Disclosures. Not applicable. 41 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+0 added−4 removed12 unchanged
Biggest changeDate BFST S&P 500 KRX 4/11/2018 $ 100.00 $ 100.00 $ 100.00 6/30/2018 104.65 102.88 102.39 9/30/2018 105.78 107.20 97.20 12/31/2018 96.83 86.03 80.78 3/31/2019 98.39 113.07 108.63 6/30/2019 102.45 103.79 103.18 9/30/2019 98.65 101.19 98.60 12/31/2019 101.20 108.53 108.91 3/31/2020 55.01 80.00 59.12 6/30/2020 63.11 119.95 113.42 9/30/2020 62.10 108.47 88.85 12/31/2020 84.74 111.69 147.55 3/31/2021 100.05 105.77 128.87 6/30/2021 96.60 108.17 97.98 9/30/2021 99.75 100.23 102.54 12/31/2021 120.06 110.65 102.87 3/31/2022 103.66 95.05 97.25 6/30/2022 91.29 83.55 87.37 9/30/2022 92.69 94.72 103.22 12/31/2022 95.79 107.08 103.24 50 Table of Contents ITEM 6.
Biggest changeThe historical stock price performance for our common stock shown on the graph below is not necessarily indicative of future stock performance. 43 Table of Contents Date BFST S&P 500 KRX 12/31/2018 $ 100.00 $ 100.00 $ 100.00 3/31/2019 101.61 113.65 109.35 6/30/2019 105.79 118.54 113.62 9/30/2019 101.84 120.55 112.87 12/31/2019 104.47 131.49 123.81 3/31/2020 56.99 105.72 73.82 6/30/2020 65.22 127.44 84.57 9/30/2020 64.16 138.81 75.90 12/31/2020 87.52 155.68 113.03 3/31/2021 103.29 165.29 146.61 6/30/2021 99.58 179.42 144.53 9/30/2021 102.01 180.47 149.17 12/31/2021 123.99 200.37 154.45 3/31/2022 107.09 191.15 151.08 6/30/2022 94.32 160.37 132.98 9/30/2022 95.83 152.54 138.21 12/31/2022 99.08 164.08 143.75 3/31/2023 77.19 176.38 117.94 6/30/2023 68.45 191.80 111.16 9/30/2023 85.76 185.52 113.81 12/31/2023 113.32 207.21 143.17 ITEM 6.
A discussion regarding significant changes in the financial condition of Business First and its subsidiaries from December 31, 2020 to December 31, 2021 and its results of operations for the year ended December 31, 2021 can be found under “
A discussion regarding significant changes in the financial condition of Business First and its subsidiaries from December 31, 2021 to December 31, 2022 and its results of operations for the year ended December 31, 2022 can be found under “
The following discussion and analysis is to focus on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2021 to December 31, 2022 and its results of operations for the year ended December 31, 2022.
The following discussion and analysis is to focus on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2022 to December 31, 2023 and its results of operations for the year ended December 31, 2023.
The following table summarizes information as of December 31, 2022 relating to the number of securities to be issued upon the exercise of the outstanding options and warrants and their weighted-average exercise price.
The following table summarizes information as of December 31, 2023 relating to the number of securities to be issued upon the exercise of the outstanding options and warrants and their weighted-average exercise price.
Although our 2006 Stock Option Plan expired on December 22, 2016 and we are no longer permitted to issue additional stock options under this plan, as of December 31, 2022, we had 130,924 outstanding and unexercised stock options that have been issued to our executive officers and key personnel and remain subject to the terms and conditions of the 2006 Stock Option Plan until they are exercised or forfeited.
Although our 2006 Stock Option Plan expired on December 22, 2016 and we are no longer permitted to issue additional stock options under this plan, as of December 31, 2023, we had 120,608 outstanding and unexercised stock options that have been issued to our executive officers and key personnel and remain subject to the terms and conditions of the 2006 Stock Option Plan until they are exercised or forfeited.
The Plan has reserved 1,043,908 shares of common stock for grant, award or issuance to eligible participants, all of which may be subject to incentive stock option treatment. As of December 31, 2022, there were 572,588 common shares issued under this Plan to our employees, directors or consultants.
The Plan has reserved 1,043,908 shares of common stock for grant, award or issuance to eligible participants, all of which may be subject to incentive stock option treatment. As of December 31, 2023, there were 745,620 common shares issued under this Plan to our employees, directors or consultants.
This 2020 stock repurchase program was effective until December 31, 2021. The 2020 stock repurchase program did not obligate the Company to repurchase any shares of its common stock.
This 2023 stock repurchase program was effective until December 31, 2023. The 2023 stock repurchase program did not obligate the Company to repurchase any shares of its common stock. The Company did not repurchase any shares under this plan.
The following assumes $100 invested on April 11, 2018 in our common stock at the closing price of $25.02 per common share, otherwise reflects our stock and the S&P 500 and KRX values as of close of trading, and assumes the reinvestment of dividends, if any.
The following assumes $100 invested on January 1, 2019 in our common stock at the closing price of $24.23 per common share, otherwise reflects our stock and the S&P 500 and KRX values as of close of trading, and assumes the reinvestment of dividends, if any.
Prior to that date, there was no public trading market for our common stock. As of February 22, 2023, there were 25,110,313 issued and outstanding shares of our common stock held of record by approximately 997 shareholders. We also had outstanding 130,924 options to purchase shares of our common stock issued under our equity compensation plans, as described below.
Prior to that date, there was no public trading market for our common stock. As of February 20, 2024, there were 25,356,393 issued and outstanding shares of our common stock held of record by approximately 937 shareholders. We also had outstanding 120,608 options to purchase shares of our common stock issued under our equity compensation plans, as described below.
The Company repurchased 520,845 shares for $11.7 million under the 2020 stock repurchase program between October 22, 2020 and December 31, 2021. 49 Table of Contents Stock Performance Graph The following table and graph compares the cumulative total shareholder return on our common stock to the cumulative total return of the S&P 500 Index and the KBW Nasdaq Regional Bank Index (“KRX”) for the period beginning on April 11, 2018, the first day of trading of our common stock on the Nasdaq Global Select Market, through December 31, 2022.
Stock Performance Graph The following table and graph compares the cumulative total shareholder return on our common stock to the cumulative total return of the S&P 500 Index and the KBW Nasdaq Regional Bank Index (“KRX”) for the period beginning on January 1, 2019 through December 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers On October 22, 2020, the Company’s board of directors approved a resolution authorizing management to repurchase shares of its common stock with an aggregate purchase price of up to $30.0 million from time to time, subject to certain limitations and conditions.
Number of Securities to Be Issued Upon Exercise of Outstanding Options Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans Equity compensations plans approved by security holders 120,608 $ 18.59 298,288 Equity compensation plans not approved by security holders — — — Total equity compensation plans 120,608 $ 18.59 298,288 42 Table of Contents Recent Sales of Unregistered Securities None Purchases of Equity Securities by the Issuer and Affiliated Purchasers On May 23, 2023, the Company’s board of directors approved a resolution authorizing management to repurchase shares of its common stock with an aggregate purchase price of up to $30.0 million from time to time, subject to certain limitations and conditions.
Removed
Number of Securities to Be Issued Upon Exercise of Outstanding Options Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans Equity compensations plans approved by security holders 130,924 $ 18.59 471,320 Equity compensation plans not approved by security holders — — — Total equity compensation plans 130,924 $ 18.59 471,320 48 Table of Contents Recent Sales of Unregistered Securities Preferred Stock On September 1, 2022, we entered into a securities purchase agreement with certain investors pursuant to which we offered and sold shares of its 7.50% fixed-to-floating rate non-cumulative perpetual preferred stock, with no par value, for an aggregate purchase price of $72.0 million.
Removed
Holders of the preferred stock will be entitled to receive, if, when, and as declared by our board of directors, non-cumulative cash dividends at a rate of 7.50% per share for the first five years following issuance and thereafter at a variable rate equal to the then current 3-month secured overnight financing rate (“SOFR”), reset quarterly, plus 470 basis points.
Removed
The preferred stock has a perpetual term and may not be redeemed, except under certain circumstances, under the first five years of issuance. The preferred stock is non-convertible and dividends equivalent to $18.75 per share were paid during the year ended December 31, 2022.
Removed
The historical stock price performance for our common stock shown on the graph below is not necessarily indicative of future stock performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCore net income available to common shareholders for the year ended December 31, 2022 included adjustment for $48,000 in losses on sales of securities, $687,000 in insurance reimbursements from storm expenditures, the incurrence of $717,000 in losses attributed to former bank premises and equipment, $5.2 million in acquisition-related expenses and $501,000 million in hurricane repair expenses compared to $378,000 in gains on the sales of securities, a $492,000 gain on the sale of the Oak Grove Banking Center, the incurrence of $1.0 million in losses attributed to former bank premises and equipment, $515,000 in acquisition-related expenses, and $1.6 million in hurricane repair expenses for the year ended December 31, 2021. 81 Table of Contents For the Years Ended December 31, 2022 2021 2020 (Dollars in thousands, except per share data) (Unaudited) Interest Income: Interest income $ 236,114 $ 170,438 $ 149,755 Core interest income 236,114 170,438 149,755 Interest Expense: Interest expense 36,537 16,554 22,109 Core interest expense 36,537 16,554 22,109 Provision for Loan Losses: Provision for loan losses 10,886 8,047 11,435 Core provision expense 10,886 8,047 11,435 Other Income: Other income 29,310 35,782 21,564 Losses on former bank premises and equipment 717 1,010 351 (Gains) losses on sale of securities 48 (378 ) (135 ) Gain on sale of branch - (492 ) - Insurance reimbursement of storm expenditures (687 ) - - Core other income 29,388 35,922 21,780 Other Expense: Other expense 149,409 117,061 100,993 Acquisition-related expenses (2) (5,178 ) (515 ) (9,559 ) Stock option exercises - excess taxes (founder's grants) - - (71 ) Occupancy and bank premises - hurricane repair (501 ) (1,556 ) - Core other expense 143,730 114,990 91,363 Pre-Tax Income: Pre-tax income 68,592 64,558 36,782 Losses on former bank premises and equipment 717 1,010 351 (Gains) losses on sale of securities 48 (378 ) (135 ) Gain on sale of branch - (492 ) - Insurance reimbursement of storm expenditures (687 ) - - Acquisition-related expenses (2) 5,178 515 9,559 Stock option exercises - excess taxes (founder's grants) - - 71 Occupancy and bank premises - hurricane repair 501 1,556 - Core pre-tax income 74,349 66,769 46,628 Provision for Income Taxes: (1) Provision for income taxes 14,337 12,422 6,788 Tax on losses on former bank premises and equipment 151 211 74 Tax on (gains) losses on sale of securities 10 (79 ) (28 ) Tax on gain on sale of branch - (138 ) - Tax on insurance reimbursement of storm expenditures (144 ) - - Tax on acquisition-related expenses (2) 942 108 1,727 Tax on stock option exercises - excess taxes (founder's grants) - - 601 Tax on occupancy and bank premises - hurricane repair 106 326 Core provision for income taxes 15,402 12,850 9,162 Preferred Dividends Preferred dividends 1,350 - - Core preferred dividends 1,350 - - Net Income Available to Common Shareholders: Net income available to common shareholders 52,905 52,136 29,994 Losses on former bank premises and equipment , net of tax 566 799 277 (Gains) losses on sale of securities, net of tax 38 (299 ) (107 ) Gain on sale of branch, net of tax - (354 ) - Insurance reimbursement of storm expenditures, net of tax (543 ) - - Acquisition-related expenses (2), net of tax 4,236 407 7,832 Stock option exercises - excess taxes (founder's grants), net of tax - - (530 ) Occupancy and bank premises - hurricane repair, net of tax 395 1,230 - Core net income available to common shareholders $ 57,597 $ 53,919 $ 37,466 Diluted Earnings Per Common Share: Diluted earnings per common share $ 2.32 $ 2.53 $ 1.64 Losses on former bank premises and equipment , net of tax 0.02 0.04 0.02 (Gains) losses on sale of securities, net of tax - (0.02 ) (0.01 ) Gain on sale of branch, net of tax - (0.02 ) - Insurance reimbursement of storm expenditures, net of tax (0.02 ) - - Acquisition-related expenses (2), net of tax 0.18 0.02 0.43 Stock option exercises - excess taxes (founder's grants), net of tax - - (0.03 ) Occupancy and bank premises - hurricane repair, net of tax 0.02 0.06 - Core diluted earnings per common share $ 2.52 $ 2.61 $ 2.05 (1) Tax rates, exclusive of certain nondeductible acquisition-related expenses and goodwill, utilized were 21% for both 2022 and 2021.
Biggest changeCore net income available to common shareholders for the year ended December 31, 2023 included an adjustment for $2.5 million in losses on sales of securities, $945,000 in a gain on the sale of our Leesville, Louisiana banking center, $1.5 million in a gain on the extinguishment of debt associated with the TCBI acquisition in 2022, which was attributed to the $8.9 million subordinated debt redemption, $236,000 in acquisition-related expenses, and a $432,000 write-down on former bank premises, compared to $48,000 in losses on the sales of securities, $687,000 in insurance reimbursements from storm expenditures, the incurrence of $717,000 in losses attributed to former bank premises and equipment, $5.2 million in acquisition-related expenses and $501,000 million in hurricane repair expenses for the year ended December 31, 2022. 72 Table of Contents For the Years Ended December 31, 2023 2022 2021 (Dollars in thousands, except per share data) (Unaudited) Interest Income: Interest income $ 353,327 $ 236,114 $ 170,438 Core interest income 353,327 236,114 170,438 Interest Expense: Interest expense 138,198 36,537 16,554 Core interest expense 138,198 36,537 16,554 Provision for Credit Losses: Provision for credit losses 4,483 10,886 8,047 Core provision expense 4,483 10,886 8,047 Other Income: Other income 36,642 29,310 35,782 Losses on former bank premises and equipment - 717 1,010 (Gains) losses on sale of securities 2,565 48 (378 ) Insurance reimbursement of storm expenditures - (687 ) - Gain on sale of branch (945 ) - (492 ) Gain on extinguishment of debt (1,458 ) - - Core other income 36,804 29,388 35,922 Other Expense: Other expense 156,702 149,409 117,061 Acquisition-related expenses (2) (236 ) (5,178 ) (515 ) Write-down of former bank premises (432 ) - - Occupancy and bank premises - storm repair - (501 ) (1,556 ) Core other expense 156,034 143,730 114,990 Pre-Tax Income: Pre-tax income 90,586 68,592 64,558 Losses on former bank premises and equipment - 717 1,010 (Gains) losses on sale of securities 2,565 48 (378 ) Insurance reimbursement of storm expenditures - (687 ) - Gain on sale of branch (945 ) - (492 ) Gain on extinguishment of debt (1,458 ) - - Acquisition-related expenses (2) 236 5,178 515 Write-down of former bank premises 432 - - Occupancy and bank premises - storm repair - 501 1,556 Core pre-tax income 91,416 74,349 66,769 Provision for Income Taxes: (1) Provision for income taxes 19,543 14,337 12,422 Tax on losses on former bank premises and equipment - 151 211 Tax on (gains) losses on sale of securities 542 10 (79 ) Tax on insurance reimbursement of storm expenditures - (144 ) - Tax on gain on sale of branch (200 ) - (138 ) Tax on gain on extinguishment of debt (308 ) - - Tax on acquisition-related expenses (2) 21 942 108 Tax on write-down of former bank premises 91 - - Tax on occupancy and bank premises - storm repair - 106 326 Core provision for income taxes 19,689 15,402 12,850 Preferred Dividends Preferred dividends 5,401 1,350 - Core preferred dividends 5,401 1,350 - Net Income Available to Common Shareholders: Net income available to common shareholders 65,642 52,905 52,136 Losses on former bank premises and equipment , net of tax - 566 799 (Gains) losses on sale of securities, net of tax 2,023 38 (299 ) Insurance reimbursement of storm expenditures, net of tax - (543 ) - Gain on sale of branch, net of tax (745 ) - (354 ) Gain on extinguishment of debt, net of tax (1,150 ) - - Acquisition-related expenses (2), net of tax 215 4,236 407 Write-down of former bank premises, net of tax 341 - - Occupancy and bank premises - storm repair, net of tax - 395 1,230 Core net income available to common shareholders $ 66,326 $ 57,597 $ 53,919 Diluted Earnings Per Common Share: Diluted earnings per common share $ 2.59 $ 2.32 $ 2.53 Losses on former bank premises and equipment , net of tax - 0.02 0.04 (Gains) losses on sale of securities, net of tax 0.08 - (0.02 ) Insurance reimbursement of storm expenditures, net of tax - (0.02 ) - Gain on sale of branch, net of tax (0.03 ) - (0.02 ) Gain on extinguishment of debt, net of tax (0.04 ) - - Acquisition-related expenses (2), net of tax 0.01 0.18 0.02 Write-down of former bank premises, net of tax 0.01 - - Occupancy and bank premises - storm repair, net of tax - 0.02 0.06 Core diluted earnings per common share $ 2.62 $ 2.52 $ 2.61 (1) Tax rates, exclusive of certain nondeductible acquisition-related expenses and goodwill, utilized were 21% for both 2023 and 2022.
The preferred stock was structured to qualify as additional Tier 1 capital under applicable regulatory capital guidelines.
The preferred stock was structured to qualify as additional Tier 1 capital under applicable regulatory capital guidelines.
Tangible Common Equity to Tangible Assets . Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate tangible common equity, as described above, and tangible assets as total assets less goodwill, core deposit and customer intangible assets, net of accumulated amortization.
Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate tangible common equity, as described above, and tangible assets as total assets less goodwill, core deposit and customer intangible assets, net of accumulated amortization.
Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets. Our exposure to interest rate risk is managed by the asset-liability committee of b1BANK, in accordance with policies approved by our board of directors.
Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets. Our exposure to interest rate risk is managed by the asset-liability committee (“ALCO”) of b1BANK, in accordance with policies approved by our board of directors.
The allocation of the allowance for loan losses as shown in the table should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily occur in these amounts or in the indicated proportions. The total allowance is available to absorb losses from any loan category.
The allocation of the allowance for credit losses as shown in the table should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily occur in these amounts or in the indicated proportions. The total allowance is available to absorb losses from any loan category.
The balance of the allowance for loan losses is based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan 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 discussion of our methodology, please refer to “— Critical Accounting Estimates — Allowance for Loan Losses. ” In connection with our review of the loan portfolio, we consider risk elements attributable to particular loan types or categories in assessing the quality of individual loans.
For additional discussion of our methodology, please refer to “— Critical Accounting Estimates — Allowance for Credit Losses. ” In connection with our review of the loan portfolio, we consider risk elements attributable to particular loan types or categories in assessing the quality of individual loans.
If we experience economic declines, or if asset quality deteriorates, material additional provisions could be required. The following table shows the allocation of the allowance for loan losses among loan categories and certain other information as of the dates indicated.
If we experience economic declines or if asset quality deteriorates, material additional provisions could be required. The following table shows the allocation of the allowance for credit losses among loan categories and certain other information as of the dates indicated.
These rates approximate the marginal tax rates for the applicable periods. (2) Includes merger and conversion-related expenses and salary and employee benefits. 82 Table of Contents Tangible Book Value Per Common Share. Tangible book value per common share is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions.
These rates approximate the marginal tax rates for the applicable periods. (2) Includes merger and conversion-related expenses and salary and employee benefits. 73 Table of Contents Tangible Book Value Per Common Share. Tangible book value per common share is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions.
As of December 31, 2022 and December 31, 2021, 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.
As of December 31, 2023 and December 31, 2022, 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.
For the years ended December 31, 2022, 2021 and 2020, interest income not recognized on nonaccrual loans was not material. Any nonaccrual loans have been included in the table as loans carrying a zero yield. The average total loans reflected below is net of deferred loan fees and discounts.
For the years ended December 31, 2023, 2022 and 2021, interest income not recognized on nonaccrual loans was not material. Any nonaccrual loans have been included in the table as loans carrying a zero yield. The average total loans reflected below is net of deferred loan fees and discounts.
(2) Net interest margin is equal to net interest income divided by average interest-earning assets. 55 Table of Contents The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities, and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates.
(2) Net interest margin is equal to net interest income divided by average interest-earning assets. 48 Table of Contents The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities, and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates.
Contractual Obligations The following tables summarize contractual obligations and other commitments to make future payments as of December 31, 2022 and 2021 (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.
Contractual Obligations The following tables summarize contractual obligations and other commitments to make future payments as of December 31, 2023 and 2022 (other than non-maturity deposit obligations), which consist of future cash payments associated with our contractual obligations pursuant to our FHLB advances, subordinated debt, revolving line of credit, and non-cancelable future operating leases.
In December 2018 we issued subordinated notes in the amount of $25.0 million. The subordinated notes bear a fixed rate of interest at 6.75% until December 31, 2028 and a floating rate thereafter through maturity in 2033. The balance outstanding at both December 31, 2022 and 2021 was $25.0 million.
In December 2018 we issued subordinated notes in the amount of $25.0 million. The subordinated notes bear a fixed rate of interest at 6.75% until December 31, 2028 and a floating rate thereafter through maturity in 2033. The balance outstanding at both December 31, 2023 and 2022 was $25.0 million.
In addition, we use short-term borrowings to periodically repurchase outstanding shares of our common stock and for general corporate purposes. Each of these relationships are discussed below. 71 Table of Contents FHLB advances . The FHLB allows us to borrow on a blanket floating lien status collateralized by certain securities and loans.
In addition, we use short-term borrowings to periodically repurchase outstanding shares of our common stock and for general corporate purposes. Each of these relationships are discussed below. FHLB advances . The FHLB allows us to borrow on a blanket floating lien status collateralized by certain securities and loans.
As of December 31, 2022 and 2021, we did not own securities of any one issuer for which aggregate adjusted cost exceeded 10% of the consolidated shareholders’ equity as of such respective dates.
As of December 31, 2023 and 2022, we did not own securities of any one issuer for which aggregate adjusted cost exceeded 10% of the consolidated shareholders’ equity as of such respective dates.
However, other operating expenses do reflect general levels of inflation. 80 Table of Contents Non-GAAP Financial Measures Our accounting and reporting policies conform to GAAP, and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional non-GAAP financial measures.
However, other operating expenses do reflect general levels of inflation. Non-GAAP Financial Measures Our accounting and reporting policies conform to GAAP, and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional non-GAAP financial measures.
In determining the allowance for loan losses, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined.
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.
There were no funds under these lines of credit outstanding as of December 31, 2021. 74 Table of Contents The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the period indicated.
There were no funds under these lines of credit outstanding as of December 31, 2023. 66 Table of Contents The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the period indicated.
As of December 31, 2022 and 2021, the Company held other equity securities of $37.5 million and $16.6 million, respectively, comprised mainly of FHLB stock, SBIC’s and financial technology (“Fintech”) fund investments. Deposits We offer a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts.
As of December 31, 2023 and 2022, the Company held other equity securities of $33.9 million and $37.5 million, respectively, comprised mainly of FHLB stock, SBIC’s and financial technology (“Fintech”) fund investments. Deposits We offer a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts.
Principal and interest payments on the junior subordinated debentures are in a superior position to the liquidation rights of holders of common stock. 73 Table of Contents Federal Funds Purchased Lines of Credit Relationships We maintain Federal Funds Purchased Lines of Credit Relationships with the following correspondent banks and limits as of December 31, 2022: Fed Funds Purchase Limits (Dollars in thousands) TIB National Association $ 45,000 PNC Bank 38,000 FNBB 35,000 First Horizon Bank 17,000 ServisFirst Bank 10,000 South State Bank 9,000 Total $ 154,000 The following table represents combined Federal Funds Purchased Lines of Credit for all relationships at the dates indicated.
Principal and interest payments on the junior subordinated debentures are in a superior position to the liquidation rights of holders of common stock. 65 Table of Contents Federal Funds Purchased Lines of Credit Relationships We maintain Federal Funds Purchased Lines of Credit Relationships with the following correspondent banks and limits as of December 31, 2023: Fed Funds Purchase Limits (Dollars in thousands) TIB National Association $ 45,000 PNC Bank 38,000 FNBB 35,000 First Horizon Bank 17,000 ServisFirst Bank 10,000 Total $ 145,000 The following table represents combined Federal Funds Purchased Lines of Credit for all relationships at the dates indicated.
The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in each credit.
Loans classified as loss are charged-off. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in each credit.
The dividend was paid on February 28, 2023. On January 25, 2023, our board of directors declared a quarterly dividend in the amount of $18.75 per preferred share to the preferred shareholders of record as of February 15, 2023. The dividend was paid on February 28, 2023.
On January 23, 2024, our board of directors declared a quarterly dividend in the amount of $18.75 per preferred share to the preferred shareholders of record as of February 15, 2024. The dividend was paid on February 28, 2024.
Fed Funds Purchased (Dollars in Thousands) December 31, 2022 Amount outstanding at year-end $ 14,057 Weighted average stated interest rate at year-end 4.50 Maximum month-end balance during the year $ 14,057 Average balance outstanding during the year $ 1,970 Weighted average interest rate during the year 1.06 % December 31, 2021 Amount outstanding at year-end $ - Weighted average stated interest rate at year-end - % Maximum month-end balance during the year $ 16,087 Average balance outstanding during the year $ 94 Weighted average interest rate during the year 0.89 % Liquidity and Capital Resources Liquidity Liquidity involves our ability to utilize funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events.
Fed Funds Purchased (Dollars in Thousands) December 31, 2023 Amount outstanding at year-end $ - Weighted average stated interest rate at year-end 0.00 % Maximum month-end balance during the year $ 14,622 Average balance outstanding during the year $ 474 Weighted average interest rate during the year 1.96 % December 31, 2022 Amount outstanding at year-end $ 14,057 Weighted average stated interest rate at year-end 4.50 % Maximum month-end balance during the year $ 14,057 Average balance outstanding during the year $ 1,970 Weighted average interest rate during the year 1.06 % Liquidity and Capital Resources Liquidity Liquidity involves our ability to utilize funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events.
We believe our conservative lending approach and focused management of nonperforming assets has resulted in sound asset quality and the timely resolution of problem assets. We had $12.8 million and $14.5 million in nonperforming assets as of December 31, 2022 and 2021, respectively.
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 $18.8 million and $12.8 million in nonperforming assets as of December 31, 2023 and 2022, respectively.
In May 2022, we utilized the full amount of this line of $5.0 million. This line of credit carried a variable interest rate equal to the Wall Street Journal Prime rate not to be less than 3.50%. This line of credit was paid in full, and not renewed, in November 2022. FNBB note payable .
In May 2022, we utilized the full amount of this line of $5.0 million. This line of credit carried a variable interest rate equal to the Wall Street Journal Prime rate not to be less than 3.50%. This line of credit was paid in full, and not renewed, in November 2022. Trust preferred securities .
As of December 31, 2022, we had outstanding $1.3 billion in commitments to extend credit and $45.6 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2021, we had outstanding $1.0 billion in commitments to extend credit and $35.3 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. As of December 31, 2022, we had outstanding $1.3 billion in commitments to extend credit and $45.6 million in commitments associated with outstanding standby and commercial letters of credit.
The average rate paid on total interest-bearing deposits increased over this period from 0.47% for the year ended December 31, 2021 to 0.81% for the year ended December 31, 2022. The increase in average rates was driven by the federal reserve raising interest rates during the year ended December 31, 2022.
The average rate paid on total interest-bearing deposits increased over this period from 0.81% for the year ended December 31, 2022 to 3.00% for the year ended December 31, 2023. The increase in average rates was driven by the federal reserve raising interest rates during the years ended December 31, 2023 and 2022.
Payments related to leases are based on actual payments specified in underlying contracts. Advances from the FHLB totaled approximately $410.1 million and $82.0 million as of December 31, 2022 and 2021, respectively.
Payments related to leases are based on actual payments specified in underlying contracts. Advances from the FHLB totaled approximately $211.2 million and $410.1 million as of December 31, 2023 and 2022, respectively.
Additionally, $304,000 and $1.2 million in mortgage loans were classified as loans held for sale as of December 31, 2022 and 2021, respectively. Total loans held for investment as a percentage of deposits were 95.6% and 78.2% as of December 31, 2022 and 2021, respectively.
Additionally, $835,000 and $304,000 in mortgage loans were classified as loans held for sale as of December 31, 2023 and 2022, respectively. Total loans held for investment as a percentage of deposits were 95.1% and 95.6% as of December 31, 2023 and 2022, respectively.
We rely primarily on competitive pricing policies, convenient locations and personalized service to attract and retain these deposits. Total deposits as of December 31, 2022 were $4.8 billion, an increase of $743.1 million, or 18.2%, compared to $4.1 billion as of December 31, 2021.
We rely primarily on competitive pricing policies, convenient locations and personalized service to attract and retain these deposits. Total deposits as of December 31, 2023 were $5.2 billion, an increase of $428.4 million, or 8.9%, compared to $4.8 billion as of December 31, 2022.
For a description of the factors taken into account by management in determining the allowance for loan losses see “— Financial Condition — Allowance for Loan Losses .” The provision for loan losses was $10.9 million and $8.0 million for the years ended December 31, 2022 and 2021, respectively.
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 $4.5 million and $10.9 million for the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2022, overall cost of funds (which includes noninterest-bearing deposits) increased 32 basis points compared to the year ended December 31, 2021, primarily due to the federal reserve increasing rates during 2022. 54 Table of Contents The following table presents, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts.
For the year ended December 31, 2023, overall cost of funds (which includes noninterest-bearing deposits) increased 169 basis points compared to the year ended December 31, 2022, primarily due to the federal reserve continuing to increase rates during the first part of 2023 and full impact of the 2022 increases. 47 Table of Contents The following table presents, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts.
For the Years Ended December 31, 2022 2021 Source of Funds: Deposits: Noninterest-bearing 28.1 % 27.2 % Interest-bearing 55.0 59.2 Subordinated debt (excluding trust preferred securities) 1.9 1.5 Advances from FHLB 4.9 1.1 Other borrowings 0.6 0.7 Other liabilities 0.7 0.6 Shareholders' equity 8.8 9.7 Total 100.0 % 100.0 % Uses of Funds: Loans, net of allowance for loan losses 72.9 % 68.4 % Securities available for sale 17.5 19.7 Interest-bearing deposits in other banks 2.1 2.4 Other noninterest-earning assets 7.5 9.5 Total 100.0 % 100.0 % Average noninterest-bearing deposits to average deposits 33.9 % 31.5 % Average loans to average deposits 88.4 79.9 Our primary source of funds is deposits, and our primary use of funds is loans.
For the Years Ended December 31, 2023 2022 Source of Funds: Deposits: Noninterest-bearing 22.3 % 28.1 % Interest-bearing 56.2 55.0 Subordinated debt (excluding trust preferred securities) 1.7 1.9 Advances from FHLB 5.2 4.9 Other borrowings 0.4 0.6 Bank Term Funding Program 4.0 - Other liabilities 0.7 0.7 Shareholders' equity 9.5 8.8 Total 100.0 % 100.0 % Uses of Funds: Loans, net of allowance for loan losses 76.0 % 72.9 % Securities available for sale 14.2 17.5 Interest-bearing deposits in other banks 2.8 2.1 Other noninterest-earning assets 7.0 7.5 Total 100.0 % 100.0 % Average noninterest-bearing deposits to average deposits 28.4 % 33.9 % Average loans to average deposits 97.6 88.4 Our primary source of funds is deposits, and our primary use of funds is loans.
Results of Operations for the Years Ended December 31, 2022 and 2021 Performance Summary For the year ended December 31, 2022, net income available to common shareholders was $52.9 million, or $2.34 per basic common share and $2.32 per diluted common share, compared to net income available to common shareholders of $52.1 million, or $2.54 per basic common share and $2.53 per diluted common share, for the year ended December 31, 2021.
Results of Operations for the Years Ended December 31, 2023 and 2022 Performance Summary For the year ended December 31, 2023, net income available to common shareholders was $65.6 million, or $2.62 per basic common share and $2.59 per diluted common share, compared to net income available to common shareholders of $52.9 million, or $2.34 per basic common share and $2.32 per diluted common share, for the year ended December 31, 2022.
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.
The dividend was paid on February 28, 2024. 67 Table of Contents 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.
Core net income available to common shareholders for the year ended December 31, 2022 was $57.6 million, or $2.52 per diluted common share, compared to core net income available to common shareholders of $53.9 million, or $2.61 per diluted common share, for the year ended December 31, 2021.
Core net income available to common shareholders for the year ended December 31, 2023 was $66.3 million, or $2.62 per diluted common share, compared to core net income available to common shareholders of $57.6 million, or $2.52 per diluted common share, for the year ended December 31, 2022.
We calculate average assets, liabilities, and equity using a monthly average, and average yield/rate utilizing an actual 365 day count convention. For the year ended December 31, 2022, net interest income totaled $199.6 million, and net interest margin and net interest spread were 3.92% and 3.57%, respectively.
We calculate average assets, liabilities, and equity using a monthly average, and average yield/rate utilizing an actual 365 day count convention. For the year ended December 31, 2023, net interest income totaled $215.1 million, and net interest margin and net interest spread were 3.62% and 2.72%, respectively.
Return to common shareholders on average assets decreased to 0.97% for the year ended December 31, 2022 from 1.18% for the year ended December 31, 2021. Return to common shareholders on average common equity decreased to 11.59% for the year ended December 31, 2022, as compared to 12.25% for the year ended December 31, 2021.
Return to common shareholders on average assets increased to 1.04% for the year ended December 31, 2023 from 0.97% for the year ended December 31, 2022. Return to common shareholders on average common equity increased to 12.36% for the year ended December 31, 2023, as compared to 11.59% for the year ended December 31, 2022.
As of December 31, 2021, our loan portfolio included 1,574 loans with an aggregate outstanding balance of $522.0 million that had previously been granted temporary payment deferrals.
As of December 31, 2022, our loan portfolio included 1,164 loans with an aggregate outstanding balance of $425.2 million that had previously been granted temporary payment deferrals.
As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services.
Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services.
Some of the risk elements we consider include: • for commercial and industrial loans, the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category, and the value, nature and marketability of collateral; • for commercial mortgage loans and multi-family residential loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner occupied properties, the loan to value ratio, the age and condition of the collateral, and the volatility of income, property value and future operating results typical for properties of that type; • for 1-4 family residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition and marketability of the collateral; and • for construction, land development and other land loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, the experience and ability of the developer, and the loan to value ratio.
Some of the risk elements we consider include: • for Real Estate: Commercial loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral, and the volatility of income, property value and future operating results typical for properties of that type; • for Real Estate: Construction loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, the experience and ability of the developer, and the loan to value ratio; 57 Table of Contents • for Real Estate: Residential real estate loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition and marketability of the collateral; and • for Commercial loans, the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category, and the value, nature and marketability of collateral; As of December 31, 2023, the allowance for credit losses totaled $43.7 million, or 0.88%, of total loans held for investment.
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 5.92 years with an estimated effective duration of 54.07 months as of December 31, 2022.
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 4.57 years with an estimated effective duration of 3.81 years as of December 31, 2023.
Average assets totaled $5.5 billion and $4.4 billion for the years ended December 31, 2022 and 2021, respectively.
Average assets totaled $6.3 billion and $5.5 billion for the years ended December 31, 2023 and 2022, respectively.
Since it is not reasonably practicable 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. Borrowings We utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities.
Since it is not reasonably practicable 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.
These subordinated notes bear interest at a fixed rate of 4.25% through March 31, 2026 and a floating rate, based on a benchmark rate plus 354 basis points, thereafter through maturity in 2031. The balance outstanding at both December 31, 2022 and 2021 was $52.5 million. On April 1, 2021, we consummated the acquisition of SSW.
These subordinated notes bear interest at a fixed rate of 4.25% through March 31, 2026 and a floating rate, based on a benchmark rate plus 354 basis points, thereafter through maturity in 2031. The balance outstanding at both December 31, 2023 and 2022 was $52.5 million. The subordinated notes are redeemable by the Company at its option beginning in 2026.
The acquisition was consummated on March 1, 2022. At February 28, 2022, TCBI reported $534.2 million in total assets, $349.5 million in loans and $477.2 million in total deposits.
At February 28, 2022, TCBI reported $534.2 million in total assets, $349.5 million in loans and $477.2 million in total deposits.
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 $2.9 million remaining at December 31, 2022.
This $8.9 million note was fully extinguished during the year ended December 31, 2023. As part of valuing these three subordinated notes from TCBI, we incurred a fair value adjustment premium of $3.4 million that will accrete over five-to-seven years, with $1.1 million and $2.9 million remaining at December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2022, we had deferrals remaining on 1,164 loans with an aggregate outstanding balance of $425.2 million, although all loans were outside their deferral periods.
As of December 31, 2023, we had deferrals remaining on 930 loans with an aggregate outstanding balance of $341.4 million, although all loans were outside their deferral periods.
As of December 31, 2022 and 2021, we maintained six lines of credit with correspondent banks which provided for extensions of credit with an availability to borrow up to an aggregate of $154.0 million and $154.0 million as of December 31, 2022 and 2021, respectively. At December 31, 2022, we had $14.1 million outstanding under these lines of credit.
As of December 31, 2023 and 2022, we maintained five and six lines of credit, respectively, with correspondent banks which provided for extensions of credit with an availability to borrow up to an aggregate of $145.0 million and $154.0 million as of December 31, 2023 and 2022, respectively.
This category includes a variety of other income producing activities, including wire transfer fees, mortgage-related income, insurance commissions and credit card income. Other income increased $1.3 million, or 48.7%, for the year ended December 31, 2022, compared to the same period in 2021.
This category includes a variety of other income producing activities, including wire transfer fees, insurance commissions and credit card income. Other income increased $860,000, or 22.0%, for the year ended December 31, 2023, compared to the same period in 2022.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity and total assets to tangible assets: As of December 31, 2022 2021 (Dollars in thousands, except per share data) (Unaudited) Tangible Common Equity Total shareholders' equity $ 580,481 $ 433,368 Preferred stock (71,930 ) - Total common shareholders' equity 508,551 433,368 Adjustments: Goodwill (88,543 ) (59,894 ) Core deposit and customer intangibles (14,042 ) (12,203 ) Total tangible common equity $ 405,966 $ 361,271 Tangible Assets Total Assets $ 5,990,460 $ 4,726,378 Adjustments: Goodwill (88,543 ) (59,894 ) Core deposit and customer intangibles (14,042 ) (12,203 ) Total tangible assets $ 5,887,875 $ 4,654,281 Common Equity to Total Assets 8.5 % 9.2 % Tangible Common Equity to Tangible Assets 6.9 7.8 83 Table of Contents Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and with general practices within the financial services industry.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity and total assets to tangible assets: As of December 31, 2023 2022 (Dollars in thousands, except per share data) (Unaudited) Tangible Common Equity Total shareholders' equity $ 644,259 $ 580,481 Preferred stock (71,930 ) (71,930 ) Total common shareholders' equity 572,329 508,551 Adjustments: Goodwill (88,391 ) (88,543 ) Core deposit and customer intangibles (11,895 ) (14,042 ) Total tangible common equity $ 472,043 $ 405,966 Tangible Assets Total Assets $ 6,584,550 $ 5,990,460 Adjustments: Goodwill (88,391 ) (88,543 ) Core deposit and customer intangibles (11,895 ) (14,042 ) Total tangible assets $ 6,484,264 $ 5,887,875 Common Equity to Total Assets 8.7 % 8.5 % Tangible Common Equity to Tangible Assets 7.3 6.9 Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and with general practices within the financial services industry.
Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes.
Fluctuations in interest rates will ultimately impact the level of income and expense recorded on many of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities. Interest rate risk is the potential of economic losses due to interest rate changes.
As of December 31, 2022 2021 Amount Ratio Amount Ratio (Dollars in thousands) Business First Total capital (to risk weighted assets) $ 704,840 12.75 % $ 478,794 11.94 % Tier 1 capital (to risk weighted assets) 557,088 10.07 % 367,431 9.17 % Common Equity Tier 1 capital (to risk weighted assets) 480,158 8.68 % 362,431 9.04 % Tier 1 Leverage capital (to average assets) 557,088 9.49 % 367,431 8.14 % b1BANK Total capital (to risk weighted assets) $ 657,588 11.91 % $ 468,834 11.71 % Tier 1 capital (to risk weighted assets) 618,805 11.20 % 438,898 10.96 % Common Equity Tier 1 capital (to risk weighted assets) 618,805 11.20 % 438,898 10.96 % Tier 1 Leverage capital (to average assets) 618,805 10.55 % 438,898 9.73 % Preferred Stock On September 1, 2022, we entered into a securities purchase agreement with certain investors pursuant to which we offered and sold shares of our 7.50% fixed-to-floating rate non-cumulative perpetual preferred stock, with no par value, for an aggregate purchase price of $72.0 million.
As of December 31, 2023 2022 Amount Ratio Amount Ratio (Dollars in thousands) Business First Total capital (to risk weighted assets) $ 754,990 12.85 % $ 704,840 12.75 % Tier 1 capital (to risk weighted assets) 614,975 10.46 % 557,088 10.07 % Common Equity Tier 1 capital (to risk weighted assets) 538,045 9.15 % 480,158 8.68 % Tier 1 Leverage capital (to average assets) 614,975 9.52 % 557,088 9.49 % b1BANK Total capital (to risk weighted assets) $ 730,117 12.43 % $ 657,588 11.91 % Tier 1 capital (to risk weighted assets) 686,379 11.69 % 618,805 11.20 % Common Equity Tier 1 capital (to risk weighted assets) 686,379 11.69 % 618,805 11.20 % Tier 1 Leverage capital (to average assets) 686,379 10.63 % 618,805 10.55 % Preferred Stock On September 1, 2022, we entered into a securities purchase agreement with certain investors pursuant to which we offered and sold shares of our 7.50% fixed-to-floating rate non-cumulative perpetual preferred stock, with no par value, for an aggregate purchase price of $72.0 million.
Subordinated Debt (Dollars in Thousands) December 31, 2022 Amount outstanding at year-end $ 110,749 Weighted average stated interest rate at year-end 5.57 % Maximum month-end balance during the year $ 111,209 Average balance outstanding during the year $ 106,054 Weighted average interest rate during the year 4.82 % December 31, 2021 Amount outstanding at year-end $ 81,427 Weighted average stated interest rate at year-end 5.04 % Maximum month-end balance during the year $ 81,427 Average balance outstanding during the year $ 68,183 Weighted average interest rate during the year 5.17 % FNBB revolving advances .
Subordinated Debt (Dollars in Thousands) December 31, 2023 Amount outstanding at year-end $ 99,990 Weighted average stated interest rate at year-end 5.72 % Maximum month-end balance during the year $ 110,698 Average balance outstanding during the year $ 105,369 Weighted average interest rate during the year 5.05 % December 31, 2022 Amount outstanding at year-end $ 110,749 Weighted average stated interest rate at year-end 5.57 % Maximum month-end balance during the year $ 111,209 Average balance outstanding during the year $ 106,054 Weighted average interest rate during the year 4.82 % FNBB revolving advances .
Interest Rate Sensitivity and Market Risk As a financial institution, our primary component of market risk is interest rate volatility. Our asset liability and funds management policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We manage our sensitivity position within our established guidelines.
Our asset and liability management policy provides management with the guidelines for effective interest rate risk management, and we have established a measurement system for monitoring our interest rate sensitivity position. We manage our sensitivity position within our established guidelines.
We do not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in our investment portfolio as of December 31, 2022.
We do not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in our investment portfolio as of December 31, 2023. The allowance for credit losses encompasses potential expected credit losses related to the securities portfolio for credit losses.
We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average loans increased 32.4% for the year ended December 31, 2022 compared to the same period in 2021, primarily due to organic growth and the acquisition of TCBI.
We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average loans increased 20.9% for the year ended December 31, 2023 compared to the same period in 2022.
Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in our markets and across our region, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within our markets. 51 Table of Contents While we continue to prioritize organic growth, we also seek to capitalize upon other opportunities as they arise.
Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in our markets and across our region, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within our markets.
We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio. The following table presents our FHLB borrowings at the dates indicated.
Our current longest dated FHLB advance matures within ten years. We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio. 63 Table of Contents The following table presents our FHLB borrowings at the dates indicated.
The preferred stock was structured to qualify as additional Tier 1 capital. On January 25, 2023, our board of directors declared a quarterly dividend based upon our financial performance for the three months ended December 31, 2022 in the amount of $0.12 per common share to the common shareholders of record as of February 15, 2023.
On January 23, 2024, our board of directors declared a quarterly dividend based upon our financial performance for the three months ended December 31, 2023 in the amount of $0.14 per common share to the common shareholders of record as of February 15, 2024.
Financial Highlights The financial highlights as of and for the year ended December 31, 2022 include: • Total assets of $6.0 billion, a $1.3 billion, or 26.7%, increase from December 31, 2021. • Total loans held for investment of $4.6 billion, a $1.4 billion, or 44.4%, increase from December 31, 2021. • Total deposits of $4.8 billion, a $743.1 million, or 18.2%, increase from December 31, 2021. • Net income available to common shareholders of $52.9 million, a $769,000, or 1.5%, increase from the year ended December 31, 2021. • Net interest income of $199.6 million, a $45.7 million, or 29.7%, increase from the year ended December 31, 2021. • An allowance for loan and lease losses of 0.83% of total loans held for investment, compared to 0.91% as of December 31, 2021, and a ratio of nonperforming loans to total loans held for investment of 0.25%, compared to 0.41% as of December 31, 2021. • Earnings per common share for the year ended December 31, 2022 of $2.34 per basic common share and $2.32 per diluted common share, compared to $2.54 per basic common share and $2.53 per diluted common share for the year ended December 31, 2021. 53 Table of Contents • Return to common shareholders on average assets of 0.97% compared to 1.18% for the year ended December 31, 2021. • Return to common shareholders on average common equity of 11.59% compared to 12.25% for the year ended December 31, 2021. • Capital Ratios included Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.49%, 8.68%, 10.07% and 12.75%, respectively, compared to Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 8.14%, 9.04%, 9.17% and 11.94% for the year ended December 31, 2021. • Book value per common share of $20.25, a decrease of 4.7% from $21.24 at December 31, 2021.
Financial Highlights The financial highlights as of and for the year ended December 31, 2023 include: • Total assets of $6.6 billion, a $594.1 million, or 9.9%, increase from December 31, 2022. • Total loans held for investment of $5.0 billion, a $386.6 million, or 8.4%, increase from December 31, 2022. • Total deposits of $5.2 billion, a $428.4 million, or 8.9%, increase from December 31, 2022. • Net income available to common shareholders of $65.6 million, a $12.8 million, or 24.1%, increase from the year ended December 31, 2022. • Net interest income of $215.1 million, a $15.6 million, or 7.8%, increase from the year ended December 31, 2022. • An allowance for credit losses of 0.88% of total loans held for investment, compared to 0.84% as of December 31, 2022, and a ratio of nonperforming loans to total loans held for investment of 0.34%, compared to 0.25% as of December 31, 2022. • Earnings per common share for the year ended December 31, 2023 of $2.62 per basic common share and $2.59 per diluted common share, compared to $2.34 per basic common share and $2.32 per diluted common share for the year ended December 31, 2022. • Return to common shareholders on average assets of 1.04% compared to 0.97% for the year ended December 31, 2022. • Return to common shareholders on average common equity of 12.36% compared to 11.59% for the year ended December 31, 2022. • Capital Ratios included Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.52%, 9.15%, 10.46% and 12.85%, respectively, compared to Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.49%, 8.68%, 10.07% and 12.75% for the year ended December 31, 2022. 46 Table of Contents • Book value per common share of $22.58, an increase of 11.5% from $20.25 at December 31, 2022.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity and presents tangible book value per common share compared to book value per common share: As of December 31, 2022 2021 (Dollars in thousands, except per share data) (Unaudited) Tangible Common Equity Total shareholders' equity $ 580,481 $ 433,368 Preferred stock (71,930 ) - Total common shareholders' equity 508,551 433,368 Adjustments: Goodwill (88,543 ) (59,894 ) Core deposit and customer intangibles (14,042 ) (12,203 ) Total tangible common equity $ 405,966 $ 361,271 Common shares outstanding (1) 25,110,313 20,400,349 Book value per common shares (1) $ 20.25 $ 21.24 Tangible book value per common shares (1) 16.17 17.71 (1) Excludes the dilutive effect, if any, of 184,015 and 132,032 shares of common stock issuable upon exercise of outstanding stock options and restricted stock awards as of December 31, 2022 and 2021, respectively.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible common equity and presents tangible book value per common share compared to book value per common share: As of December 31, 2023 2022 (Dollars in thousands, except per share data) (Unaudited) Tangible Common Equity Total shareholders' equity $ 644,259 $ 580,481 Preferred stock (71,930 ) (71,930 ) Total common shareholders' equity 572,329 508,551 Adjustments: Goodwill (88,391 ) (88,543 ) Core deposit and customer intangibles (11,895 ) (14,042 ) Total tangible common equity $ 472,043 $ 405,966 Common shares outstanding (1) 25,351,809 25,110,313 Book value per common shares (1) $ 22.58 $ 20.25 Tangible book value per common shares (1) 18.62 16.17 (1) Excludes the dilutive effect, if any, of 217,094 and 184,015 shares of common stock issuable upon exercise of outstanding stock options and restricted stock awards as of December 31, 2023 and 2022, respectively. 74 Table of Contents Tangible Common Equity to Tangible Assets .
As of December 31, 2022 and 2021, the FHLB advances were collateralized by a blanket floating lien on certain securities and loans, had a weighted average stated rate of 3.88% and 1.08%, respectively, and maturing within five years. The subordinated debt totaled $110.7 million and $81.4 million as of December 31, 2022 and 2021.
As of December 31, 2023 and 2022, the FHLB advances were collateralized by a blanket floating lien on certain securities and loans, had a weighted average stated rate of 3.65% and 3.88%, respectively, and maturing within ten years.
Below is a summary of recent transactions that have contributed to our growth. For additional information about these transactions, See “ Note 3 – Mergers and Acquisitions ” in our audited consolidated financial statements included in Item 8 of this Report. Acquisition of Pedestal Bancshares, Inc.
While we continue to prioritize organic growth, we also seek to capitalize upon other opportunities as they arise. Below is a summary of recent transactions that have contributed to our growth. For additional information about these transactions, See “ Note 3 – Mergers and Acquisitions ” in our audited consolidated financial statements included in Item 8 of this Report.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022, which is available on the SEC ’ s website at www.sec.gov and on the Company ’ s website, www.b1bank.com.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 2, 2023, as amended, which is available on the SEC ’ s website at www.sec.gov and on the Company ’ s website, www.b1bank.com. 44 Table of Contents Overview We are a registered financial holding company headquartered in Baton Rouge, Louisiana.
As of December 31, 2022, total loans, excluding mortgage loans held for sale, were $4.6 billion, an increase of $1.4 billion or 44.4%, compared to $3.2 billion as of December 31, 2021. The increase was primarily due to the acquisition of TCBI and growth in our Dallas/Fort Worth metroplex, Houston, North Louisiana and New Orleans regions.
As of December 31, 2023, total loans, excluding mortgage loans held for sale, were $5.0 billion, an increase of $386.6 million or 8.4%, compared to $4.6 billion as of December 31, 2022. The increase was primarily due to the growth in our Dallas/Fort Worth metroplex, North Louisiana and New Orleans regions, offset by a reduction in the Bayou region.
As of December 31, 2022, the allowance for loan losses totaled $38.2 million, or 0.83%, of total loans held for investment. As of December 31, 2021, the allowance for loan losses totaled $29.1 million, or 0.91%, of total loans held for investment.
As of December 31, 2022, the allowance for credit losses totaled $38.8 million, or 0.84%, of total loans held for investment.
The average yield on the loan portfolio was 5.43%, excluding SBA PPP loans, for the year ended December 31, 2022, compared to 5.16% for the year ended December 31, 2021, and the average yield on total interest-earning assets was 4.64% for the year ended December 31, 2022, compared to 4.25% for the year ended December 31, 2021.
The average yield on the loan portfolio was 6.65%, for the year ended December 31, 2023, compared to 5.42% for the year ended December 31, 2022, and the average yield on total interest-earning assets was 5.95% for the year ended December 31, 2023, compared to 4.64% for the year ended December 31, 2022.
As of December 31, 2022, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature.
As of December 31, 2023, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature. We had cash and cash equivalents, including federal funds sold, of $377.2 million and $168.3 million as of December 31, 2023 and 2022, respectively.
We use interest rate risk simulation models and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics.
We use interest rate risk simulation models and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated into the model as are prepayment assumptions, maturity data and optionality.
The balance outstanding at both December 31, 2022 and 2021 was $3.9 million. On March 1, 2022, we consummated the acquisition of TCBI. As part of the acquisition, we assumed $26.4 million in subordinated debt.
On March 1, 2022, we consummated the acquisition of TCBI. As part of the acquisition, we assumed $26.4 million in subordinated debt.
As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Deferred tax assets and liabilities are reflected at currently enacted income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
For the year ended December 31, 2021 net interest income totaled $153.9 million and net interest margin and net interest spread were 3.84% and 3.65%, respectively.
For the year ended December 31, 2022 net interest income totaled $199.6 million and net interest margin and net interest spread were 3.92% and 3.57%, respectively.
None of these loans are currently in their deferral period at December 31, 2022 and 2021, respectively. 64 Table of Contents Potential Problem Loans From a credit risk standpoint, we classify loans in one of four categories: pass, special mention, substandard or doubtful. Loans classified as loss are charged-off.
Loans under these deferrals remain in their current risk rating and/or past due status through the deferral period. None of these loans are currently in their deferral period at December 31, 2023 and 2022, respectively. Potential Problem Loans From a credit risk standpoint, we classify loans in one of four categories: pass, special mention, substandard or doubtful.
As of December 31, 2022 and 2021, total borrowing capacity of $1.8 billion and $1.3 billion, respectively, was available under this arrangement and $410.1 million and $82.0 million, respectively, was outstanding with a weighted average stated interest rate of 3.88% as of December 31, 2022 and 1.08% as of December 31, 2021. Our current FHLB advances mature within five years.
As of December 31, 2023 and 2022, total borrowing capacity of $1.8 billion, for both periods, was available under this arrangement and $211.2 million and $410.1 million, respectively, was outstanding with a weighted average stated interest rate of 3.65% as of December 31, 2023 and 3.88% as of December 31, 2022.
This subordinated debt bears interest at a fixed rate of 4.25% through March 31, 2026 and a floating rate, based on a benchmark rate plus 354 basis points, thereafter through maturity in 2031. The subordinated notes are redeemable by us at our option beginning in 2026.
This subordinated debt bears interest at a fixed rate of 4.75% through April 1, 2026 and a floating rate, based on a benchmark rate plus 442 basis points, thereafter through maturity in 2031. The balance outstanding at both December 31, 2023 and 2022 was $3.9 million. The subordinated notes are redeemable by the Company at its option beginning in 2026.
However, we expect to monitor and control our growth in order to remain in compliance with all applicable regulatory capital standards applicable to us.
However, we expect to monitor and control our growth in order to remain in compliance with all applicable regulatory capital standards applicable to us. The following table presents the actual capital amounts and regulatory capital ratios for us and b1BANK as of the dates indicated.
This category includes various operating and administrative expenses including business development expenses (i.e. travel and entertainment, donations and club dues), insurance, supplies and printing, equipment rent, and software support and maintenance. Other noninterest expense increased $2.5 million, or 16.4%, for the year ended December 31, 2022 compared to the same period in 2021.
Merger and conversion related expenses for the years ended December 31, 2022 was primarily to the acquisition of TCBI in 2022. Other . This category includes various operating and administrative expenses including business development expenses (i.e. travel and entertainment, donations and club dues), insurance, supplies and printing, equipment rent, and software support and maintenance.
The following table presents, for the periods indicated, the major categories of noninterest expense: For the Years Ended December 31, 2022 2021 Increase (Decrease) (Dollars in thousands) Salaries and employee benefits $ 85,222 $ 65,825 $ 19,397 Non-staff expenses: Occupancy of bank premises 9,244 7,238 2,006 Depreciation and amortization 6,853 5,792 1,061 Data processing 8,358 8,137 221 FDIC assessment fees 2,854 2,194 660 Legal and professional fees 2,359 2,679 (320 ) Advertising and promotions 3,949 2,712 1,237 Utilities and communications 3,193 2,475 718 Ad valorem shares tax 3,400 2,499 901 Directors' fees 972 790 182 Other real estate owned expenses and write-downs 193 736 (543 ) Merger and conversion related expenses 4,808 515 4,293 Other 18,004 15,469 2,535 Total noninterest expense $ 149,409 $ 117,061 $ 32,348 58 Table of Contents Noninterest expense for the year ended December 31, 2022 increased $32.3 million, or 27.6%, to $149.4 million compared to noninterest expense of $117.1 million for the same period in 2021.
The following table presents, for the periods indicated, the major categories of noninterest expense: For the Years Ended December 31, 2023 2022 Increase (Decrease) (Dollars in thousands) Salaries and employee benefits $ 90,611 $ 85,222 $ 5,389 Non-staff expenses: Occupancy of bank premises 9,518 9,244 274 Depreciation and amortization 6,767 6,853 (86 ) Data processing 9,034 8,358 676 FDIC assessment fees 3,645 2,854 791 Legal and professional fees 3,173 2,359 814 Advertising and promotions 4,628 3,949 679 Utilities and communications 2,899 3,193 (294 ) Ad valorem shares tax 3,160 3,400 (240 ) Directors' fees 1,079 972 107 Other real estate owned expenses and write-downs 687 193 494 Merger and conversion related expenses 236 4,808 (4,572 ) Other 21,265 18,004 3,261 Total noninterest expense $ 156,702 $ 149,409 $ 7,293 Noninterest expense for the year ended December 31, 2023 increased $7.3 million, or 4.9%, to $156.7 million compared to noninterest expense of $149.4 million for the same period in 2022.

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