Business First Bancshares Inc

Previous wording

The following discussion and analysis focuses on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2023 to September 30, 2024, and its results of operations for the three and nine months ended September 30, 2024. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this reportand should be read in conjunction with (i) the accompanying unaudited consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form 10-K for the year ended December 31, 2023, including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that Business First believes are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this report, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. Business First assumes no obligation to update any of these forward-looking statements.

Current wording

The following discussion and analysis focuses on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2024 to March 31, 2025, and its results of operations for the three months ended March 31, 2025. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this reportand should be read in conjunction with (i) the accompanying unaudited consolidated financial statements and the notes thereto (the “Notes”) and (ii) our Annual Report on Form 10-K for the year ended December 31, 2024, including the audited consolidated financial statements and notes thereto, management’s discussion and analysis, and the risk factor disclosures contained therein. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that Business First believes are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Forward-Looking Statements,” “Risk Factors” and elsewhere in this report, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. Business First assumes no obligation to update any of these forward-looking statements.

Previous wording

We are a registered financial holding company headquartered in Baton Rouge, Louisiana. Through our wholly-owned subsidiary, b1BANK, a Louisiana state chartered bank, we provide a broad range of financial services tailored to meet the needs of small-to-midsized businesses and professionals. Since our inception in 2006, our priority has been and continues to be creating shareholder value through the establishment of an attractive commercial banking franchise in Louisiana and across our region. We consider our primary market to include the State of Louisiana, the Dallas/Fort Worth metroplex, and Houston. We currently operate out of banking centers and loan production offices across Louisiana and Texas. As of September 30, 2024, we had total assets of $6.9 billion, total loans of $5.2 billion, total deposits of $5.6 billion, and total shareholders’ equity of $699.5 million.

Current wording

We are a registered financial holding company headquartered in Baton Rouge, Louisiana. Through our wholly-owned subsidiary, b1BANK, a Louisiana state chartered bank, we provide a broad range of financial services tailored to meet the needs of small-to-midsized businesses and professionals. Since our inception in 2006, our priority has been and continues to be creating shareholder value through the establishment of an attractive commercial banking franchise in Louisiana and across our region. We consider our primary market to include the State of Louisiana, the Dallas/Fort Worth metroplex, and Houston. We currently operate out of banking centers and loan production offices across Louisiana and Texas. As of March 31, 2025, we had total assets of $7.8 billion, total loans of $6.0 billion, total deposits of $6.5 billion, and total shareholders’ equity of $826.3 million.

Previous wording

On March 12, 2023, the Federal Reserve developed the BTFP, which offered loans to banks with a term of up to one year. The loans are secured by pledging the banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities were valued at par for collateral purposes. The Bank participated in the BTFP and had outstanding debt of $300.0 million at December 31, 2023. The loans bore a fixed rate of 4.38% and matured on March 22,2024, at which time we repaid them in full.

Current wording

On March 12, 2023, the Federal Reserve developed the BTFP, which offered loans to banks with a term of up to one year. The loans are secured by pledging the banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities were valued at par for collateral purposes. The Bank participated in the BTFP and had outstanding debt of $300.0 million at December 31, 2023. The loans bore a fixed rate of 4.38% and matured on March 22, 2024, at which time we repaid them in full.

Previous wording

On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $921.9 million and $1.0 billion as of September 30, 2024, and December 31, 2023, respectively, through the Federal Reserve discount window. The Bank has not yet drawn on either of the lines of credit as of the date of this report.

Current wording

On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $1.3 billion and $907.7 billion as of March 31, 2025, and December 31, 2024, respectively, through the Federal Reserve discount window. The Bank has not yet drawn on either of the lines of credit as of the date of this report.

Previous wording

On January 31, 2024, we consummated the acquisition, through b1BANK, of Waterstone, headquartered in Katy, Texas. Waterstone offers community banks and small businesses a range of SBA lending services including planning, pre-qualification, packaging, closing and disbursements, servicing, and liquidations. Upon consummation of the acquisition, we paid $3.3 million in cash to the former owners of Waterstone.

Current wording

On January 31, 2024, we consummated the acquisition, through b1BANK, of Waterstone, headquartered in Katy, Texas. Waterstone offers community banks and small businesses a range of small business administration ("SBA") lending services including planning, pre-qualification, packaging, closing and disbursements, servicing, and liquidations. Upon consummation of the acquisition, we paid $3.3 million in cash to the former owners of Waterstone.

Previous wording

On October 1, 2024, we consummated the merger of Oakwood Bancshares, Inc. (“Oakwood”), the parent bank holding company for Oakwood Bank, with and into us, with us continuing as the surviving corporation (the “Oakwood Merger”) pursuant to the terms of that certain Agreement and Plan of Reorganization (the “Reorganization Agreement”), dated as of April 25, 2024, by and between us and Oakwood. Immediately, following consummation of the Oakwood Merger, Oakwood Bank merged with and into the us, with us surviving the merger. Pursuant to the terms of the Reorganization Agreement, upon consummation of the Oakwood Merger, we issued 3,914,012 shares of our common stock to the former shareholders of Oakwood. As of September 30, 2024, Oakwood had $863.6 million of total assets, $700.2 million in loans and $741.3 million in deposits.

Current wording

On October 1, 2024, we consummated the merger of Oakwood, the parent bank holding company for Oakwood Bank, with and into us, with us continuing as the surviving corporation pursuant to the terms of the Reorganization Agreement. Immediately following the consummation of the Oakwood acquisition, Oakwood Bank merged with and into us, with us surviving the merger. Pursuant to the terms of the Reorganization Agreement, upon consummation of the Oakwood acquisition, we issued 3,973,134 shares of our common stock to the former shareholders of Oakwood. As of September 30, 2024, Oakwood had $863.6 million in total assets, $700.2 million in loans and $741.3 million in total deposits.

Previous wording

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

Current wording

The financial highlights as of and for the three months ended March 31, 2025, include:

Previous wording

•Allowance for credit losses of 0.86% of total loans held for investment, compared to 0.88% as of December 31, 2023, and a ratio of nonperforming loans to total loans held for investment of 0.50%, compared to 0.34% as of December 31, 2023.

Current wording

•Allowance for credit losses of 1.01% of total loans held for investment, compared to 0.98% as of December 31, 2024, and a ratio of nonperforming loans to total loans held for investment of 0.69%, compared to 0.42% as of December 31, 2024.

Previous wording

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

Current wording

•Earnings per common sharefor the first three months of 2025 of $0.65 per basic and diluted common share, compared to $0.49 per basic common share and $0.48 per diluted common share for the first three months of 2024.

Previous wording

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

Current wording

•Return on average assetsof 1.00% over the first three months of 2025, compared to 0.74% for the first three months of 2024.

Previous wording

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

Current wording

•Return on average common equityof 10.48% over the first three months of 2025, compared to 8.51% for the first three months of 2024.

Previous wording

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

Current wording

•Capital ratios for Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.70%, 9.78%, 10.90% and 13.03%, respectively, compared to 9.53%, 9.44%, 10.56% and 12.75% at December 31, 2024.

Previous wording

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

Current wording

Results of Operations for the Three Months Ended March 31, 2025, and 2024

Previous wording

For the three months ended September 30, 2024, net income available to common shareholders was $16.5 million, or $0.65 per basic and diluted common share, compared to net income of $19.1 million, or $0.76 per basic and diluted common share, for the three months ended September 30, 2023. Return on average assets, on an annualized basis, decreased to 0.97% for the three months ended September 30, 2024, from 1.17% for the three months ended September 30, 2023. Return on average equity, on an annualized basis, decreased to 10.76% for the three months ended September 30, 2024, as compared to 14.16% for the three months ended September 30, 2023.

Current wording

For the three months ended March 31, 2025, net income available to common shareholders was $19.2 million, or $0.65 per basic and diluted common share, compared to net income of $12.2 million, or $0.49 per basic common share and $0.48 per diluted common share, for the three months ended March 31, 2024. Return on average assets, on an annualized basis, increased to 1.00% for the three months ended March 31, 2025, from 0.74% for the three months ended March 31, 2024. Return on average equity, on an annualized basis, increased to 10.48% for the three months ended March 31, 2025, as compared to 8.51% for the three months ended March 31, 2024.

Previous wording

For the three months ended September 30, 2024, net interest income totaled $56.1 million, and net interest margin and net interest spread were 3.51% and 2.54%, respectively, compared to $55.3 million, 3.61%, and 2.68%, respectively, for the three months ended September 30, 2023. The average yield on the loan portfolio was 7.12% for the three months ended September 30, 2024, compared to 6.84% for the three months ended September 30, 2023, and the average yield on total interest-earning assets was 6.42% for the three months ended September 30, 2024, compared to 6.10% for the three months ended September 30, 2023. For the three months ended September 30, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 48 basis points compared to the three months ended September 30, 2023, primarily due to the Federal Reserve increasing rates during 2023.

Current wording

For the three months ended March 31, 2025, net interest income totaled $66.0 million, and net interest margin and net interest spread were 3.68% and 2.91%, respectively, compared to $51.5 million, 3.32%, and 2.36%, respectively, for the three months ended March 31, 2024. The average yield on the loan portfolio was 6.99% for the three months ended March 31, 2025, compared to 6.88% for the three months ended March 31, 2024, and the average yield on total interest-earning assets was 6.35% for the three months ended March 31, 2025, compared to 6.18% for the three months ended March 31, 2024. For the three months ended March 31, 2025, overall cost of funds (which includes noninterest-bearing deposits) decreased 18 basis points compared to the three months ended March 31, 2024.

Previous wording

The following tables present, for the periods indicated, an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. Interest earned on loans that are classified as nonaccrual is not recognized in income; however, the balances are reflected in average outstanding balances for the period. For the three and nine months ended September 30, 2024, and 2023, interest income not recognized on nonaccrual loans was not material. Any nonaccrual loans have been included in the table as loans carrying a zero yield. The average total loans reflected below are net of deferred loan fees and discounts. Acquired loans were recorded at fair value at acquisition and accrete/amortize discounts and premiums as an adjustment to yield.

Current wording

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. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. Interest earned on loans that are classified as nonaccrual is not recognized in income; however, the balances are reflected in average outstanding balances for the period. For the three months ended March 31, 2025, and 2024, 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 are net of deferred loan fees and discounts. Acquired loans were recorded at fair value at acquisition and accrete/amortize discounts and premiums as an adjustment to yield. Averages presented in the table below, and throughout this report, are month-end averages.

Previous wording

The following tables present information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. For the purposes of these tables, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

Current wording

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. For the purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

Previous wording

Our provision for credit losses is a charge to income in order to bring our allowance for credit losses to a level deemed appropriate by management. For a description of the factors taken into account by management in determining the allowance for credit losses see “—Financial Condition—Allowance for Credit Losses.” The provision for credit losses was $1.7 million for the three months ended September 30, 2024, and $604,000 for the same period in 2023. For the nine months ended September 30, 2024, and 2023, the provision for credit losses was $4.2 million and $4.4 million, respectively. The higher provision for the three months ended September 30, 2024, compared to the same period in 2023 relates primarily to deterioration in the economic forecast in the current period, as compared to the prior period. Additionally, during the three months ended September 30, 2023, certain nonperforming loans were resolved through charge-offs, with the remaining portfolio requiring a lower reserve replenishment rate. The lower provision for the nine months ended September 30, 2024, compared to the same period in 2023 relates primarily to an improved macro-economic and market outlook in the current nine-month period. Additionally, net charge-offs were elevated during the nine months ended September 30, 2023 due to the resolution of certain acquired credit deteriorated loans.

Current wording

Our provision for credit losses is a charge to income in order to bring our allowance for credit losses to a level deemed appropriate by management. For a description of the factors taken into account by management in determining the allowance for credit losses see “—Financial Condition—Allowance for Credit Losses.” The provision for credit losses was $2.8 million for the three months ended March 31, 2025, and $1.2 million for the same period in 2024. The higher provision for the three months ended March 31, 2025, compared to the same period in 2024 relates primarily to reserves on two individual commercial lending relationships in the current quarter of $2.3 million. This increase was partially offset by changes in the composition of the loan portfolio and related reserve rates, compared to the quarter ended March 31, 2024.

Previous wording

Our primary sources of noninterest income are service charges on deposit accounts, debit card and automated teller machine (“ATM”) fee income, income from bank-owned life insurance, fees and brokerage commissions and pass-through income from other investments (small business investment company (“SBIC”) partnerships and financial technology (“Fintech”) funds. The following tables present, for the periods indicated, the major categories of noninterest income:

Current wording

Our primary sources of noninterest income are service charges on deposit accounts, debit card and automated teller machine (“ATM”) fee income, income from bank-owned life insurance, fees and brokerage commissions, loan sales, swap fee income, and pass-through income from other investments (small business investment company (“SBIC”) partnerships and financial technology (“Fintech”) funds).

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Total noninterest expense increased $8.1 million, or 18.9%, from the three months ended March 31, 2024, primarily attributed to the increase in salaries and employee benefits of $4.1 million, or 16.1%, an increase in occupancy and bank premises of $887,000, or 35.3%, and an increase in data processing of $657,000, or 25.5%. The increases were largely attributable to the acquisition of Oakwood.

Previous wording

For the three months ended September 30, 2024, income tax expense totaled $4.9 million, a decrease of $581,000, or 10.5%, compared to $5.5 million for the same period in 2023. Our effective tax rates for the three months ended September 30, 2024, and 2023 were 21.6% and 21.2%, respectively.

Current wording

For the three months ended March 31, 2025, income tax expense totaled $5.3 million, a increase of $1.6 million, or 45.0%, compared to $3.6 million for the same period in 2024. Our effective tax rates for the three months ended March 31, 2025, and 2024 were 20.4% and 21.1%, respectively.

Previous wording

As of September 30, 2024, total loans, excluding mortgage loans held for sale, were $5.2 billion, an increase of $227.3 million, or 4.6%, compared to $5.0 billion as of December 31, 2023. Additionally, $835,000 in loans were classified as loans held for sale as of December 31, 2023, and none at September 30, 2024.

Current wording

As of March 31, 2025, total loans, excluding mortgage loans held for sale, were $6.0 billion, a decrease of $480,000, compared to $6.0 billion as of December 31, 2024. Additionally, $717,000 in loans were classified as loans held for sale as of December 31, 2024, and we had none as of March 31, 2025.

Previous wording

Total loans held for investment as a percentage of total deposits were 92.5% and 95.1% as of September 30, 2024, and December 31, 2023, respectively. Total loans held for investment as a percentage of total assets were 75.8% as of both September 30, 2024, and December 31, 2023, respectively.

Current wording

Total loans held for investment as a percentage of total deposits were 92.6% and 91.9% as of March 31, 2025, and December 31, 2024, respectively. Total loans held for investment as a percentage of total assets were 76.8% and 76.1% as of March 31, 2025, and December 31, 2024, respectively.

Previous wording

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

Current wording

Real Estate: Residential loans increased $49.8 million, or 5.6%, to $934.4 million as of March 31, 2025, from $884.5 million as of December 31, 2024.

Previous wording

Consumer and other loans increased $5.2 million, or 8.2%, to $69.0 million as of September 30, 2024, from $63.8 million as of December 31, 2023.

Current wording

Consumer and other loans increased $4.1 million, or 5.5%, to $78.6 million as of March 31, 2025, from $74.5 million as of December 31, 2024.

Previous wording

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 $27.8 million and$18.8 million in nonperforming assets as of September 30, 2024, and December 31, 2023, respectively. We had $26.1 million in nonperforming loans as of September 30, 2024, compared to $17.1 million as of December 31, 2023. The increase in nonperforming assets from December 31, 2023, to September 30, 2024, is primarily due to two lending relationships secured by residential real estate, one secured by commercial real estate, and one commercial loan that is unsecured.

Current wording

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 $42.8 million and $30.5 million in nonperforming assets as of March 31, 2025, and December 31, 2024, respectively. We had $41.6 million in nonperforming loans as of March 31, 2025, compared to $25.0 million as of December 31, 2024. The increase in nonperforming assets from December 31, 2024, to March 31, 2025, is primarily due to three commercial lending relationships.

Previous wording

Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness; however, such concerns are not so pronounced that we generally expect to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits with a lower rating.

Current wording

Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness; however, such concerns are not so pronounced that we generally expect to experience significant loss within the short-term.

Previous wording

As of September 30, 2024, the allowance for credit losses totaled $45.0 million, or 0.86%, of total loans held for investment. As of December 31, 2023, the allowance for credit losses totaled $43.7 million, or 0.88%, of total loans held for investment.

Current wording

As of March 31, 2025, the allowance for credit losses totaled $60.4 million, or 1.01%, of total loans held for investment. As of December 31, 2024, the allowance for credit losses totaled $58.5 million, or 0.98%, of total loans held for investment.

Previous wording

We use our securities portfolio to provide a source of liquidity, an appropriate return on funds invested, manage interest rate risk, meet collateral requirements, and meet regulatory capital requirements. As of September 30, 2024, the carrying amount of investment securities totaled $916.1 million, an increase of $36.5 million, or 4.2%, compared to $879.6 million as of December 31, 2023. The increase was primarily due to unrealized gains in the first nine months of 2024. Securities represented 13.3% and 13.4% of total assets as of September 30, 2024, and December 31, 2023, respectively.

Current wording

We use our securities portfolio to provide a source of liquidity, an appropriate return on funds invested, manage interest rate risk, meet collateral requirements, and meet regulatory capital requirements. As of March 31, 2025, the carrying amount of investment securities totaled $920.6 million, an increase of $27.0 million, or 3.0%, compared to $893.5 million as of December 31, 2024. The increase was primarily due to purchases and unrealized gains in the first three months of 2025. Securities represented 11.8% and 11.4% of total assets as of March 31, 2025, and December 31, 2024, respectively.

Previous wording

The contractual maturity of mortgage-backed securities, collateralized mortgage obligations and asset-backed securities is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time. Mortgage-backed securities and asset-backed securities are typically issued with stated principal amounts and are backed by pools of mortgage loans and other loans with varying maturities. The term of the underlying mortgages and loans may vary significantly due to the ability of a borrower to prepay. Monthly paydowns on mortgage-backed securities tend to cause the average life of the securities to be much different than the stated contractual maturity. During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal and, consequently, the average life of this security will be lengthened. If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of this security. The weighted average life of our investment portfolio was 4.49 years with an estimated effective duration of 3.77 years as of September 30, 2024.

Current wording

The contractual maturity of mortgage-backed securities, collateralized mortgage obligations and asset-backed securities is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time. Mortgage-backed securities and asset-backed securities are typically issued with stated principal amounts and are backed by pools of mortgage loans and other loans with varying maturities. The term of the underlying mortgages and loans may vary significantly due to the ability of a borrower to prepay. Monthly paydowns on mortgage-backed securities tend to cause the average life of the securities to be much different than the stated contractual maturity. During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal and, consequently, the average life of this security will be lengthened. If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of this security. The weighted average life of our investment portfolio was 4.67 years with an estimated effective duration of 3.76 years as of March 31, 2025.

Previous wording

As of September 30, 2024, and December 31, 2023, the Company held other equity securities of $39.6 million and $33.9 million, respectively, comprised mainly of FHLB stock, small business investment companies (“SBICs”) and financial technology (“Fintech”) fund investments.

Current wording

As of March 31, 2025, and December 31, 2024, the Company held other equity securities of $40.9 million and $41.1 million, respectively, comprised mainly of FHLB stock, small business investment companies (“SBICs”) and financial technology (“Fintech”) fund investments.

Previous wording

Total deposits as of September 30, 2024, were $5.6 billion, an increase of $392.2 million, or 7.5%, compared to $5.2 billion as of December 31, 2023. Total uninsured deposits were $2.4 billion, or 42.4%, of total deposits as of September 30, 2024 compared to $2.0 billion, or 38.9%, of total deposits as of December 31, 2023. Since it is not reasonably practical to provide a precise measure of uninsured deposits, the amounts are estimated and are based on the same methodologies and assumptions that are used for regulatory reporting requirements for the call report.

Current wording

Total deposits as of March 31, 2025, were $6.5 billion, an decrease of $53.2 million, or 0.8%, compared to $6.5 billion as of December 31, 2024. Total uninsured deposits were $2.7 billion, or 41.7%, of total deposits as of March 31, 2025 compared to $2.8 billion, or 43.4%, of total deposits as of December 31, 2024. Since it is not reasonably practical to provide a precise measure of uninsured deposits, the amounts are estimated and are based on the same methodologies and assumptions that are used for regulatory reporting requirements for the call report.

Previous wording

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

Current wording

Noninterest-bearing deposits as of March 31, 2025, were $1.3 billion compared to $1.4 billion as of December 31, 2024, a decrease of $48.7 million, or 3.6%.

Previous wording

Average deposits for the nine months ended September 30, 2024, were $5.5 billion, an increase of $520.7 million, or 10.5%, over the full year average for the year ended December 31, 2023, of $5.0 billion. The average rate paid on total interest-bearing deposits increased over this period from 3.00% for the year ended December 31, 2023, to 3.81% for the nine months ended September 30, 2024. The increase in average rates was driven by the Federal Reserve raising rates during the year ended December 31, 2023 and consumer demand for higher earning interest bearing accounts. The cost of deposits increased to 2.92% for the nine months ended September 30, 2024, compared to 2.15% for the year ended December 31, 2023.

Current wording

Average deposits for the three months ended March 31, 2025, were $6.4 billion, an increase of $673.6 million, or 11.8%, over the full year average for the year ended December 31, 2024, of $5.7 billion. The increase was largely attributable to the impact of the acquisition of Oakwood on October 1, 2024. The average rate paid on total interest-bearing deposits decreased over this period from 3.73% for the year ended December 31, 2024, to 3.35% for the three months ended March 31, 2025. In addition, noninterest-bearing demand accounts served to reduce the cost of deposits to 2.70% for the three months ended March 31, 2025, compared to 2.89% for the year ended December 31, 2024.

Previous wording

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

Current wording

The ratio of average noninterest-bearing deposits to average total deposits for the three months ended March 31, 2025, and the year ended December 31, 2024, was 19.5% and 22.5%, respectively.

Previous wording

Liquidity involves our ability to utilize funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. For the nine months ended September 30, 2024, and the year ended December 31, 2023, liquidity needs were primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios. In addition, we also utilize, or have available, brokered deposits, purchased funds from correspondent banks, the Federal Reserve discount window, and overnight advances from the FHLB. As of September 30, 2024, and December 31, 2023, we maintained five federal funds purchased lines of credit with correspondent banks which provided for extensions of credit with an availability to borrow up to an aggregate of $145.0 million. There were no funds drawn under these lines of credit at September 30, 2024, and December 31, 2023. We had an additional $1.2 billion of availability through the FHLB at both September 30, 2024, and December 31, 2023. As of September 30, 2024 and December 31, 2023, we had $921.9 million and $1.0 billion, respectively, of availability through the Federal Reserve Discount Window.

Current wording

Liquidity involves our ability to utilize funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. For the three months ended March 31, 2025, and the year ended December 31, 2024, liquidity needs were primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios. In addition, we also utilize, or have available, brokered deposits, purchased funds from correspondent banks, the Federal Reserve discount window, and overnight advances from the FHLB. As of March 31, 2025, and December 31, 2024, we maintained six federal funds purchased lines of credit with correspondent banks which provided for extensions of credit with an availability to borrow up to an aggregate of $160.0 million. There were no funds drawn under these lines of credit at March 31, 2025, and December 31, 2024. We had an additional $1.6 billion of availability through the FHLB at both March 31, 2025, and December 31, 2024. As of March 31, 2025 and December 31, 2024, we had $1.3 billion and $907.7 million, respectively, of availability through the Federal Reserve Discount Window.

Previous wording

The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average total assets equaled $6.7 billion and $6.3 billion for the nine months ended September 30, 2024, and the year ended December 31, 2023, respectively.

Current wording

The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average total assets equaled $7.8 billion and $7.0 billion for the three months ended March 31, 2025, and the year ended December 31, 2024, respectively.

Previous wording

Our primary source of funds is deposits, and our primary use of funds is loans. We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average net loans increased 6.3% for the nine months ended September 30, 2024, compared to the same period in 2023. We predominantly invest excess deposits in overnight deposits with the Federal Reserve, securities, interest-bearing deposits at other banks or other short-term liquid investments until needed to fund loan growth. Our securities portfolio had a weighted average life of 4.49 years and an effective duration of 3.77 years as of September 30, 2024. As of December 31, 2023, our securities portfolio had a weighted average life of 4.57 years and an effective duration of 3.81 years.

Current wording

Our primary source of funds is deposits, and our primary use of funds is loans. We do not expect a change in the primary source or use of our funds in the foreseeable future. Our average net loans increased 18.7% for the three months ended March 31, 2025, compared to the same period in 2024. We predominantly invest excess deposits in overnight deposits with the Federal Reserve, securities, interest-bearing deposits at other banks or other short-term liquid investments until needed to fund loan growth. Our securities portfolio had a weighted average life of 4.67 years and an effective duration of 3.76 years as of March 31, 2025. As of December 31, 2024, our securities portfolio had a weighted average life of 4.63 years and an effective duration of 3.79 years.

Previous wording

As of September 30, 2024, we had outstanding $1.2 billion in commitments to extend credit and $47.9 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2023, we had outstanding $1.2 billion in commitments to extend credit and $45.2 million in commitments associated with outstanding standby and commercial letters of credit. Because commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements. See “Off Balance Sheet Items” below for additional information.

Current wording

As of March 31, 2025, we had outstanding $1.3 billion in commitments to extend credit and $49.9 million in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2024, we had outstanding $1.4 billion in commitments to extend credit and $50.0 million in commitments associated with outstanding standby and commercial letters of credit. Because commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements. See “Off Balance Sheet Items” below for additional information.