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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
FORM 10-Q
_______________________________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-38447
_______________________________________________________________________
BUSINESS FIRST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
Louisiana
20-5340628
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
500 Laurel Street, Suite 101
Baton Rouge, Louisiana
70801
(Address of principal executive offices)(Zip Code)
(225) 248-7600
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per share
BFST
NASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b)[]. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No x
As of April 26, 2024, the issuer has outstanding 25,485,273 shares of common stock, par value $1.00 per share.


BUSINESS FIRST BANCSHARES, INC.
 
 
 
 
 
 
3

PART I FINANCIAL INFORMATION
Item 1.    Financial Statements
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
 March 31, 2024
(Unaudited)
December 31,
2023
ASSETS
Cash and Due from Banks$185,906 $226,110 
Federal Funds Sold211,292 151,134 
Securities Available for Sale, at Fair Values (Amortized Cost of $963,726 at March 31, 2024 and $963,978 at December 31, 2023)
872,903 879,571 
Mortgage Loans Held for Sale77 835 
Loans and Lease Receivable, Net of Allowance for Loan Losses of $41,165 at March 31, 2024 and $40,414 at December 31, 2023
5,047,674 4,952,371 
Premises and Equipment, Net68,716 69,480 
Accrued Interest Receivable29,326 29,916 
Other Equity Securities34,940 33,942 
Other Real Estate Owned1,339 1,685 
Cash Value of Life Insurance100,056 96,478 
Deferred Taxes26,800 27,323 
Goodwill91,527 88,391 
Core Deposit and Customer Intangible11,372 11,895 
Other Assets13,630 15,419 
Total Assets$6,695,558 $6,584,550 
LIABILITIES
Deposits:  
Noninterest Bearing$1,295,050 $1,299,090 
Interest Bearing4,277,700 3,949,700 
Total Deposits5,572,750 5,248,790 
Securities Sold Under Agreements to Repurchase17,207 18,885 
Bank Term Funding Program- 300,000 
Federal Home Loan Bank Borrowings308,206 211,198 
Subordinated Debt99,933 99,990 
Subordinated Debt - Trust Preferred Securities5,000 5,000 
Accrued Interest Payable3,930 14,841 
Other Liabilities39,498 41,587 
Total Liabilities6,046,524 5,940,291 
 
Commitments and Contingencies (See Note 11)
 
SHAREHOLDERS' EQUITY
Preferred Stock, No Par Value; 5,000,000 Shares Authorized; 72,010 Shares ($1,000 Liquidation Preference) Issued at both March 31, 2024 and December 31, 2023, respectively
71,930 71,930 
Common Stock, $1 Par Value; 50,000,000 Shares Authorized; 25,485,383 and 25,351,809 Shares Issued and Outstanding at March 31, 2024 and December 31, 2023, respectively
25,485 25,352 
Additional Paid-in Capital398,511 397,447 
Retained Earnings224,742 216,115 
Accumulated Other Comprehensive Loss(71,634)(66,585)
Total Shareholders' Equity649,034 644,259 
Total Liabilities and Shareholders' Equity$6,695,558 $6,584,550 
The accompanying notes are an integral part of these financial statements.
4

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
 For the Three Months Ended
March 31,
 20242023
Interest Income:  
Interest and Fees on Loans$85,947 $73,768 
Interest and Dividends on Non-taxable Securities1,074 1,065 
Interest and Dividends on Taxable Securities4,525 3,717 
Interest on Federal Funds Sold and Due From Banks4,465 942 
Total Interest Income96,011 79,492 
Interest Expense:  
Interest on Deposits38,029 18,928 
Interest on Borrowings6,451 7,815 
Total Interest Expense44,480 26,743 
Net Interest Income51,531 52,749 
Provision for Credit Losses1,186 3,222 
Net Interest Income after Provision for Credit Losses50,345 49,527 
Other Income:  
Service Charges on Deposit Accounts2,439 2,281 
Loss on Sales of Securities(1)(1)
Gain on Sales of Loans139 611 
Other Income6,809 5,497 
Total Other Income9,386 8,388 
Other Expenses:  
Salaries and Employee Benefits25,416 23,176 
Occupancy and Equipment Expense5,357 5,001 
Other Expenses11,749 10,502 
Total Other Expenses42,522 38,679 
Income Before Income Taxes17,209 19,236 
Provision for Income Taxes3,639 4,211 
Net Income13,570 15,025 
Preferred Stock Dividends1,350 1,350 
Net Income Available to Common Shareholders$12,220 $13,675 
Earnings Per Common Share:  
Basic$0.49 $0.55 
Diluted$0.48 $0.54 
The accompanying notes are an integral part of these financial statements.
5

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
 For the Three Months Ended
March 31,
 20242023
Consolidated Net Income$13,570 $15,025 
  
Other Comprehensive Income (Loss):  
Unrealized Gain (Loss) on Investment Securities(6,417)8,001 
Unrealized Gain (Loss) on Share of Other Equity Investments14 (134)
Reclassification Adjustment for Losses on Sale of AFS Investment Securities Included in Net Income1 1 
Income Tax Effect1,353 (1,662)
Other Comprehensive Income (Loss)(5,049)6,206 
Consolidated Comprehensive Income$8,521 $21,231 
The accompanying notes are an integral part of these financial statements.
6

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Dollars in thousands, except per share data)
 Preferred
Stock
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders'
Equity
Balances at December 31, 2022$71,930 $25,110 $393,690 $163,955 $(74,204)$580,481 
Cumulative Effect of Change in Accounting Principle for Credit Losses(827)(827)
Comprehensive Income:     
Net Income15,025 15,025 
Other Comprehensive Income6,206 6,206 
Cash Dividends Declared on Preferred Stock, $18.75 Per Share
(1,350)(1,350)
Cash Dividends Declared on Common Stock, $0.12 Per Share
(3,042)(3,042)
Stock Based Compensation Cost210 987 1,197 
Balances at March 31, 2023 $71,930 $25,320 $394,677 $173,761 $(67,998)$597,690 
Balances at December 31, 2023$71,930 $25,352 $397,447 $216,115 $(66,585)$644,259 
Comprehensive Income:     
Net Income13,570 13,570 
Other Comprehensive Loss(5,049)(5,049)
Cash Dividends Declared on Preferred Stock, $18.75 Per Share
(1,350)(1,350)
Cash Dividends Declared on Common Stock, $0.14 Per Share
(3,593)(3,593)
Stock Based Compensation Cost133 1,064 1,197 
Balances at March 31, 2024 $71,930 $25,485 $398,511 $224,742 $(71,634)$649,034 
The accompanying notes are an integral part of these financial statements

7

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 For the Three Months Ended
March 31,
 20242023
Cash Flows From Operating Activities:  
Consolidated Net Income$13,570 $15,025 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:  
Provision for Credit Losses1,186 3,222 
Depreciation and Amortization1,153 1,187 
Net Accretion of Purchase Accounting Adjustments(319)(2,540)
Stock Based Compensation Cost1,197 1,197 
Net Amortization of Securities634 1,160 
Loss on Sales of Securities1 1 
Gain on Sale of Loans(24)(161)
Income on Other Equity Securities(509)(420)
Gain on Sale of Other Real Estate Owned, Net of Writedowns(63)(209)
Increase in Cash Value of Life Insurance(578)(524)
Deferred Income Tax Expense1,876 1,073 
Changes in Assets and Liabilities:  
Decrease in Accrued Interest Receivable590 220 
Decrease in Other Assets1,994 2,386 
Increase (Decrease) in Accrued Interest Payable(10,911)1,421 
Decrease in Other Liabilities(2,194)(100)
Net Cash Provided by Operating Activities7,603 22,938 
   
Cash Flows From Investing Activities:  
Purchases of Securities Available for Sale(24,333)(30,236)
Proceeds from Maturities / Sales of Securities Available for Sale7,663 6,625 
Proceeds from Paydowns of Securities Available for Sale16,287 17,258 
Net Cash Paid in Acquisition(3,279)- 
Purchases of Other Equity Securities(713)(11,351)
Redemption of Other Equity Securities238 12,365 
Purchase of Life Insurance(3,000)(2,273)
Net Increase in Loans(94,879)(192,107)
Net Purchases of Premises and Equipment(389)(2,075)
Proceeds from Sales of Other Real Estate409 1,026 
Net Increase in Federal Funds Sold(60,158)(88,644)
Net Cash Used in Investing Activities(162,154)(289,412)
(CONTINUED)
8

 For the Three Months Ended
March 31,
 20242023
Cash Flows From Financing Activities:  
Net Increase (Decrease) in Deposits323,960 (14,167)
Net Decrease in Securities Sold Under Agreements to Repurchase(1,678)(3,539)
Net Increase in Federal Funds Purchased- 565 
Net Advances (Repayments) on Federal Home Loan Bank Borrowings97,008 (14,966)
Net Proceeds (Repayments) on Bank Term Funding Program(300,000)310,000 
Payment of Dividends on Preferred Stock(1,350)(1,350)
Payment of Dividends on Common Stock(3,593)(3,042)
Net Cash Provided by Financing Activities114,347 273,501 
Net Increase (Decrease) in Cash and Cash Equivalents(40,204)7,027 
Cash and Cash Equivalents at Beginning of Period226,110 152,740 
Cash and Cash Equivalents at End of Period$185,906 $159,767 
   
Supplemental Disclosures for Cash Flow Information:  
Cash Payments for:  
Interest on Deposits$38,852 $18,015 
Interest on Borrowings$16,539 $7,307 
Income Tax Payments$- $- 
   
Supplemental Schedule for Noncash Investing and Financing Activities:  
Change in the Unrealized Gain (Loss) on Securities Available for Sale$(6,416)$8,002 
Change in the Unrealized Gain (Loss) on Equity Securities$14 $(134)
Change in Deferred Tax Effect on the Unrealized (Gain) Loss on Securities Available for Sale$1,353 $(1,662)
Transfer of Loans to Other Real Estate$- $810 
The accompanying notes are an integral part of these financial statements.


9

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The unaudited consolidated financial statements include the accounts of Business First Bancshares, Inc. (the “Company”) and its two direct, wholly-owned subsidiaries, b1BANK (the “Bank”), and Coastal Commerce Statutory Trust I; and the Bank’s wholly-owned subsidiaries, Business First Insurance, LLC, Smith Shellnut Wilson, LLC, and Waterstone LSP, LLC ("Waterstone"). The Bank operates out of full-service banking centers and loan production offices in markets across Louisiana, the Dallas/Fort Worth metroplex and Houston, Texas. As a state bank, it is subject to regulation by the Office of Financial Institutions (“OFI”), State of Louisiana, and the Federal Deposit Insurance Corporation (“FDIC”) and undergoes periodic examinations by these agencies. The Company is also regulated by the Federal Reserve and is subject to periodic examinations.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial results for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions are eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.
These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted or abbreviated. These interim financial statements should be read in conjunction with the audited consolidated financial statements and footnote disclosures for the Company’s previously filed Form 10-K for the year ended December 31, 2023.
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Critical accounting estimates that are particularly susceptible to significant change for the Company include the determination of the acquired loans and allowance for credit losses and purchase accounting adjustments (other than loans). Other estimates include goodwill, fair value of financial instruments, investment securities and the assessment of income taxes. Management does not anticipate any material changes to estimates in the near term. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, economic conditions in the Company’s markets, and changes in applicable banking regulations. Actual results may ultimately differ from estimates.
Accounting Standards Adopted in Current Period
None
Accounting Standards Not Yet Adopted
ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 requires public business entities to disclose additional information in specified categories with respect to the rate reconciliation for federal, state and foreign income taxes. In addition, the updates also require more details about reconciling items in the rate reconciliation in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. ASU 2023-09 is effective for the Company starting January 1, 2025, though early adoption is permitted. ASU 2023-09 is not expected to have a significant impact on our financial statements.
Note 2 Reclassifications –
Certain reclassifications may have been made to conform to reporting in 2024. These reclassifications have no material effect on previously reported shareholders’ equity or net income.

10

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 Mergers and Acquisitions
Waterstone, LSP, LLP

On January 31, 2024, the Company consummated the acquisition, through b1BANK, of Waterstone LSP, LLC (“Waterstone”), headquartered in Katy, Texas. Upon consummation of the acquisition, the Company paid $3.3 million in cash to the former owners of Waterstone. As part of the acquisition, the Company recorded $3.1 million in goodwill.
The Company has recorded approximately $715,000 and $236,000 of acquisition-related costs within merger and conversion-related expenses and salaries and benefits for the three months ended March 31, 2024, and year ended December 31, 2023, respectively.
Note 4 Earnings per Common Share
Basic earnings per share (“EPS”) represents income available to common shareholders divided by the weighted average number of common shares outstanding; no dilution for any potentially convertible shares is included in the calculation. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential common shares that may be issued by the Company relate to outstanding stock options and unvested restricted stock awards (“RSAs”), excluding any that were antidilutive. In addition, nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of EPS pursuant to the two-class method.
 For the Three Months Ended
March 31,
 20242023
 (Dollars in thousands, except per share data)
Numerator:  
Net Income$13,570 $15,025 
Less: Preferred Stock Dividends1,350 1,350 
Net Income Available to Common Shares$12,220 $13,675 
Denominator:  
Weighted Average Common Shares Outstanding25,127,18724,979,955
Dilutive Effect of Stock Options and RSAs302,007242,353
Weighted Average Dilutive Common Shares25,429,19425,222,308
   
Basic Earnings Per Common Share From Net Income Available to Common Shares$0.49 $0.55 
   
Diluted Earnings Per Common Share From Net Income Available to Common Shares$0.48 $0.54 
11

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 Securities
The amortized cost and fair values of securities available for sale as of March 31, 2024, and December 31, 2023 are summarized as follows:
 March 31, 2024
 (Dollars in thousands)
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. Treasury Securities$17,676 $- $1,460 $16,216 
U.S. Government Agencies10,235 - 858 9,377 
Corporate Securities49,453 12 5,292 44,173 
Mortgage-Backed Securities563,406 446 52,235 511,617 
Municipal Securities322,956 62 31,498 291,520 
Total Securities Available for Sale$963,726 $520 $91,343 $872,903 
 December 31, 2023
 (Dollars in thousands)
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. Treasury Securities$17,690 $- $1,451 $16,239 
U.S. Government Agencies10,258 - 848 9,410 
Corporate Securities49,609 - 5,770 43,839 
Mortgage-Backed Securities555,148 976 49,814 506,310 
Municipal Securities331,273 298 27,798 303,773 
Total Securities Available for Sale$963,978 $1,274 $85,681 $879,571 
The following tables present a summary of securities with gross unrealized losses and fair values at March 31, 2024 and December 31, 2023, aggregated by investment category and length of time in a continued unrealized loss position. Due to the nature of these investments and current prevailing market prices, these unrealized losses are considered non-credit related.
 March 31, 2024
 Less Than 12 Months12 Months or GreaterTotal
 (Dollars in thousands)
 Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. Treasury Securities$- $- $16,216 $1,460 $16,216 $1,460 
U.S. Government Agencies- - 9,377 858 9,377 858 
Corporate Securities7,675 218 35,458 5,074 43,133 5,292 
Mortgage-Backed Securities112,492 1,025 375,877 51,210 488,369 52,235 
Municipal Securities19,761 193 261,986 31,305 281,747 31,498 
Total Securities Available for Sale$139,928 $1,436 $698,914 $89,907 $838,842 $91,343 
12

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2023
 Less Than 12 Months12 Months or GreaterTotal
 (Dollars in thousands)
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. Treasury Securities$- $- $16,239 $1,451 $16,239 $1,451 
U.S. Government Agencies- - 9,410 848 9,410 848 
Corporate Securities7,529 362 36,106 5,408 43,635 5,770 
Mortgage-Backed Securities21,436 895 375,891 48,919 397,327 49,814 
Municipal Securities8,013 63 270,467 27,735 278,480 27,798 
Total Securities Available for Sale$36,978 $1,320 $708,113 $84,361 $745,091 $85,681 
As of March 31, 2024, and December 31, 2023, respectively, no allowance for credit losses was recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to credit quality. This determination is based on the Company’s analysis of the underlying risk characteristics including credit ratings, historical loss experience, and other qualitative factors. Further, the securities continue to make principal and interest payments under their contractual terms and management does not have the intent to sell any of the securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of amortized cost basis. Therefore, the Company has determined the unrealized losses are due to changes in market interest rates compared to rates when the securities were acquired.
The amortized cost and fair values of securities available for sale as of March 31, 2024, by contractual maturity are shown below. Actual maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.
 Amortized
Cost
Fair
Value
 (Dollars in thousands)
Less Than One Year$24,719 $24,324 
One to Five Years181,104 168,917 
Over Five to Ten Years377,532 341,398 
Over Ten Years380,371 338,264 
Total Securities Available for Sale$963,726 $872,903 
Securities available for sale with a fair value of $612.2 million and $629.7 million, were pledged as collateral on public deposits and for other purposes as required or permitted by law as of March 31, 2024, and December 31, 2023, respectively.
At March 31, 2024 and December 31, 2023, accrued interest receivable on securities was $3.7 million and $4.7 million, respectively, and included within accrued interest receivable on the consolidated balance sheets.
13

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 Loans and the Allowance for Loan Losses
Loans receivable at March 31, 2024 and December 31, 2023 are summarized as follows:
 March 31,
2024
December 31,
2023
 (Dollars in thousands)
Real Estate Loans:  
Commercial$2,215,889 $2,217,928 
Construction662,013 669,798 
Residential717,007 682,394 
Total Real Estate Loans3,594,909 3,570,120 
Commercial1,426,957 1,358,838 
Consumer and Other66,973 63,827 
Total Loans Held for Investment5,088,839 4,992,785 
   
Less:  
Allowance for Loan Losses(41,165)(40,414)
Net Loans$5,047,674 $4,952,371 
The performing 1-4 family residential, multi-family residential, commercial real estate, and commercial loans, are pledged, under a blanket lien, as collateral securing advances from the FHLB at March 31, 2024 and December 31, 2023. Commercial and agricultural loans are pledged against the Federal Reserve Banks’ (“FRB”) discount window as of March 31, 2024, and December 31, 2023.
Net deferred loan origination fees were $12.8 million and $12.6 million at March 31, 2024 and December 31, 2023, respectively, and are netted in their respective loan categories above. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies overdrafts as loans in its consolidated balance sheets. At March 31, 2024 and December 31, 2023, overdrafts of $4.5 million and $2.2 million, respectively, have been reclassified to loans.
The Bank is the lead lender on participations sold, without recourse, to other financial institutions which amounts are not included in the consolidated balance sheets. The unpaid principal balances of mortgages and other loans serviced for others were approximately $693.0 million and $723.5 million at March 31, 2024 and December 31, 2023, respectively. The Company had servicing rights of $928,000 and $1.1 million recorded as of March 31, 2024, and December 31, 2023, respectively, and is recorded within other assets.
The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located in its general market areas throughout Louisiana and Texas. Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Bank develops and documents a systematic method for determining its allowance for credit losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.
Portfolio Segments and Risk Factors
The loan portfolio is disaggregated into portfolio segments and then further disaggregated into classes for certain disclosures. GAAP defines a portfolio segment as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. A class is generally a disaggregation of a portfolio segment. The Company's loan portfolio segments are Real Estate, Commercial, and Consumer and Other. The classes and risk characteristics of each segment are discussed in more detail below. The segmentation and disaggregation of the portfolio is part of the ongoing credit monitoring process.
14

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Real Estate Portfolio Segment
Real Estate: Commercial loans are extensions of credit secured by owner-occupied and non-owner-occupied collateral. Repayment is generally dependent on the successful operations of the property. General economic conditions may impact the performance of these types of loans, including fluctuations in the value of real estate, vacancy rates, and unemployment trends. Real estate commercial loans also include farmland loans that can be, or are, used for agricultural purposes. These loans are usually repaid through refinancing, cash flow from the borrower’s ongoing operations, development of the property, or sale of the property.
Real Estate: Construction loans include loans to small-to-midsized businesses to construct owner-occupied properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single-family homes in the Company’s market areas. Risks associated with these loans include fluctuations in the value of real estate, project completion risk and changes in market trends. The Company is also exposed to risk based on the ability of the construction loan borrower to finance the loan or sell the property upon completion of the project, which may be affected by changes in secondary market terms and criteria for permanent financing since the time that the Company funded the loan.
Real Estate: Residential loans include first and second lien 1-4 family mortgage loans, as well as home equity lines of credit, in each case primarily on owner-occupied primary residences. The Company is exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness, or other personal hardship. Real estate residential loans also include multi-family residential loans originated to provide permanent financing for multi-family residential income producing properties. Repayment of these loans primarily relies on successful rental and management of the property.
Commercial Portfolio Segment
Commercial loans include general commercial and industrial, or C&I, loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion, and development loans, borrowing base loans, letters of credit and other loan products, primarily in the Company’s target markets that are underwritten based on the borrower’s ability to service the debt from income. Commercial loan risk is derived from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan.
Consumer and Other Portfolio Segment
Consumer and other loans include a variety of loans to individuals for personal, family and household purposes, including secured and unsecured installment and term loans. The risk is based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
The following table sets forth, as of March 31, 2024, and December 31, 2023, the balance of the allowance for credit losses by loan portfolio segment. The allowance for credit losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.
15

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Credit Losses and Recorded Investment in Loans Receivable
March 31, 2024
(Dollars in thousands)
Real Estate:
Commercial
Real Estate:
Construction
Real Estate:
Residential
CommercialConsumer
and Other
Total
Allowance for Loan Losses:      
Beginning Balance$17,676 $6,596 $5,485 $10,424 $233 $40,414 
Charge-offs16 (49)(71)1 (430)(533)
Recoveries5 - 3 40 93 141 
Provision (Recovery)83 (58)616 (98)600 1,143 
Ending Balance$17,780 $6,489 $6,033 $10,367 $496 $41,165 
      
Reserve for Unfunded Loan Commitments:     
Beginning Balance$206 $1,546 $177 $1,372 $23 $3,324 
Provision (Recovery)57 (213)(24)209 14 43 
Ending Balance$263 $1,333 $153 $1,581 $37 $3,367 
      
Total Allowance for Credit Losses$18,043 $7,822 $6,186 $11,948 $533 $44,532 
16

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(Dollars in thousands)
Real Estate:
Commercial
Real Estate:
Construction
Real Estate:
Residential
CommercialConsumer
and Other
Total
Allowance for Loan Losses:
Beginning Balance$14,702 $5,768 $5,354 $11,721 $633 $38,178 
Adoption of ASU 2016-134,823 933 (365)(2,483)(248)2,660 
Beginning Balance After Adoption19,525 6,701 4,989 9,238 385 40,838 
Charge-offs(2,049)(36)(42)(2,813)(1,489)(6,429)
Recoveries26 1 18 672 327 1,044 
Provision (Recovery)174 (70)520 3,327 1,010 4,961 
Ending Balance$17,676 $6,596 $5,485 $10,424 $233 $40,414 
Reserve for Unfunded Loan Commitments:
Beginning Balance$220 $137 $13 $229 $6 $605 
Adoption of ASU 2016-13116 2,113 190 657 121 3,197 
Beginning Balance After Adoption336 2,250 203 886 127 3,802 
Provision (Recovery)(130)(704)(26)486 (104)(478)
Ending Balance$206 $1,546 $177 $1,372 $23 $3,324 
Total Allowance for Credit Losses$17,882 $8,142 $5,662 $11,796 $256 $43,738 
Included within the above allowance, in the tables above, are loans which management has individually evaluated to determine an allowance for credit losses. The following table summarizes, by segment, the loan balance and specific allowance allocation for those loans which have been individually evaluated.
 March 31, 2024December 31, 2023
 Loan BalanceSpecific AllocationsLoan BalanceSpecific Allocations
 (Dollars in thousands)
Real Estate Loans:    
Commercial$1,719 $38 $883 $- 
Construction5,345 569 2,334 513 
Residential1,500 - 1,533 - 
Total Real Estate Loans8,564 607 4,750 513 
Commercial- - - - 
Consumer and Other- - - - 
Total$8,564 $607 $4,750 $513 


17

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Credit Quality Indicators
We utilize a risk grading matrix to assign a risk grade to each of our commercial loans. Loans are graded on a scale of 10 to 80. Individual loan officers review updated financial information for all pass grade loans to reassess the risk grade, generally on at least an annual basis. When a loan has a risk grade of 60, it is still considered a pass grade loan; however, it is considered to be on management’s “watch list,” and subject to additional and more frequent monitoring by both the loan officer and senior credit and risk personnel. When a loan has a risk grade of 70 or higher, a special assets officer monitors the loan on an on-going basis.
The following tables set forth the credit quality indicators, disaggregated by loan segment, as of March 31, 2024, and December 31, 2023:
18

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
Criticized
Pass
(Risk Grade 10-45)
Special Mention
(Risk Grade 50)
Substandard
(Risk Grade 60)
Doubtful
(Risk Grade 70)
Loss
(Risk Grade 80)
TotalCurrent Period Charge-
offs
(Dollars in thousands)
Real Estate: Commercial       
Originated in 2024 $59,026 $- $- $- $- $59,026 $- 
Originated in 2023 231,816 - 82 - - 231,898 - 
Originated in 2022 741,590 17,577 - - - 759,167 - 
Originated in 2021 406,928 14,704 490 - - 422,122 - 
Originated in 2020131,068 3,514 189 - - 134,771 3 
Originated Prior to 2020513,710 10,803 2,591 1,235 - 528,339 (19)
Revolving79,679 644 243 - - 80,566 - 
Revolving Loans Converted to Term- - - - - - - 
Total Real Estate: Commercial$2,163,817 $47,242 $3,595 $1,235 $- $2,215,889 $(16)
Real Estate: Construction      
Originated in 2024 $34,427 $- $- $- $- $34,427 $- 
Originated in 2023 138,845 241 419 - - 139,505 7 
Originated in 2022 272,528 - 706 - - 273,234 9 
Originated in 2021 77,592 - 3,594 - - 81,186 33 
Originated in 202037,257 - 16 - - 37,273 - 
Originated Prior to 202032,672 444 2,284 345 - 35,745 - 
Revolving60,247 396 - - - 60,643 - 
Revolving Loans Converted to Term- - - - - - - 
Total Real Estate: Construction$653,568 $1,081 $7,019 $345 $- $662,013 $49 
Real Estate: Residential      
Originated in 2024 $19,660 $- $197 $- $- $19,857 $- 
Originated in 2023 72,599 - 25 - - 72,624 - 
Originated in 2022 196,817 338 403 13 - 197,571 - 
Originated in 2021 96,888 - 729 - - 97,617 - 
Originated in 202067,233 386 501 52