Business First Bancshares Inc
For the period ended Dec 31, 2024. Filed Mar 7, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 7, 2025
BFST$32.20-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-01.
0001437749-24-006270
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-07.
0001624322-25-000011
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 194 previous paragraphs and 207 current paragraphs.
119 unchanged; 58 reworded; 26 added; 16 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 52 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Acquisition of Waterstone
Current report
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 report
Acquisition of Oakwood
Current report
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.
Current report
•Total assetsof $7.9 billion, a $1.3 billion, or 19.3%, increase from December 31, 2023.
Current report
•Total loans held for investmentof $6.0 billion, a $988.6 million, or 19.8%, increase from December 31, 2023.
Current report
•Total deposits of $6.5 billion, a $1.3 billion, or 24.1%, increase from December 31, 2023.
Current report
•Net income available to common shareholdersof $59.7 million, a $5.9 million, or 9.0%, decrease from the year ended December 31, 2023.
Current report
•Net interest income of $227.4 million, a $12.3 million, or 5.7%, increase from the year ended December 31, 2023.
Current report
•An allowance for credit losses of 0.98% 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 0.42%, compared to 0.34% as of December 31, 2023.
Current report
•Return to common shareholders on average assetsof 0.86% compared to 1.04% for the year ended December 31, 2023.
Current report
•Return to common shareholders on average common equityof 9.54% compared to 12.36% for the year ended December 31, 2023.
Current report
•Capital Ratios included Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 9.53%, 9.44%, 10.56% and 12.75%, respectively, compared to 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% for the year ended December 31, 2023.
Current report
•Book value per common share of $24.62, an increase of 9.0% from $22.58 at December 31, 2023.
Current report
(1)Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.
Current report
(2)Net interest margin is equal to net interest income divided by average interest-earning assets.
Current report
Occupancy of bank premises. Occupancy of bank premises expenses were $10.9 million and $9.5 million for the years ended December 31, 2024 and 2023, respectively, an increase of $1.4 million, or 15.0%, which is primarily due to the acquisition of Oakwood.
Current report
Real Estate: Construction loans increased $704,000, or 0.1%, to $670.5 million as of December 31, 2024, from $669.8 million as of December 31, 2023.
Current report
•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;
Current report
•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;
Current report
•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
Current report
•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;
Current report
(1)Tax rates, exclusive of certain nondeductible acquisition-related expenses and goodwill, utilized were 21.129% for both 2024 and 2023. These rates approximate the marginal tax rates for the applicable periods.
Current report
(2)Includes merger and conversion-related expenses and salary and employee benefits.
Current report
(3)CECL non-PCD provision/unfunded commitment expense attributable to Oakwood.
Current report
(1)Excludes the dilutive effect, if any, of 198,238 and 217,094 shares of common stock issuable upon exercise of outstanding stock options and restricted stock awards as of December 31, 2024 and 2023, respectively.
Removed paragraphs (16)
Previous report
Acquisition of Texas Citizens Bancorp, Inc.
Previous report
On October 20, 2021, we entered into a definitive agreement to acquire Texas Citizens Bancshares, Inc. (“TCBI”), the parent bank holding company for Texas Citizens Bank, National Association, headquartered in Pasadena, Texas. 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.
Previous report
Preferred Stock Issuance
Previous report
Public Offering
Previous report
On October 12, 2022, we entered into an underwriting agreement with Stephens, Inc., a representative of several underwriters, to issue and sell 2,500,000 shares of our common stock, $1.00 par value per share, in an underwritten public offering and a public offering price of $20.00 per share. After deducting underwriting discounts, commissions and offering expenses, the net proceeds of the offering was $47.2 million.
Previous report
Loan Deferrals
Previous report
Beginning on March 25, 2020, we took proactive measures to help customers impacted by COVID-19 by deferring principal and/or interest payments. 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.
Previous report
In accordance with FASB and interagency regulatory guidance issued in March 2020, loans that are modified under the terms of our COVID-19 Deferral Assistance Program will not be considered as troubled debt restructurings to the extent that they meet the terms of such guidance under Section 4013 of the CARES Act, as extended by the Consolidated Appropriations Act of 2021.
Previous report
Loss on sales / disposals of other assets.* *We had a disposal of former bank premises during 2022 which resulted in a loss of $717,000.
Previous report
FDIC assessment fees. FDIC assessment fees were $3.6 million and $2.9 million for the years ended December 31, 2023 and 2022, respectively, an increase of $791,000, or 27.7%, mainly due to the increased regulatory rates by the FDIC.
Previous report
Other real estate owned expenses and write-downs.* *Other real estate owned expenses and write-downs increased to $687,000 compared to $193,000 for the years ended December 31, 2023 and 2022, respectively. An increase of $494,000, or 256.0%, resulted mainly from the write-down of $432,000 on one property that we were holding for future expansion.
Previous report
Real Estate: Construction loans decreased $52.3 million, or 7.2%, to $669.8 million as of December 31, 2023, from $722.1 million as of December 31, 2022.
Previous report
As of December 31, 2023, our loan portfolio included 930 loans with an aggregate outstanding balance of $341.4 million that had previously been granted temporary payment deferrals of principal and/or interest due to the effect of the COVID-19 pandemic. 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. In accordance with FASB and interagency regulatory guidance issued in March 2020, loans that were modified under the terms of our COVID-19 Deferral Assistance Program are not to be considered as troubled debt restructurings to the extent that they meet the terms of such guidance under Section 4013 of the CARES Act. 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.
Previous report
Allowance for Credit Losses
Previous report
Prior to the adoption of ASU 2016-13, declines in the fair value of available-for-sale securities below their cost that were deemed to be other than temporary were reflected in earnings as realized losses. In estimating other-than-temporary impairment losses prior to January 1, 2023, management considered, among other things, (i) the length of time and the extent to which the fair value had been less than cost, (ii) the financial condition and near-term prospects of the issuer and (iii) the intent and our ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Previous report
FNBB revolving advances. FNBB allowed us to borrow on a revolving basis up to $5.0 million. This line of credit, established on September 12, 2016, was secured by a pledge of and security interest in the common stock of our wholly-owned subsidiary, b1BANK. This line of credit carried a variable interest rate equal to the Wall Street Journal Prime rate. This FNBB line was established for the purpose of repurchasing shares of our common stock from certain of our shareholders and for general corporate purposes.** **This line of credit was paid in full in March 2021. This line of credit was re-established on November 3, 2021. This line of credit did not have a balance at December 31, 2021. 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.
Reworded paragraphs (58)
Previous wording
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. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this Report, particularly the consolidated financial statements and related notes appearing in Item 8. 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 statement, 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. 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*“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, 2022, filed with the SEC on March 2, 2023, as amended, which is available on the SEC*’s website atwww.sec.gov and on the Company’s website, www.b1bank.com.
Current wording
The following discussion and analysis is to focus on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2023 to December 31, 2024 and its results of operations for the year ended December 31, 2024. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this Report, particularly the consolidated financial statements and related notes appearing in Item 8. 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 statement, 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. A discussion regarding 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 can be found under“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, 2023, filed with the SEC on March 1, 2024, as amended, which is available on the SEC’s website atwww.sec.gov and on the Company’s website, www.b1bank.com.
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 in markets across Louisiana and Texas. As of December 31, 2023, we had total assets of $6.6 billion, total loans of $5.0 billion, total deposits of $5.2 billion, and total shareholders’ equity of $644.3 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 in markets across Louisiana and Texas. As of December 31, 2024, we had total assets of $7.9 billion, total loans of $6.0 billion, total deposits of $6.5 billion, and total shareholders’ equity of $799.5 million.
Previous wording
On March 12, 2023, the Federal Reserve developed the BTFP, which offers loans to banks with a term of up to one year. The loans are secured by pledging participating banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and other qualifying assets. These pledged securities are valued at par for collateral purposes. The Bank participated in the BTFP and pledged securities with a remaining par value of $333.3 million as of December 31, 2023. The Bank had outstanding BTFP debt of $300.0 million at December 31, 2023. These loans bear a fixed rate of 4.38% and mature on March 22, 2024.
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. These loans were secured by pledging participating banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and other qualifying assets. These pledged securities were valued at par for collateral purposes. The Bank participated in the BTFP and had outstanding debt of $300.0 million at December 31, 2023. These loans bore a fixed rate of 4.38% and matured on March 22, 2024, at which time we repaid them in full.
Previous wording
On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $1.0 billion as of December 31, 2023, 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 $907.7 million and $1.0 billion as of December 31, 2024 and 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.
Previous wording
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. 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.
Current wording
For the year ended December 31, 2024, net income available to common shareholders was $59.7 million, or $2.27 per basic common share and $2.26 per diluted common share, compared to net income available to common shareholders of $65.6 million, or $2.62 per basic common share and $2.59 per diluted common share, for the year ended December 31, 2023. Return to common shareholders on average assets decreased to 0.86% for the year ended December 31, 2024 from 1.04% for the year ended December 31, 2023. Return to common shareholders on average common equity decreased to 9.54% for the year ended December 31, 2024, as compared to 12.36% for the year ended December 31, 2023.
Previous wording
To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets, (2) the costs of our deposits and other funding sources, (3) our net interest spread and (4) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources. We calculate average assets, liabilities, and equity using a monthly average, and average yield/rate utilizing an actual 365 day count convention.
Current wording
To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets, (2) the costs of our deposits and other funding sources, (3) our net interest spread and (4) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources. We calculate average assets, liabilities, and equity using a daily average, and average yield/rate utilizing an actual day count convention.
Previous wording
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. 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. 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. 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.
Current wording
For the year ended December 31, 2024, net interest income totaled $227.4 million, and net interest margin and net interest spread were 3.48% and 2.55%, respectively. 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. The average yield on the loan portfolio was 7.03%, for the year ended December 31, 2024, compared to 6.65% for the year ended December 31, 2023, and the average yield on total interest-earning assets was 6.35% for the year ended December 31, 2024, compared to 5.95% for the year ended December 31, 2023. For the year ended December 31, 2024, overall cost of funds (which includes noninterest-bearing deposits) increased 58 basis points compared to the year ended December 31, 2023.
Previous 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 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. Acquired loans were recorded at fair value at acquisition and accrete interest income over the remaining lives of the respective loans or expected cash flows. Averages presented in the table below, and throughout this report, are month-end averages.
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 years ended December 31, 2024, 2023 and 2022, 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. Acquired loans were recorded at fair value at acquisition and accrete/amortize discounts and premiums as an adjustment to yield.
Previous 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 purposes of this table, 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.
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 $4.5 million and $10.9 million for the years ended December 31, 2023 and 2022, respectively. The lower provision during the year ended December 31, 2023 compared to 2022 relates primarily to lower loan growth in 2023, as well as improvements in the macroeconomic environment and continued resolution of acquired PCD loans in our portfolio.
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 $10.9 million and $4.5 million for the years ended December 31, 2024 and 2023, respectively. The higher provision during the year ended December 31, 2024 compared to 2023 relates primarily to the acquisition of Oakwood, and, to a lesser extent, increases from organic loan growth and non-performing loans.
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 fintech technology (“Fintech”) funds). The following table presents, 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). The following table presents, for the periods indicated, the major categories of noninterest income:
Previous wording
Noninterest income for the year ended December 31, 2023 increased $7.3 million, or 25.0%, to $36.6 million compared to noninterest income of $29.3 million for the same period in 2022. The components of noninterest income with significant fluctuations compared to the prior year period were as follows:
Current wording
Noninterest income for the year ended December 31, 2024 increased $7.6 million, or 20.6%, to $44.2 million compared to noninterest income of $36.6 million for the same period in 2023. The components of noninterest income with significant fluctuations compared to the prior year period were as follows:
Previous wording
Service charges on deposit accounts. We earn fees from our customers for deposit-related services, and these fees constitute a significant and predictable component of our noninterest income. Service charges on deposit accounts were $9.7 million for the year ended December 31, 2023, compared to $8.3 million for the 2022, an increase of $1.4 million, or 17.3%.
Current wording
Service charges on deposit accounts. We earn fees from our customers for deposit-related services, and these fees constitute a significant and predictable component of our noninterest income. Service charges on deposit accounts were $10.6 million for the year ended December 31, 2024, compared to $9.7 million for the 2023, an increase of $873,000, or 9.0%.
Previous wording
Gain on sales of loans.* *We had gains on sales of loans of $2.0 million in 2023, compared to $574,000 in 2022, an increase of $1.4 million, or 243.6%, primarily due to increased SBA loan sale activity.
Current wording
Gain on sales of loans. We had gains on sales of loans of $3.0 million in 2024, compared to $2.0 million in 2023, an increase of $1.0 million, or 50.8%, primarily due to increased SBA loan sale activity.
Previous wording
Loss on sales of investment securities.* *We had losses on the sales of investment securities of $2.6 million in 2023, compared to $48,000 in 2022, an additional loss of $2.5 million. During the fourth quarter of 2023, we sold $71.5 million in securities at a loss, with a weighted average book yield of 1.98% and reinvested the funds into high yielding investments with an average book yield of 5.17%, locking in higher yields and keeping consistent, the duration and overall portfolio weighted average life. As of December 31, 2023, we expect to recoup our losses within 1.1 years.
Current wording
Gain (loss) on sales of investment securities. We had net gains on the sales of investment securities of $7,000 in 2024, compared to net losses on the sales of $2.6 million in 2023. During the fourth quarter of 2023, we sold $71.5 million in securities at a loss, with a weighted average book yield of 1.98% and reinvested the funds into high yielding investments with an average book yield of 5.17%, locking in higher yields and keeping consistent, the duration and overall portfolio weighted average life.
Previous wording
Gain on sales of other real estate owned.* *We had net gains on the sales or other real estate owned of $646,000 in 2023, compared to $33,000 in 2022, an increase of $613,000. The majority of the gains on sale of other real estate in 2023 resulted from the sale of two properties at a total gain of $511,000.
Current wording
Gain on sales of other real estate owned. We had net gains on the sales or other real estate owned of $89,000 in 2024, compared to $646,000 in 2023, a decrease of $557,000. The majority of the gains on sale of other real estate in 2023 resulted from the sale of two properties at a total gain of $511,000.
Previous wording
Swap fee income.* *We had swap fee income from back-to-back interest rate swaps in the amount of $964,000 during 2023.
Current wording
Swap fee income. We had swap fee income from back-to-back interest rate swaps in the amount of $2.7 million in 2024, compared to $964,000 during 2023, an increase of $1.8 million, or 184.1%.
Previous wording
Other.* *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.
Current wording
Other. This category includes a variety of other income producing activities, including wire transfer fees, insurance commissions and credit card income. Other income increased $2.5 million, or 53.0%, for the year ended December 31, 2024, compared to the same period in 2023.
Previous wording
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational expenses, such as occupancy expenses, depreciation and amortization, professional and regulatory fees, including Federal Deposit Insurance Corporation (“FDIC”) assessments, data processing expenses, and advertising and promotion expenses, among others.
Current wording
Generally, noninterest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational expenses, such as occupancy expenses, depreciation and amortization, professional and regulatory fees, including FDIC assessments, data processing expenses, and advertising and promotion expenses, among others.
Previous wording
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. The components of noninterest expense with significant fluctuations compared to the prior year period were as follows:
Current wording
Noninterest expense for the year ended December 31, 2024 increased $21.0 million, or 13.4%, to $177.7 million compared to noninterest expense of $156.7 million for the same period in 2023. The components of noninterest expense with significant fluctuations compared to the prior year period were as follows:
Previous wording
Salaries and employee benefits. Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $90.6 million for the year ended December 31, 2023, an increase of $5.4 million, or 6.3%, compared to the same period in 2022. The increase was primarily due to additional hires for new positions and our merit increase cycle. As of December 31, 2023, we had 761 full-time equivalent employees, compared to 742 full-time equivalents as of December 31, 2022. Salaries and employee benefits included stock-based compensation expense of $4.4 million and $4.0 million for the years ended December 31, 2023 and 2022, respectively.
Current wording
Salaries and employee benefits. Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $103.9 million for the year ended December 31, 2024, an increase of $13.3 million, or 14.7%, compared to the same period in 2023. The increase was primarily due to the acquisitions of Waterstone and Oakwood, additional hires for new positions and our merit increase cycle. As of December 31, 2024, we had 859 full-time equivalent employees, compared to 761 full-time equivalents as of December 31, 2023. Salaries and employee benefits included stock-based compensation expense of $2.5 million and $4.4 million for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Data processing. Data processing fees were $9.0 million and $8.4 million for the years ended December 31, 2023 and 2022, respectively, an increase of $676,000, or 8.1%.
Current wording
Data processing. Data processing fees were $12.0 million and $9.0 million for the years ended December 31, 2024 and 2023, respectively, an increase of $2.9 million, or 32.4%.
Previous wording
Merger and conversion related expenses. Merger and conversion related expenses for the years ended December 31, 2022 was primarily to the acquisition of TCBI in 2022.
Current wording
Merger and conversion related expenses. Merger and conversion related expenses for the year ended December 31, 2024 was primarily to the acquisitions of Waterstone and Oakwood in 2024.
Previous wording
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. Other noninterest expense increased $3.3 million, or 18.1%, for the year ended December 31, 2023 compared to the same period in 2022.
Current wording
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. Other noninterest expense increased $235,000, or 1.1%, for the year ended December 31, 2024 compared to the same period in 2023.
Previous wording
For the year ended December 31, 2023, income tax expense totaled $19.5 million, an increase of $5.2 million, or 36.3%, compared to $14.3 million for the same period in 2022. For the years ended December 31, 2023 and 2022, our effective tax rates were 21.6% and 20.9%, respectively. Our income tax rate expense increased in 2023 largely due to the Section 291 of the Tax Equity an Fiscal Responsibility Act of 1982 (“TEFRA”) disallowance calculation.
Current wording
For the year ended December 31, 2024, income tax expense totaled $17.9 million, an decrease of $1.6 million, or 8.2%, compared to $19.5 million for the same period in 2023. For the years ended December 31, 2024 and 2023, our effective tax rates were 21.6% and 21.6%, respectively.
Previous wording
Our total assets increased $594.1 million, or 9.9%, from $6.0 billion as of December 31, 2022 to $6.6 billion as of December 31, 2023, due primarily from the increases in our loan portfolio, as well as our cash and cash equivalents due to our increase in deposits.
Current wording
Our total assets increased $1.3 billion, or 19.3%, from $6.6 billion as of December 31, 2023 to $7.9 billion as of December 31, 2024, due primarily from the acquisition of Oakwood, increases in our loan portfolio, as well as our cash and cash equivalents due to our increase in deposits.
Previous wording
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. Additionally, $835,000 and $304,000 in mortgage loans were classified as loans held for sale as of December 31, 2023 and 2022, respectively.
Current wording
As of December 31, 2024, total loans, excluding mortgage loans held for sale, were $6.0 billion, an increase of $988.6 million or 19.8%, compared to $5.0 billion as of December 31, 2023. The increase was primarily due to the acquisition of Oakwood. Additionally, $717,000 and $835,000 in mortgage loans were classified as loans held for sale as of December 31, 2024 and 2023, respectively.
Previous wording
Total loans held for investment as a percentage of deposits were 95.1% and 95.6% as of December 31, 2023 and 2022, respectively. Total loans held for investment as a percentage of assets were 75.8% and 76.9% as of December 31, 2023 and 2022, respectively.
Current wording
Total loans held for investment as a percentage of deposits were 91.9% and 95.1% as of December 31, 2024 and 2023, respectively. Total loans held for investment as a percentage of assets were 76.1% and 75.8% as of December 31, 2024 and 2023, respectively.
Previous wording
Real Estate: Commercial loans increased $197.5 million, or 9.8%, to $2.2 billion as of December 31, 2023, from $2.0 billion as of December 31, 2022.
Current wording
Real Estate: Commercial loans increased $265.3 million, or 12.0%, to $2.5 billion as of December 31, 2024, from $2.2 billion as of December 31, 2023.
Previous wording
Real Estate: Residential loans increased $26.0 million, or 4.0%, to $682.4 million as of December 31, 2023, from $656.4 million as of December 31, 2022.
Current wording
Real Estate: Residential loans increased $202.1 million, or 29.6%, to $884.5 million as of December 31, 2024, from $682.4 million as of December 31, 2023.
Previous wording
Commercial loans increased $205.0 million, or 17.8%, to $1.4 billion as of December 31, 2023, from $1.2 billion as of December 31, 2022.
Current wording
Commercial loans increased $509.8 million, or 37.5%, to $1.9 billion as of December 31, 2024, from $1.4 billion as of December 31, 2023.
Previous wording
Consumer and other loans increased $10.4 million, or 19.4%, to $63.8 million as of December 31, 2023, from $53.4 million as of December 31, 2022.
Current wording
Consumer and other loans increased $10.6 million, or 16.7%, to $74.5 million as of December 31, 2024, from $63.8 million as of December 31, 2023.
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 $18.8 million and $12.8 million in nonperforming assets as of December 31, 2023 and 2022, respectively. We had $17.1 million in nonperforming loans as of December 31, 2023 compared to $11.4 million as of December 31, 2022. The increase in nonperforming assets from December 31, 2022 to December 31, 2023 is primarily due to the adoption of CECL and the elimination of ASC 310-30 which excluded purchased impaired loans accreting interest income from nonperforming loans.
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 $30.5 million and $18.8 million in nonperforming assets as of December 31, 2024 and 2023, respectively. We had $25.0 million in nonperforming loans as of December 31, 2024 compared to $17.1 million as of December 31, 2023. The increase in nonperforming assets from December 31, 2023 to December 31, 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.
Previous wording
As of December 31, 2023, the allowance for credit losses totaled $43.7 million, or 0.88%, 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. As of December 31, 2021, the allowance for credit losses totaled $29.9 million, or 0.94%, of total loans held for investment.
Current wording
As of December 31, 2024, the allowance for credit losses totaled $58.5 million, or 0.98%, 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. As of December 31, 2022, the allowance for credit losses totaled $38.8 million, or 0.84%, 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 December 31, 2023, the carrying amount of investment securities totaled $879.6 million, a decrease of $11.2 million, or 1.3%, compared to $890.8 million as of December 31, 2022. Securities represented 13.4% and 14.9% of total assets as of December 31, 2023 and 2022, 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 December 31, 2024, the carrying amount of investment securities totaled $893.5 million, an increase of $14.0 million, or 1.6%, compared to $879.6 million as of December 31, 2023. Securities represented 11.4% and 13.4% of total assets as of December 31, 2024 and 2023, respectively.
Previous wording
The allowance for credit losses encompasses potential expected credit losses related to the securities portfolio for credit losses. The assessment includes reviewing historical loss data for both our portfolio and similar types of investment securities to develop an estimate for the current securities portfolio. Additionally, our review of the securities portfolio for expected credit losses includes an evaluation of factors including the security issuer bond ratings, delinquency status, insurance or other available credit support, as well as our expectations of the forecasted economic outlook relevant to these securities. The results of the analysis are evaluated quarterly to confirm that credit loss estimates are appropriate for the securities portfolio. Based on our assessments, expected credit losses on the investment securities portfolio as of December 31, 2023, was negligible and therefore, no allowance for credit loss was recorded related to our investment securities.
Current wording
The allowance for credit losses encompasses potential expected credit losses related to the securities portfolio. In order to develop an estimate of credit losses expected for the current securities portfolio, we perform an assessment that includes reviewing historical loss data for both our portfolio and similar types of investment securities. Additionally, our review of the securities portfolio for expected credit losses includes an evaluation of factors including the security issuer bond ratings, delinquency status, insurance or other available credit support, as well as our expectations of the forecasted economic outlook relevant to these securities. The results of the analysis are evaluated quarterly to confirm that credit loss estimates are appropriate for the securities portfolio. Based on our assessments, expected credit losses on the investment securities portfolio as of December 31, 2024 and 2023, was negligible and therefore, no allowance for credit loss was recorded related to our investment securities.
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 4.57 years with an estimated effective duration of 3.81 years as of December 31, 2023.
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 4.63 years with an estimated effective duration of 3.79 years as of December 31, 2024.
Previous wording
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.
Current wording
As of December 31, 2024 and 2023, the Company held other equity securities of $41.1 million and $33.9 million, respectively, comprised mainly of FHLB stock, SBIC’s and financial technology (“Fintech”) fund investments.
Previous wording
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. Total uninsured deposits were $2.0 billion, or 38.9% of deposits as of December 31, 2023 compared to $1.5 billion, or 31.9%, or total deposits as of December 31, 2022. 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.
Current wording
Total deposits as of December 31, 2024 were $6.5 billion, an increase of $1.3 billion, or 24.1%, compared to $5.2 billion as of December 31, 2023. Total uninsured deposits were $2.8 billion, or 43.4% of deposits as of December 31, 2024 compared to $2.0 billion, or 38.9%, or total deposits as of December 31, 2023. 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.
Previous wording
Noninterest-bearing deposits as of December 31, 2023 were $1.3 billion compared to $1.5 billion as of December 31, 2022, a decrease of $250.3 million, or 16.2%.
Current wording
Noninterest-bearing deposits as of December 31, 2024 were $1.4 billion compared to $1.3 billion as of December 31, 2023, an increase of $58.0 million, or 4.5%.
Showing the first 40 of 58 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current report — wording carried from elsewhere
•Earnings per common sharefor the year ended December 31, 2024 of $2.27 per basic common share and $2.26 per diluted common share, compared to $2.62 per basic common share and $2.59 per diluted common share for the year ended December 31, 2023.
Current report — wording carried from elsewhere
Results of Operations for the Years Ended December 31, 2024 and 2023
Current report — wording carried from elsewhere
For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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. The preferred stock was structured to qualify as additional Tier 1 capital under applicable regulatory capital guidelines. Holders of the preferred stock will be entitled to receive, if, when, and as declared by our board of directors (the “Board”), non-cumulative cash dividends at a rate of 7.50% 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. The preferred stock has a perpetual term and may not be redeemed, except under certain circumstances, under the first five years of issuance. We intend to use the net proceeds from the preferred stock issuance to provide additional capital support to the Bank, to support growth, to better position us to take advantage of strategic opportunities that may arise from time to time, repayment of existing debt, and for general corporate purposes.