Business First Bancshares, Inc. (BFST)

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

When we refer in this Form 10-Q to “we,” “our,” “us,” the “Company” and “Business First,” we are referring to Business First Bancshares, Inc. and its consolidated subsidiaries, including b1BANK, which we sometimes refer to as “the Bank,” unless the context indicates otherwise.

The information contained in this Form 10-Q is accurate only as of the date of this form and the dates specified herein.

All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q (this “Report”) and other periodic reports filed by the Company, and other written or oral statements made by us or on our behalf, are “forward-looking statements,” as defined by (and subject to the “safe harbor” protections under) the federal securities laws. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and the banking industry in general. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “will continue,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” and similar expressions of a future or forward-looking nature. These statements involve estimates, assumptions, and risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements.

We believe these factors include, but are not limited to, the following:

•risks related to the integration of any other acquired businesses, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, risks related to entering a new geographic market, the time and costs associated with integrating systems, technology platforms, procedures and personnel, the ability to retain key employees and maintain relationships with significant customers, the need for additional capital to finance such transactions, and possible failures in realizing the anticipated benefits from acquisitions;

•changes in the strength of the United States (“U.S.”) economy in general and the local economy in our local market areas adversely affecting our customers and their ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral;

•economic risks posed by our geographic concentration in Louisiana, the Dallas/Fort Worth metroplex and Houston;

•the ability to sustain and continue our organic loan and deposit growth, and manage that growth effectively;

•market declines in industries to which we have exposure, such as the volatility in oil prices and downturns in the energy industry that impact certain of our borrowers and investments that operate within, or are backed by collateral associated with, the energy industry;

•volatility and direction of interest rates and market prices, which could reduce our net interest margins, asset valuations and expense expectations;

•interest rate risk associated with our business;

•changes in the levels of loan prepayments and the resulting effects on the value of our loan portfolio;

•increased competition in the financial services industry, particularly from regional and national institutions and emerging non-bank competitors;

•increased credit risk in our assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of our total loan portfolio;

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•changes in the value of collateral securing our loans;

•deteriorating asset quality and higher loan charge-offs, and the time and effort required to resolve problem assets;

•the failure of assumptions underlying the establishment of and provisions made to our allowance for credit losses;

•changes in the availability of funds resulting in increased costs or reduced liquidity;

•our ability to maintain important deposit customer relationships and our reputation;

•a determination or downgrade in the credit quality and credit agency ratings of the securities in our securities portfolio;

•increased asset levels and changes in the composition of assets and the resulting impact on our capital levels and regulatory capital ratios;

•our ability to prudently manage our growth and execute our strategy;

•risks associated with our acquisition and de novo branching strategy;

•the loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels;

•legislative or regulatory developments, including changes in the laws, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters;

•government intervention in the U.S. financial system;

•changes in statutes and government regulations or their interpretations applicable to us, including changes in tax requirements and tax rates;

•natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, epidemics and pandemics such as coronavirus, and other matters beyond our control; and

•other risks and uncertainties listed from time to time in our reports and documents filed with the U.S. Securities and Exchange Commission (“SEC”).

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. Additional information on these and other risk factors can be found in Item 1A. “Risk Factors” of this Report and in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC.

In the event that one or more events related to these, or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BUSINESS FIRST

The following discussion and analysis focuses on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2025 to June 30, 2026, and its results of operations for the three and six months ended June 30, 2026. This discussion and analysis is intended to highlight and supplement information presented elsewhere in this report and 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, 2025, 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.

Overview

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 June 30, 2026, we had total assets of $8.9 billion, total loans of $6.7 billion, total deposits of $7.2 billion, and total shareholders’ equity of $1.0 billion.

As a financial holding company operating through one reportable operating segment, community banking, we generate most of our revenues from interest income on loans, customer service and loan fees, and interest income from securities. We incur interest expense on deposits and other borrowed funds and noninterest expense, such as salaries and employee benefits and occupancy expenses. We analyze our ability to maximize income generated from interest-earning assets and expense of our liabilities through our net interest margin. Net interest margin is a ratio calculated as net interest income divided by average interest-earning assets. Net interest income is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings, which are used to fund those assets.

Changes in the market interest rates and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions, and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in our markets and across our region, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within our markets.

Other Developments

Acquisition of Progressive Bancorp, Inc. ("Progressive")

On January 1, 2026, we consummated the merger of Progressive, the parent bank holding company for Progressive Bank, with and into Business First, with Business First continuing as the surviving corporation pursuant to the terms of the Reorganization Agreement. Immediately following consummation of the Progressive acquisition, Progressive Bank merged with and into b1BANK, with b1BANK surviving the merger. Pursuant to the terms of the Reorganization Agreement, upon consummation of the Progressive acquisition, we issued 3,192,367 shares of our common stock to the former

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion presents management’s analysis of our results of operations and financial condition over each of the last two most recent fiscal years. The discussion should be read in conjunction with our financial statements and the notes related thereto which appear elsewhere in this Report.

The following discussion and analysis is to focus on significant changes in the financial condition of Business First and its subsidiaries from December 31, 2024 to December 31, 2025 and its results of operations for the year ended December 31, 2025. 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, 2023 to December 31, 2024 and its results of operations for the year ended December 31, 2024 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, 2024, filed with the SEC on March 7, 2025, as amended, which is available on the SEC’s website at www.sec.gov and on the Company’s website, www.b1bank.com.

Overview

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, 2025, we had total assets of $8.2 billion, total loans of $6.2 billion, total deposits of $6.7 billion, and total shareholders’ equity of $896.9 million.

As a financial holding company operating through one reportable operating segment, community banking, we generate most of our revenues from interest income on loans, customer service and loan fees, and interest income from securities. We incur interest expense on deposits and other borrowed funds and noninterest expense, such as salaries and employee benefits and occupancy expenses. We analyze our ability to maximize income generated from interest-earning assets and expense of our liabilities through our net interest margin. Net interest margin is a ratio calculated as net interest income divided by average interest-earning assets. Net interest income is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings, which are used to fund those assets.

Changes in the market interest rates and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions, and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in our markets and across our region, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within our markets.

While we continue to prioritize organic growth, we also seek to capitalize upon other opportunities as they arise. Below is a summary of recent transactions that have contributed to our growth. For additional information about these transactions, See “Note 3 – Mergers and Acquisitions” in our audited consolidated financial statements included in Item 8 of this Report.

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Federal Reserve Bank’s Discount Window

On April 11, 2023, the Bank opened two new lines of credit for additional contingent liquidity, totaling $967.3 million and $907.7 million as of December 31, 2025 and 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.

Acquisition of Waterstone

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.

Acquisition of Oakwood

On October 1, 2024, we consummated the merger of Oakwood, the parent bank holding company for Oakwood Bank, with and into Business First, with Business First 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 b1BANK, with b1BANK 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.

Sale of Kaplan Banking Center

On April 4, 2025, we sold the Kaplan banking center, located in Kaplan, Louisiana, to Currency Bank headquartered in Baton Rouge, Louisiana, in accordance with the Branch Purchase and Assumption Agreement dated December 12, 2024. The sale included $50.7 million in deposits, $2.3 million in loans, and $1.4 million in fixed assets, net of depreciation. The total deposit premium paid by Currency Bank as consideration was 8.00% of the total deposits assumed at closing resulting in a gain on the sale of $3.4 million.

Acquisition of Progressive

On January 1, 2026, we consummated the merger of Progressive, the parent bank holding company for Progressive Bank, with and into Business First, with Business First continuing as the surviving corporation pursuant to the terms of the Progressive Reorganization Agreement. Immediately following consummation of the Progressive acquisition, Progressive Bank merged with and into b1BANK, with b1BANK surviving the merger. Pursuant to the terms of the Progressive Reorganization Agreement, upon consummation of the Progressive acquisition, we issued 3,192,367 shares of our common stock to the former shareholders of Progressive. As of December 31, 2025, Progressive had $773.8 million in total assets, $597.2 million in loans and $684.9 million in total deposits.

Financial Highlights

The financial highlights as of and for the year ended December 31, 2025 include:

•Total assets of $8.2 billion, a $357.7 million, or 4.6%, increase from December 31, 2024.

•Total loans held for investment of $6.2 billion, a $208.1 million, or 3.5%, increase from December 31, 2024.

•Total deposits of $6.7 billion, a $187.3 million, or 2.9%, increase from December 31, 2024.

•Net income available to common shareholders of $82.5 million, a $22.8 million, or 38.1%, increase from the year ended December 31, 2024.

•Net interest income of $273.2 million, a $45.8 million, or 20.1%, increase from the year ended December 31, 2024.

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•An allowance for credit losses of 0.94% 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 1.24%, compared to 0.42% as of December 31, 2024.

•Earnings per common share for the year ended December 31, 2025 of $2.81 per basic common share and $2.79 per diluted common share, compared to $2.27 per basic common share and $2.26 per diluted common share for the year ended December 31, 2024.

•Return to common shareholders on average assets of 1.05% compared to 0.86% for the year ended December 31, 2024.

•Return to common shareholders on average common equity of 10.59% compared to 9.54% for the year ended December 31, 2024.

•Capital Ratios included Tier 1 Leverage, Common Equity Tier 1, Tier 1 Risk-based and Total Risk-based Capital of 10.08%, 9.94%, 11.00% and 12.93%, respectively, compared to 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% for the year ended December 31, 2024.

•Book value per common share of $27.95, an increase of 13.5% from $24.62 at December 31, 2024.

Results of Operations for the Years Ended December 31, 2025 and 2024

Performance Summary

For the year ended December 31, 2025, net income available to common shareholders was $82.5 million, or $2.81 per basic common share and $2.79 per diluted common share, compared to net income available to common shareholders of $59.7 million, or $2.27 per basic common share and $2.26 per diluted common share, for the year ended December 31, 2024. Return to common shareholders on average assets increased to 1.05% for the year ended December 31, 2025 from 0.86% for the year ended December 31, 2024. Return to common shareholders on average common equity increased to 10.59% for the year ended December 31, 2025, as compared to 9.54% for the year ended December 31, 2024.

Net Interest Income

Our operating results depend primarily on our net interest income, calculated as the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Fluctuations in market interest rates impact the yield and rates paid on interest sensitive assets and liabilities. Changes in the amount and type of interest-earning assets and interest-bearing liabilities also impact net interest income. The variance driven by the changes in the amount and mix of interest-earning assets and interest-bearing liabilities is referred to as a “volume change.” Changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds are referred to as a “rate change.”

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

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