Business First Bancshares (BFST) risk factors, FY2025 10-K

Risks Relating to our Business

1. 01As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions
2. 02The geographic concentration of our business in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, imposes risks and may magnify the consequences of any regional or local economic downturn affecting our markets, including any downturn in the real estate sector
3. 03We face significant competition to attract and retain customers, which could impair our growth, decrease our profitability or result in loss of market share
4. 04Our success is largely dependent upon our ability to successfully execute our business strategy, and failure to successfully execute our business strategy could have an adverse effect on our business, financial condition and results of operations
5. 05We rely heavily on our executive management team and other key employees, and an unexpected loss of their service could have an adverse effect on our business, financial condition and results of operations
6. 06Our ability to attract and retain profitable bankers is critical to the success of our business strategy, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations
7. 07We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses
8. 08Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to our other mortgage loans
9. 09Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses
10. 10We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of the real property
11. 11A large portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could expose us to credit losses and could adversely affect our business, financial condition and results of operations
12. 12Our portfolio contains a number of large loans to certain borrowers, and deterioration in the financial condition of these large loans could have a significant adverse impact on our asset quality30% rewritten
13. 13Our allowance for credit losses may prove to be insufficient to absorb losses inherent in our loan portfolio, which could have a material adverse effect on our business, financial condition and results of operations
14. 14The small-to-midsized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could have a material adverse effect on our business, financial condition and results of operations
15. 15The borrowing needs of our customers may increase, especially during a challenging economic environment, which could result in increased borrowing against our contractual obligations to extend credit
16. 16Our ability to maintain our reputation is critical to the success of our business
17. 17Our business has grown rapidly, and we may not be able to maintain our historical rate of growth, which could have an adverse effect on our ability to successfully implement our business strategy
18. 18We may not be able to manage the risks associated with our anticipated growth and expansion through de novo branching
19. 19We may pursue acquisitions in the future, which could expose us to financial, execution and operational risks that could have an adverse effect on our business, financial condition, results of operations and growth prospects
20. 20Interest rate shifts could have an adverse effect on our business, financial condition, results of operations and growth prospects
21. 21The markets in which we operate are susceptible to hurricanes and other natural disasters and adverse weather, which could result in a disruption of our operations and increases in credit losses
22. 22We earn income by originating residential mortgage loans for resale in the secondary mortgage market, and disruptions in that market could reduce our operating income
23. 23New lines of business, products, product enhancements or services may subject us to additional risks
24. 24A lack of liquidity could impair our ability to fund operations, which could have an adverse effect on our business, financial condition and results of operations
25. 25We have a concentration of deposit accounts with state and local municipalities that is a material source of our funding, and the loss of these deposits or significant fluctuations in balances held by these public bodies could force us to fund our business through more expensive and less stable sources
26. 26We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, we may not be able to maintain regulatory compliance, which could have an adverse effect on our business, financial condition and results of operations
27. 27We utilize alternative sources of funding, which may become more expensive or may not be available in the future, which could have an adverse effect on our business, financial condition and results of operations
28. 28The fair value of our investment securities can fluctuate due to factors outside of our control
29. 29If we fail to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud81% rewritten
30. 30Our financial results depend on management’s selection of accounting methods and certain assumptions and estimates
31. 31We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology
32. 32We rely on third parties to provide key components of our business infrastructure, and a failure of these parties to perform for any reason could disrupt our operations
33. 33We could be subject to losses, regulatory action or reputational harm due to fraudulent and negligent acts on the part of loan applicants, our employees and vendors
34. 34Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm our reputation, and otherwise have an adverse effect on our business, financial condition and results of operations36% rewritten
35. 35We are subject to environmental liability risk associated with our lending activities
36. 36We are subject to claims and litigation pertaining to intellectual property
37. 37If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could require charges to earnings

Risks Related to the Regulation of Our Industry

1. 38We are subject to stringent capital requirements, which may result in lower returns on equity, require us to raise additional capital, limit growth opportunities or result in regulatory restrictions
2. 39New activities and expansion require regulatory approvals, and failure to obtain them may restrict our growth
3. 40We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
4. 41We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions
5. 42Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans, increase our risk of liability with respect to such loans, or increase the time and expense associated with the foreclosure process or prevent us from foreclosing at all
6. 43The expanding body of federal, state and local regulations and/or the licensing of loan collections or other aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance and subject us to litigation
7. 44Potential limitations on incentive compensation contained in proposed federal agency rulemaking may adversely affect our ability to attract and retain our highest performing employees
8. 45Increases in FDIC insurance premiums could adversely affect our earnings and results of operations24% rewritten
9. 46The Federal Reserve may require us to commit capital resources to support the Bank
10. 47We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements
11. 48The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your common shares at the volume, prices and times desired
12. 49Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future sales of equity securities
13. 50The rights of our common shareholders are subordinate to the rights of our outstanding subordinated notes and our outstanding preferred stock and may be subordinate to the rights of the holders of any senior indebtedness or preferred stock that we may issue in the future
14. 51Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions
15. 52Our corporate governance documents, and certain corporate and banking laws applicable to us, could make a takeover more difficult
16. 53An investment in Business First’s common stock is not an insured deposit and is subject to risk of loss